SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. __)
Filed by the Registrant [X]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Under Rule 14a-12
TENET INFORMATION SERVICES, INC.
--------------------------------
------------------------------------------------
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required.
[X] 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 transactions applies: N/A
2) Aggregate number of securities to which transactions applies: N/A
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined): The filing
fee has been calculated in accordance with Rule 0-11 under the Exchange
Act and is equal to 1/50 of 1% of $339,000 (the aggregate amount of
cash to be received by the Registrant in connection with the
transaction)
4) Proposed maximum aggregate value of transaction: $339,000
5) Total fee paid: $68
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
1) Amount previously paid:
2) Form, Schedule or Registration Statement No.:
3) Filing party:
4) Date filed:
TENET INFORMATION SERVICES, INC.
53 West 9000 South
Sandy, Utah 84070
(801) 568-0899
Dear Shareholder:
You are invited to attend a Special Meeting in Lieu of Annual Meeting (the
"Special Meeting") of the shareholders of Tenet Information Services, Inc. ("we"
or "Tenet") at , , on August __, 2003,
at , local time.
Shareholders will vote on the following items of business:
* Approval of that certain Asset Purchase Agreement by and between Tenet and
ClinicalVentures, LLC ("ClinicalVentures") and dated July 29, 2003 (the
"Asset Purchase Agreement") and the sale of substantially all of our operating
assets and the assignment of certain of our liabilities (the "Transaction")
pursuant to the Asset Purchase Agreement;
* Approval of resolutions authorizing our shareholders to take action by the
written consent of fewer than all of the shareholders entitled to vote with
respect to the action, to the fullest extent permitted by Utah corporate law
(the "Written Consent Resolutions");
* Approval of amendments to and a restatement of our Articles of
Incorporation (the "Amended and Restated Articles"), which amendments will
include the following:
1.a one-for-twenty reverse stock split of the outstanding shares of our
common stock, to take effect upon the filing of the Amended and
Restated Articles with the Utah Department of Commerce, Division of
Corporations and Commercial Code;
2.reference to our shareholders' right to take action by the written
consent of fewer than all of the shareholders entitled to vote with
respect to the action, to the fullest extent permitted by Utah
corporate law;
3.an elimination of those provisions the Board of Directors deems no
longer necessary or appropriate under current Utah corporate law; and
4.a restatement of the Articles of Incorporation by incorporating in a
single document the amendments approved and adopted by our
shareholders at the Special Meeting, as well as all prior provisions
still in effect.
* Election of three (3) directors to the Tenet Board of Directors, each to
serve for a one year term expiring at our annual meeting in 2004, and with
three nominees for those positions presented by the Board (the "Director
Nominees").
The Board of Directors has unanimously determined that the approval of the Asset
Purchase Agreement, the Transaction, the Written Consent Resolutions, the
Amended and Restated Articles and the election of the Director Nominees, are
in the best interests of Tenet and its shareholders and recommends that
shareholders vote in favor of each of such matters.
The accompanying material includes the Notice of Special Meeting in Lieu of
Annual Meeting, a Summary, the Proxy Statement and exhibits, a proxy card, and
our Annual Report on Form 10-KSB for the fiscal year ended June 30, 2002 and our
Quarterly Reports on Form 10-QSB for the three-month periods ended September 30,
2002, December 31, 2002 and March 31, 2003. We hope you will be able to attend
the Special Meeting. Whether or not you are able to attend the Special Meeting,
we urge you to sign and date the enclosed proxy card and to return it promptly
in the enclosed envelope. If you do attend the Special Meeting, you may
withdraw your prior vote or proxy and vote personally on any matters brought
properly before the meeting by following the instructions on the proxy card.
Sincerely,
Jerald L. Nelson
President
Sandy, Utah
August , 2003
TENET INFORMATION SERVICES, INC.
53 West 9000 South
Sandy, Utah 84070
(801) 568-0899
NOTICE OF SPECIAL MEETING IN LIEU OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD AUGUST , 2003
To the Shareholders of Tenet Information Services, Inc.:
A Special Meeting in Lieu of Annual Meeting of the Shareholders (the "Special
Meeting") of Tenet Information Services, Inc., a Utah corporation ("we" or
"Tenet"), will be held at the ,
, on , August , 2003, at , local time, for
the following purposes:
1. To consider and vote upon a proposal to approve that certain Asset
Purchase Agreement by and between Tenet and ClinicalVentures, LLC
("ClinicalVentures") and dated July 29, 2003 (the "Asset Purchase
Agreement") and the sale of substantially all of our operating
assets, and the assumption by ClinicalVentures of certain of
our obligations and liabilities, with such acquisition
and assumption being referred to herein as the "Transaction".
2. To consider and vote upon resolutions authorizing our shareholders to
take action by written consent of fewer than all of the shareholders
entitled to vote with respect to the action (the "Written Consent
Resolutions"), to the fullest extent permitted by the Utah Revised
Business Corporation Act (the "Act").
3. To consider and vote upon amendments to and a restatement of our
Articles of Incorporation (the "Amended and Restated Articles"),
which amendments will include the following :
a. a one-for-twenty reverse stock split of the outstanding shares
of our common stock, to take effect upon the filing of the
Amended and Restated Articles with the Utah Department of
Commerce Division of Corporations and Commercial Code;
b. reference to our shareholders' right to take action by the
written consent of fewer than all of the shareholders entitled
to vote with respect to the subject matter of the action, to the
fullest extent permitted by the Act;
c. elimination of provisions that are no longer deemed necessary or
appropriate under the Act; and
d. restatement of the Articles of Incorporation by incorporating in
a single document the amendments approved and adopted by our
shareholders at the Special Meeting, as well as all prior
provisions still in effect.
4. To elect three (3) directors to our Board of Directors, each to serve
for a one year term expiring at our annual meeting in 2004, with three
nominees to fill these positions being nominated by the Board of
Directors (the "Director Nominees").
Holders of record of our common stock at the close of business on July __, 2003
will receive notice of and may vote at the Special Meeting, including any
adjournment of the Special Meeting. You are invited to attend the Special
Meeting in person, if possible. Whether or not you plan to attend, please mark,
date and sign the enclosed proxy and mail it promptly. A return envelope is
enclosed for your convenience. We will pay all expenses of the meeting,
including the cost of printing and mailing the enclosed proxy statement.
By Order of the Board of Directors,
Fred Anderson
Corporate Secretary
Sandy, Utah
, 2003
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To assure your representation at the meeting, please sign, date and return the
enclosed proxy card whether or not you expect to attend in person. Shareholders
who attend the meeting may revoke their proxies and vote in person if they
desire.
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TABLE OF CONTENTS
Proxy Statement 1
Summary 3
Voting Securities and Principal Holders Thereof 8
Proposal #1 - Approval of the Asset Purchase 9
Agreement and Transaction 9
General 9
The Parties 9
Reasons for the Transaction 10
Background Information 10
The Transaction 12
Description of the Asset Purchase Agreement 13
Purchase and Sale 13
Payment of Purchase Price 13
Employees and Associates 13
Indemnification 13
Representations and Warranties 13
Pre-Closing Covenants 14
The Special Meeting 15
Cumulative Voting and Dissenters' Rights 15
The Closing 16
Conditions to Closing 16
Impact of Management Services Agreement on the 17
Conditions to Closing 17
Covenant Against Competition 17
Termination 17
Our Business Following the Transaction 18
Securities Exchange Reporting and the Over-the- 19
Counter Bulletin Board 19
Accounting Treatment 19
Unaudited Pro Forma Financial Statements 19
Federal Income Tax Consequences 25
Dissenters' Rights as a Result of the Sale of
Substantially All of Tenet's Assets 25
Recommendation of the Board of Directors (Proposal #1) 26
Proposal #2 - Approval of the Written Consent
Resolutions 26
Proposal #3 - Approval of the Amended and Restated
Articles 28
1. 1 for 20 Reverse Split 28
Reasons for Reverse Split 28
Effect of the Reverse Split 29
Summary of Federal Income Tax Consequences 30
Authorized Shares; Future Earnings 31
Accounting Matters 31
Potential Takeover Effect 31
Effect upon Outstanding Options and Warrants 31
2.Approval and Adoption of Written Consent
Resolutions 31
3.Elimination of Provisions No Longer Necessary
or Appropriate 31
Proposal #4 - Election of Directors 33
Vote Required 33
Other Information 35
Shareholder Proposals 36
Proxy Card
Exhibits:
Exhibit A: Asset Purchase Agreement A-1
ii
Exhibit B: Form of Amended and Restated B-1
Articles of Incorporation
Exhibit C: Utah Code Ann. 16-10a-1301, et. C-1
seq. Regarding Dissenters' Rights
Exhibit D: Annual Report on Form 10-KSB for D-1
the year ended June 30, 2002
Exhibit E: Quarterly Report on Form 10-QSB E-1
for the quarter ended September 30, 2002
Exhibit F: Quarterly Report on Form 10-QSB F-1
for the quarter ended December 31, 2002
Exhibit G: Quarterly Report on Form 10-QSB G-1
for the quarter ended March 31, 2003
iii
TENET INFORMATION SERVICES, INC.
53 West 9000 South
Sandy, Utah 84070
(801) 568-0899
PROXY STATEMENT
SPECIAL MEETING IN LIEU OF ANNUAL MEETING OF SHAREHOLDERS
YOU SHOULD CAREFULLY READ THIS ENTIRE PROXY STATEMENT
(INCLUDING THE EXHIBITS) BEFORE YOU VOTE
Solicitation of Proxies
The Board of Directors of Tenet Information Services, Inc. ("we" or
"Tenet"), is soliciting the enclosed proxy for use at the Special Meeting in
Lieu of Annual Meeting of Shareholders (the "Special Meeting") to be held at
at , local time, on August , 2003, and at any adjournment thereof.
Tenet will mail this proxy statement and the enclosed proxy card to shareholders
on or about , 2003.
We will pay the expense of the solicitation of proxies for the Special
Meeting, including the cost of printing and mailing these materials. In
addition to solicitation by mail, our management may solicit proxies personally
or by telephone or facsimile without additional compensation.
Record Date and Outstanding Common Stock
Only holders of record of the common stock at the close of business on
, 2003 will receive notice of, and will be permitted to vote at, the Special
Meeting. As of , 2003, there were 19,336,213 shares of common
stock outstanding.
Voting and Revocation of Proxy
Shareholders of record on the Record Date may receive notice of, and vote
at, the Special Meeting. Each share of common stock gives the holder the right
to one vote upon each matter to be presented at the Special Meeting.
Each properly dated, executed and returned proxy received by us prior to
the Special Meeting will be voted at the Special Meeting in accordance with the
instructions indicated thereon. If no specific instructions are given on a proxy
received before the Special Meeting, the shares represented by that proxy will
be voted FOR approval of the Asset Purchase Agreement and the Transaction; FOR
the approval of the Written Consent Resolutions; FOR approval and adoption of
the Amended and Restated Articles; and FOR the election of each of the Director
Nominees.
A shareholder giving a proxy may revoke it at any time before the Special
Meeting. You may revoke your proxy by doing any of the following:
* Giving written notice of revocation to our Secretary before the
Special Meeting,
* Giving another written proxy bearing a later date, provided we receive
it before the Special Meeting, or
* Attending the Special Meeting and voting in person (although
attendance at the Special Meeting will not in and of itself
constitute a revocation of your proxy).
Quorum, Abstentions, and Broker Non-Votes
At the Special Meeting, the following procedures will apply:
A quorum will be deemed present for all purposes at the Special Meeting if
there are represented, either in person or by proxy, a majority of the issued
and outstanding shares of common stock at , 2003. Before action
may be taken at the Special Meeting, we must determine that a quorum is present.
Calculating the number of shares present at the Special Meeting for purposes of
determining whether there is a quorum present will be accomplished by reviewing
the proxies received before the Special Meeting and by counting any additional
shares owned by shareholders actually present at the Special Meeting.
If an executed proxy is returned and the shareholder has marked the proxy
to indicate that the shares are abstained from voting on any matter, the shares
represented by that proxy will be considered present at the meeting for purposes
of determining a quorum and for purposes of calculating the vote, but will not
be counted as voting in favor of the matter. If an executed proxy is returned
by a broker holding shares in "street name," which indicates that the broker
lacks discretionary authority to vote part or all of those shares on one or more
matters to be considered at the Special Meeting, those shares will be considered
present at the meeting for purposes of determining a quorum, but will not be
considered to be represented at the meeting for purposes of calculating the vote
with respect to those matters for which the broker lacks authority to vote.
Required Vote
We will proceed with the Transaction only if a quorum is present at the
Special Meeting and the Asset Purchase Agreement and Transaction are approved by
a majority of all issued and outstanding shares.
The proposal to authorize our shareholders to take action by written
consent of fewer than all of the shareholders entitled to vote with respect to
the action will be approved if we receive the affirmative vote of a majority of
all shares actually voted at the Special Meeting.
The proposal to amend and restate our Articles of Incorporation will be
approved if we receive the affirmative vote of a majority of all issued and
outstanding shares with respect to each amendment to be effected.
Election of Directors will be determined by a simple plurality of the votes
cast by all shares actually voted at the Special Meeting.
There is no cumulative voting, and each share counts as one vote.
Shareholders are entitled to dissenters' rights in connection with the
Transaction. Dissenters' rights allow shareholders to dissent from a sale of
substantially all of the corporation's assets if the net proceeds from the
transaction are not to be distributed to the shareholders within one year after
the sale. Shareholders perfecting dissenters' rights are entitled to receive a
fair cash payment for their shares. Shareholders' dissenters' rights are more
specifically described on page 25, under the heading "Dissenters' Rights as a
Result of the Sale of Substantially all of Tenet's Assets."
2
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SUMMARY
===============================================================================
This summary highlights selected information from this proxy statement and may
not contain all of the information that is important to you. To better
understand the Transaction, before voting you should carefully read this entire
proxy statement, including the exhibits, one of which is the Asset Purchase
Agreement. The Asset Purchase Agreement is the legal document that governs the
Transaction.
When and where is the Special Meeting?
The Special Meeting will be held on August __, 2003 at________________________,
commencing at ____ local time.
What matters will be voted upon at the Special Meeting?
Shareholders will vote on four proposals: (1) approval of the Asset Purchase
Agreement and the Transaction, (2) approval of the Written Consent Resolutions,
(3) approval and adoption of the Amended and Restated Articles, and (4) the
election of the Director Nominees.
If the shareholders approve the Asset Purchase Agreement and the Transaction, we
plan to sell to ClinicalVentures substantially all of our operating assets.
ClinicalVentures will assume certain of our liabilities, other than certain
trade debt and other obligations more specifically set forth in the Asset
Purchase Agreement.
What are the reasons for the Transaction?
For several years, our management has explored various strategies which might
enable us to expand our product lines, or to increase our sales based on our
current product lines, in order to increase shareholder value. Sales based upon
our current product have remained relatively flat for the past several years.
However, after several unsuccessful attempts to acquire additional products and
to expand our business based upon our current product lines, our management has
concluded that it is in the best interest of Tenet and our shareholders to sell
substantially all of our operating assets in order to explore new opportunities
based upon different product or service offerings. Our Board of Directors has
concluded that the sale of substantially all of our operating assets to
ClinicalVentures on the terms set forth in the Asset Purchase Agreement will
provide an opportunity to pursue a new venture that might ultimately provide a
greater return to our shareholders, when compared to our existing business or
opportunities previously considered by the Board.
Did the board of directors obtain the opinion or appraisal of outside experts?
No. The Board of Directors has not engaged independent valuation consultants to
prepare an opinion as to the fairness of the Transaction.
Does the board of directors recommend that I vote for approval of the
Transaction?
Yes. The Board of Directors believes that the execution and performance of the
Asset Purchase Agreement and the consummation of the Transaction are in the best
interests of Tenet and its shareholders, and recommends that you vote to approve
the Asset Purchase Agreement and the Transaction. See "Recommendation of the
Board of Directors" at page 26.
What is the financial condition of Tenet and how will it be affected by the
Transaction?
Tenet has been relatively self-sufficient over the previous several years,
maintaining its operations without the infusion of additional debt or equity
capital. If the Transaction is closed as currently contemplated, we will
materially reduce our payables and our short and long-term obligations, but will
dispose of our existing operations that have generated our historical revenues.
3
What will the shareholders own after the Transaction?
The shareholders will continue to own their shares after the Transaction
(subject to the reverse stock split referenced below). Tenet will continue to
own assets with a net tangible book value of approximately $0.01 per pre-split
share. These assets will include cash, one retained promissory note, certain
accounts receivable and cash equivalents, and miscellaneous personal property.
Our Unaudited Pro Forma Financial Statements are included in this proxy
statement and illustrate the estimated effect of the Transaction on our
financial statements. You should review them carefully with the other
information and material included in this proxy statement.
Will the Transaction affect my ownership of common stock or my rights as a
shareholder?
No. Subject to the one-for-twenty reverse split to be effective upon filing of
the Amended and Restated Articles, you will continue to own the same number of
shares after the Transaction closes as you did immediately before the
Transaction. The Transaction will not involve the redemption or purchase of any
outstanding shares of common stock. In connection with the Transaction, you are
not being asked to exchange your shares of common stock for any other shares or
for cash or other property. Immediately before the Transaction there will be
approximately 19,336,213 shares of common stock issued and outstanding. After
the closing of the Transaction and prior to the filing of the Amended and
Restated Articles, the same number of shares of common stock will remain issued
and outstanding, subject to the exercise of dissenters' rights by any of our
shareholders.
The Amended and Restated Articles provide for a one-for-twenty reverse stock
split, to be effective upon their filing with the Division. It is expected that
such filing will be made subsequent to the closing of the Transaction. However,
if for any reason the Transaction is not completed as currently anticipated, we
may proceed with the filing of the Amended and Restated Articles. Upon such
filing, each group of twenty shares held by each shareholder will be combined
and consolidated into one share. In lieu of issuing fractional shares, we will
pay to each shareholder the fair value of the shares held which cannot be
consolidated into one whole share. The Board of Directors has determined that $
represents the fair value of one pre-split share. As a result of the reverse
stock split, each shareholder will retain and exercise voting rights with
respect to approximately the same percentage equity interest in Tenet as he, she
or it held prior to the filing of the Amended and Restated Articles, except for
changes resulting from cashing out fractional shares resulting from the reverse
split. Shareholders holding fewer than twenty pre-split shares will not hold
any shares, or have any further rights as a shareholder, after giving effect to
the reverse split.
What will Tenet do after the completion of the Transaction?
Following the Transaction, we will pursue potential acquisitions or business
opportunities. We have not identified any targets and we do not expect to
identify a target before the Special Meeting. We cannot estimate a timetable
for completing any such transaction, and we cannot assure you that we will be
able to complete a transaction at all. Until we complete a transaction, we will
generate revenues primarily by the collection of retained accounts receivable
that are part of the Excluded Assets, the receipt of payments of principal and
interest on the promissory note issued by Delta Healthcare Consulting Group,
Inc. in favor of Tenet in the principal amount of $25,700, and by receipt of
certain software license fees received from ClinicalVentures, pursuant to a
license agreement between Tenet and ClinicalVentures dated July 18, 2003 (the
"License Agreement"). Pursuant to the License Agreement, ClinicalVentures is
obligated to pay to us 5% of the initial software license fees received by
ClinicalVentures during the first five years following the effective date of
the License Agreement with respect to new sales or licenses of the EDNet and
ARCNet tracking products we currently sell, or any updates or new versions
thereof or other software products (to the extent such updates, new versions or
other products contain the code transferred to ClinicalVentures in the
Transaction which implements the "tracking feature" included in the EDNet
tracking system), marketed by ClinicalVentures after the effective date of the
License Agreement, up to an aggregate of $90,000. See "Our Business Following
the Transaction," on page 18.
4
What are the basic terms of the Transaction?
If the shareholders approve the Transaction, the following will occur:
* Upon satisfaction of the applicable conditions to the closing of the
Transaction, ClinicalVentures will acquire our operating assets and assume
certain of our liabilities, except for assets and liabilities specifically
excluded under the Asset Purchase Agreement.
* ClinicalVentures will pay us a purchase price of $339,000 in cash at
closing of the Transaction.
* ClinicalVentures will assume certain of our obligations and liabilities.
* We will seek to pursue a new business plan based on a strategic
combination with or an acquisition of or by another business. The Asset
Purchase Agreement also contains other terms and conditions customary
for this type of transaction. See "Description of the Asset Purchase
Agreement" at page 13.
How will Tenet use the excluded assets?
The assets that we keep in the Transaction will include cash on hand just prior
to closing (before payment of costs related to the Transaction), a promissory
note payable to Tenet in the principal amount of $25,700, certain accounts
receivable and cash equivalents, miscellaneous personal property, the License
Agreement and our Respiratory Care Management System. We intend to use a
portion of the cash, as well as a portion of the cash received in the
Transaction to pay applicable costs and expenses associated with the
Transaction. We will also reduce retained obligations and pay expenses
associated with our ongoing public company reporting requirements. Remaining
cash, including funds paid under the retained promissory note issued by Delta
Healthcare Consulting Group, Inc. and received pursuant to the License
Agreement, will be retained pending use in an acquisition or other transactions.
See "Our Business Following the Transaction" at page 18.
Do I have dissenters' rights?
Yes. Dissenters' rights allow our shareholders to dissent from the Transaction
and receive a fair cash payment for their shares. See "Dissenters' Rights as a
Result of the Sale of Substantially all of Tenet's Assets" at page 25.
How will the Transaction affect the net book value of my shares?
Before the Transaction (at June 30, 2003, the end of the most recently completed
fiscal year), the net tangible book value of our common stock was approximately
$0.00 per share. We estimate the net tangible book value of our common stock
immediately after the Transaction will be approximately $0.01 per share. See the
Unaudited Pro Forma Financial Statements at page 19.
Will Tenet have positive cash flow following the Transaction?
After the closing of the Transaction, Tenet will receive monthly payments due
under a promissory note previously delivered to Tenet by Delta Healthcare
Consulting Group, Inc. in the principal amount of $25,700 as well as certain
software license fees, up to $90,000, pursuant to the License Agreement, and
will collect accounts receivable retained as part of the Excluded Assets. We
believe these revenues will exceed the short-term cash obligations of Tenet,
pending its search for potential business opportunities.
What are the federal income tax consequences of the Transaction?
The Transaction alone will not produce any separate and independent federal
income tax consequences directly to you. The Transaction will be taxed to Tenet
as a sale of assets and will result in gain or loss depending on whether the net
proceeds realized from the sale of the various assets exceed our various basis
in those assets, as determined on an asset-by-asset basis. Tenet has sufficient
net operating loss carry forwards to offset any gains and avoid any tax
obligation arising from the Transaction. See "Federal Income Tax Consequences"
at page 25.
5
Who may vote at the Special Meeting?
Only shareholders of record at the close of business on _____________ will
receive notice of and be permitted to vote at the Special Meeting. See "Voting
and Revocation of Proxy" at page 1.
If my broker holds my shares in "street name," will my broker vote my shares for
me?
Your broker will vote your shares at the Special Meeting only if you provide
written instructions on how to vote. You should follow the directions provided
by your broker regarding how to instruct your broker to vote your shares. See
"Quorum, Abstentions and Broker Non-Votes," at page 1.
May I change my vote after I have submitted my proxy?
Yes. You may change your vote before the Special Meeting by:
* Giving notice to us of your changed vote in writing, provided that we must
receive your notice of a change in your vote prior to the Special Meeting;
* Executing and delivering to us prior to the Special Meeting a
subsequently dated proxy; or
* Attending the Special Meeting and giving oral notice of your intention to
vote in person.
You should be aware that simply attending the Special Meeting will not
automatically revoke your proxy. See "Voting and Revocation of Proxy" at page 1.
What shareholder vote is required to approve the Transaction?
The Transaction involves the sale of substantially all of our assets. We will
not proceed with the Transaction unless it is approved by a majority of all
outstanding shares.
How will the Transaction affect management of Tenet?
Tenet and ClinicalVentures have entered into a Management Services Agreement,
providing for ClinicalVentures to manage the operations of our business, pending
the holding of the Special Meeting and the approval of the Transaction by our
shareholders. If the Transaction is completed, all existing employees will be
terminated, except for Linda Gibb, who will provide day-to-day services for
record keeping, collection of accounts and payment of obligations. Other
employees involved in Tenet's product development, maintenance, technical
support and marketing may be hired by ClinicalVentures, as ClinicalVentures
and such employees may determine. Jerry Nelson and Fred Anderson, Tenet's
key management personnel, will remain available to Tenet, to assist it in
evaluating and pursuing new business opportunities.
What will I receive in the Transaction?
You will continue to own your shares of common stock (subject to the reverse
stock split described elsewhere). You will not receive any cash, stock or other
property in connection with, or as result of, the Transaction.
Will the common stock continue to be publicly traded?
Yes. We expect that the common stock will continue to be quoted on the National
Association of Securities Dealers' Over the Counter Bulletin Board (the "OTCBB")
after the Transaction. The OTCBB does not require companies traded thereon to
maintain minimum stockholders' equity.
6
What do I need to do now?
First, read this proxy statement carefully. Then, as soon as possible, you
should submit your proxy by carefully completing, signing, and returning the
enclosed proxy card. Your shares represented by proxy will be voted in
accordance with the instructions you specify on the proxy card. The Board of
Directors recommends that you vote in favor of the Asset Purchase Agreement and
the Transaction. If you submit a proxy card without specifying how your shares
should be voted, they will be voted FOR the approval of the Asset Purchase
Agreement and the Transaction.
Who should I call if I have questions?
If you have questions about the proposals, you may call our President, Jerald L.
Nelson, at (801) 568-0899.
===============================================================================
The Securities and Exchange Commission has not approved or disapproved the
Transaction or passed upon the fairness or merit of the Transaction or the
accuracy or adequacy of this proxy statement. Any representation to the contrary
is unlawful.
7
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
The following table contains information as of July 25, 2003, summarizing
the beneficial ownership of our common stock by (1) each person known to us to
be the beneficial owner of more than 5% of the issued and outstanding common
stock, (2) our executive officers and directors individually, and (3) all
executive officers and directors as a group. Except as stated in the footnotes
to the table, each of these persons exercises sole voting and investment power
over the shares of common stock listed for that person. Except as shown, the
mailing address of the persons listed in the table is our address: 53 West 9000
South, Sandy, Utah 84070.
Name and Address of Beneficial Owner Common(1) Percent of
as of September 27, 2002 Shares
Outstanding(2)
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Michael R. Carlston (3) 4,673,977 24.17%
Dennis C. Peterson (4) 4,220,442 21.83%
Mark Oldroyd (5) 3,975,559 20.56%
Scott Staker (6) 3,975,559 20.56%
T-Acquisition L.L.C. (7) 3,775,559 19.53%
Eric J. Nickerson (8) 2,278,175 11.78%
Third Century II (8) 2,278,175 11.78%
Robert Smith (9) 1,166,246 6.03%
Richard Gwinn (10) 1,004,920 5.20%
Fred J. Anderson (11) 263,212 1.36%
Jerald L. Nelson (12) 1,542,326 7.98%
All Officers and Directors (13) 4,083,713 21.12%
-----------------------------------------------------------------
* Less than one percent.
(1) The number and percentage of shares beneficially owned is determined in
accordance with Rule 13d-3 of the Securities Exchange Act of 1934, and the
information is not necessarily indicative of beneficial ownership for any
other purpose. Under this rule, beneficial ownership includes any shares as
to which the shareholder has sole or shared voting power or investment
power and also any shares that the shareholder has the right to acquire
within 60 days.
(2) Percentages are based on 19,336,213 shares outstanding before the
Transaction. Shares of common stock subject to options that are presently
exercisable or exercisable within 60 days are deemed to be beneficially
owned by the person holding the options for the purpose of computing the
percentage ownership of that person, but are not treated as outstanding for
the purpose of computing the percentage of any other person.
(3) The shares indicated include: 898,418 shares of Common Stock beneficially
owned by Mr. Carlston (including shares owned by his wife and held in trust
for the benefit of his children) and 3,775,559 shares of Common Stock held
by T-Acquisition L.L.C. Mr. Carlson's address is 855 Harwood Dr., Murray,
UT 84107.
(4) Includes 444,883 shares of Common Stock beneficially owned by Mr. Peterson,
and 3,775,559 shares of Common Stock held by T-Acquisition L.L.C. Mr.
Peterson's address is 2508 W. Bueno Vista Dr., W. Jordan, UT 84088.
(5) Includes 200,000 shares of Common Stock beneficially held by Mr. Oldroyd,
including shares held in trust for the Violet Johnson Brown Family Trust.
Also includes 3,775,559 shares of Common Stock held by T-Acquisition L.L.C.
Mr. Oldroyd's address is 55 North 800 West, Provo, UT 84601.
8
(6) Includes 200,000 shares of Common Stock held by Mr. Staker and also
includes 3,775,559 shares of Common Stock held by T-Acquisition L.L.C.
Mr. Staker's address is 880 North 98 West #9, Provo, UT 84604.
(7) A Utah Limited Liability company of which Michael R. Carlston owns or
controls 56.7%, Mark Oldroyd owns or controls 32.1%, Dennis C. Peterson
owns or controls 6.4% and Scott Staker owns or controls 4.8%. The shares
indicated consist of 3,775,559 shares of Common Stock The address of T-
Acquisition L.L.C. is 855 Harwood Dr., Murray, UT 84107.
(8) Includes 2,278,175 shares of Common Stock held by Third Century Fund II.
Mr. Nickerson is Senior Partner of Third Century Fund II. Mr. Nickerson is
also a director of the Company. Mr. Nickerson and Third Century Fund II's
address is 1711 Chateau Ct., Fallston, MD 21047
(9) Includes 1,166,246 shares of Common Stock held by Dr. Smith. Dr. Smith's
address is 2291 Greer Rd., Palo Alto, CA 94303.
(10) Includes 1,004,920 shares of Common Stock held by Dr. Gwinn. Dr. Gwinn's
address is 304 W. Thorn, San Diego, CA 92103.
(11) Includes 263,212 shares of Common Stock held by Mr. Anderson.
(12) Includes 1,542,326 shares of Common Stock. Mr. Nelson's address is 10242
Ashley Hills Circle, Sandy, Utah 84092.
(13) After the Transaction there will be 3 members of this group, including
Messrs. Anderson, Nelson and Erickson.
9
PROPOSAL #1
APPROVAL OF THE ASSET PURCHASE AGREEMENT AND THE TRANSACTION
General
At the Special Meeting, the shareholders will be asked to consider and vote
upon the Asset Purchase Agreement and the Transaction contemplated therein,
including the sale of substantially all of our operating assets (the "Acquired
Assets") but excluding certain cash, accounts receivable, a promissory note
issued by Delta Healthcare Consulting Group, Inc. in the principal amount of
$25,700 (the "Delta Note") and a license agreement by and between Tenet and
ClinicalVentures dated July 18, 2003 and pursuant to which Tenet may be entitled
to certain software license fees up to an aggregate of $90,000 (the "License
Agreement"), as well as certain equipment and furniture being retained by Tenet
(collectively, the "Excluded Assets"), as well as the assumption by
ClinicalVentures of certain of our obligations and liabilities (the "Assumed
Obligations and Liabilities") but excluding certain liabilities to be retained
by Tenet (the "Excluded Liabilities").
The terms of the Transaction are summarized in this proxy statement under
the caption "Description of the Asset Purchase Agreement" beginning on page 13.
For a more detailed understanding of all of the terms of the Transaction you
should carefully read the Asset Purchase Agreement and the attachments and
exhibits to that agreement.
The Parties
Tenet Information Services, Inc
Tenet Information Services, Inc. ("Tenet") is a Utah corporation in the
business of developing, marketing and servicing computerized patient tracking
and information management systems for use in hospitals and other health care
facilities, with a focus on emergency departments, urgent care sites, ambulatory
care departments and same day surgery facilities. Tenet is a publicly held
corporation and its common stock is quoted on the National Association of
Securities Dealers' Over the Counter Bulletin Board under the symbol "TISV." As
of July 7, 2003, we had 19,336,213 shares of common stock issued and
outstanding. Our net sales for the fiscal years ended June 30, 2001, 2002 and
2003 were $0.5 million, $0.7 million and $0.9 million, respectively. As of July
7, 2003, we had approximately 16 customers to whom we have sold our management
systems and with whom we have ongoing maintenance agreements (the "Maintenance
Agreements"). Our customers are located primarily in North America.Our
principal offices are located at 53 West 9000 South, Sandy, Utah 84070; and our
telephone number is (801) 568-0899.
9
ClinicalVentures Information Systems, Inc.
ClinicalVentures, LLC ("ClinicalVentures") is a Delaware corporation
which provides integrated clinical information management systems for clinicians
and the healthcare community. The administrative offices of ClinicalVentures are
located at 3225 South Hardy Drive, Suite 101, Tempe, Arizona 85282, and the
telephone number is (480) 831-7800.
Reasons for the Transaction
We have explored several alternatives for maximizing shareholder value
during the past several years and were able to locate and complete two
significant acquisitions. However, the acquired businesses never developed to
the extent we had hoped, and the market for our common stock has become
increasingly weak. Earlier this year, we sold the assets of our consulting
business. After analyzing the various alternatives, we determined to dispose of
our remaining operations, to allow Tenet to investigate other transactions and
business opportunities that might hold greater prospects for the generation of
value to shareholders. In furtherance of this strategy, we have entered into
the Asset Purchase Agreement with ClinicalVentures.
Our management anticipated that we would receive the best value in exchange
for our operating assets from ClinicalVentures, because our product line
complements the products and services marketed by ClinicalVentures and provides
features not currently provided by ClinicalVentures to its customers. Tenet has
considered other disposition transactions, and our Board has considered at least
one previous offer to purchase substantially all of our operating assets.
However, our Board concluded that the terms of the Transaction as set forth in
the Asset Purchase Agreement are more favorable to Tenet than those contemplated
by the prior offer or available from other contacted parties. We intend to use
the proceeds from this sale of assets, the Delta Note and the License Agreement,
along with the retained cash, receivables and other property to discharge
liabilities (including costs associated with the Transaction) and to pursue
other business opportunities with the ultimate objective of maximizing
shareholder value.
Background Information
Tenet was incorporated on February 24, 1984 by employees of Telemed, a
Delaware corporation, that organized a buyout of Telemed's pulmonary and
respiratory care information services business. In March 1984, we purchased
that business for cash and a promissory note. By 1988, our annual revenue had
grown to $2.4 million and we completed an initial public offering of our common
stock in 1989. By September 15, 1989, 23 hospitals were using our respiratory
care management systems (then referred to as "RCMS") and we employed 23 full and
part-time employees. Over time, with improvements in computer hardware and
performance, the mini computer based RCMS product became dated. The last RCMS
sale was made in January 1991. In 1994 a new senior management team was put
into place.
Effective September 5, 1995, we acquired certain assets of The
International HealthCare Consulting Group ("HCG") including certain accounts
receivable, equipment, software products and other intangible assets. Since
1986 HCG has provided healthcare institutions, mainly hospitals, with consulting
services in the following areas:
* Nurse Staffing and Patient Classification
* Cost Benefit Analysis for Computerized Patient Records (CPR)
* Productivity
* Cost Accounting
* Operations Assessment
* Modeling and Simulation
10
On September 29, 1995, Tenet and National MicroComputer Corporation ("NMC")
approved the terms of an Agreement and Plan of Reorganization (the "Agreement")
pursuant to which NMC was merged with and into Tenet Merger Subsidiary, Inc.,
our wholly-owned subsidiary. NMC developed and marketed an integrated
information management/patient tracking system (EDNet) designed specifically for
use in emergency departments. However, these acquisitions did not result in
significantly increased shareholder value. After we acquired the assets of HCG,
and NMC became our wholly-owned subsidiary, we discontinued the RCMS product
line.
On May 23, 2003, we sold to Delta Healthcare Consulting Group, Inc.
("Delta") the assets relating to the consulting services business previously
conducted by us, pursuant to an Agreement for Sale and Purchase of Assets dated
May 23, 2003.
During the past several years, our management has explored alternatives for
maximizing shareholder value. Among other things, we actively pursued a variety
of acquisitions and strategic alliances, holding active discussions with several
industry participants. In the past several years, Tenet experienced a
significant deterioration in its stock market valuation. During our 2003 fiscal
year, our common stock closed as high as $0.11 on May 15, 2003 and as low as
$0.0001 on January 30, 2003. On July 17, 2003, the day immediately before the
announcement of the plan to sell the business to ClinicalVentures during which
trading in our Common Stock occurred, the closing sale price of our common stock
was $0.03 per share, with a low bid of $0.03 and a high ask of $0.03, on a total
of approximately 6,000 shares traded. These quotations reflect inter-dealer
prices, without retail mark-up, mark-down or commission, and may not represent
actual transactions.
Over the previous several years, the officers of Tenet and ClinicalVentures
have periodically engaged in discussions regarding various potential
business combinations between Tenet and ClinicalVentures.
In November 2002, Jerald Nelson, our President, contacted the President of
ClinicalVentures to renew discussions regarding a potential business
relationship or transaction. In December of 2002, Mr. Nelson and the
ClinicalVentures President met to discuss ClinicalVentures's customer base and
ClinicalVentures's potential need for the products sold by Tenet. During the
course of this meeting, the possible acquisition by ClinicalVentures of Tenet's
operating assets was discussed. On December 6, 2002, ClinicalVentures and Tenet
executed a Confidentiality Agreement in order to begin formal discussions
related to the possible acquisition by ClinicalVentures of Tenet's operating
assets.
Between March and April 2003, our Board of Directors held several meetings
with the ClinicalVentures President to further investigate the possible
acquisition by ClinicalVentures of our operating assets and, on March 3, 2003,
our Board of Directors held a board meeting to consider the possible acquisition
and voted to authorize our management to submit to ClinicalVentures a Letter of
Intent. On March 4, 2003, Tenet and ClinicalVentures executed a non-binding
Letter of Intent outlining the terms of a proposed acquisition. During the
period between March and July 2003, ClinicalVentures engaged in due diligence
related to our business operations, customers, employees and records. During
this same period, the parties continued to negotiate the terms and conditions
of the proposed acquisition.
On July 29, 2003, ClinicalVentures and Tenet executed the Asset Purchase
Agreement and a Management Services Agreement.
The Board of Directors, in consultation with its financial and legal
advisors, carefully considered the terms and conditions of the Transaction as
contained in the Asset Purchase Agreement. In reaching its decision to approve
execution of the Asset Purchase Agreement and Management Services Agreement and
its determination that the Transaction is in the best interest of Tenet and its
shareholders, the Board of Directors carefully considered a number of factors.
The factors considered by the Board of Directors included, among others, the
following:
* Our inability to increase shareholder value based upon our current
business and product lines.
* The fact that the anticipated synergy between our consulting and
patient information and tracking systems segments did not materialize.
* Our history of relatively flat sales.
* Our lack of significant market share within the industry.
* The research and development expenses necessary to maintain a lead
among our industry competitors and the lengthy sales cycle for our
product line.
* The proposed terms and conditions of the Asset Purchase Agreement.
* The fact that the Asset Purchase Agreement requires that the
Transaction be approved by a majority of the outstanding shares of
our common stock.
11
* The Board's view that ClinicalVentures would accept terms more
favorable to Tenet than other potential purchasers due to the
complementary nature of the products marketed by Tenet and
ClinicalVentures.
* The fact that other potential purchasers offered terms less
favorable than those offered by ClinicalVentures.
* The Board's view that the Transaction may facilitate a future
merger with or acquisition of or by an operating business that could
ultimately result in higher shareholder value than was being realized
through our current business.
The Board of Directors believed that overall, because of the lack of
available acceptable alternatives, the risks associated with the Transaction
were outweighed by the benefits of the Transaction.
This discussion of the information and principal factors considered by the
Board of Directors is not intended to be exhaustive. Because of the wide
variety of the factors considered by the Board of Directors in evaluating the
Transaction and the complexity of these matters, the Board of Directors did not
find it practicable to, and did not, quantify or otherwise attempt to assign any
relative weight to the various factors considered.
License Agreement
On July 18, 2003, Tenet and ClinicalVentures executed a software license
agreement (the "License Agreement") pursuant to which ClinicalVentures obtained
a non-exclusive right and license to use our EDNet and ARCNet tracking software
products, and the codes relating thereto (the "Licensed Software"), which
entitles ClinicalVentures to reproduce, use, modify, market and distribute the
Licensed Software for a period of five years from the effective date of the
License Agreement. Pursuant to the License Agreement, ClinicalVentures is
obligated to pay to us 5% of the initial software license fees received by
ClinicalVentures during the first five years following the effective date of
the License Agreement with respect to new sales or licenses of the EDNet and
ARCNet tracking products, or any updates or new versions thereof or other
software products (to the extent such updates, new versions or other products
contain the code transferred to ClinicalVentures in the Transaction which
implements the "tracking feature" included in the EDNet tracking system),
marketed by ClinicalVentures after the effective date of the License Agreement,
up to an aggregate of $90,000. Following the close of the Transaction, we will
retain our right to receive the royalty payments pursuant to the License
Agreement; however, ClinicalVentures will acquire the underlying rights to the
Licensed Software upon closing of the Transaction.
The Transaction
Under the terms of the Asset Purchase Agreement and subject to the approval
of the shareholders at the Special Meeting, we will sell to ClinicalVentures
substantially all of the operating assets of Tenet including those used in the
marketing and sale of health care information systems. Included in the
Transaction will be our ARCNet and EDNet patient tracking and information
systems, certain accounts receivable and certain fixed assets, tangible and
intangible assets, equipment, personal property, material contracts (including
continuing Maintenance Agreements), other current assets, intellectual property,
trademarks, trade names, trade dress and all records related to existing and
prospective customers. ClinicalVentures will also assume certain of the
liabilities of Tenet, including ongoing Maintenance Agreements. The Asset
Purchase Agreement refers to the assets to be acquired by ClinicalVentures as
the "Acquired Assets." The liabilities to be assigned to and assumed by
ClinicalVentures in the Transaction are referred to as the "Assumed
Obligations and Liabilities."
Excluded from the Transaction and retained by Tenet are cash on hand at the
date of closing, a promissory note in the principal amount of $25,700 issued by
Delta Healthcare Consulting Group, Inc. ("Delta") and related Agreement for Sale
and Purchase of Assets executed by Tenet and Delta, the License Agreement,
certain accounts receivable and cash equivalents, the Respiratory Care
Management System and miscellaneous personal property. The Asset Purchase
Agreement refers to the assets to be retained by Tenet in the Transaction as the
"Excluded Assets." Excluded from the Assumed Obligations and Liabilities are
certain trade debts and other obligations described in the Asset Purchase
Agreement. The liabilities described in the Asset Purchase Agreement to be
retained by Tenet in the Transaction are referred to as the "Retained
Liabilities." The Retained Liabilities are estimated to be approximately
$200,000.
12
Description of the Asset Purchase Agreement - Material Terms of the Transaction
This section describes the key provisions of the Asset Purchase Agreement.
This is only a summary and does not include all of the terms or conditions of
the Transaction. You should refer to and review the full text of the Asset
Purchase Agreement attached as Exhibit A to this proxy statement for a more
complete discussion of the terms and conditions of the Transaction.
Purchase and Sale
Tenet will sell and ClinicalVentures will purchase the Acquired Assets.
ClinicalVentures will also accept assignment of the Assumed Obligations and
Liabilities. ClinicalVentures will take final possession of the business at the
closing and will be responsible for all expenses and other liabilities of the
business from that date forward. However, pursuant to that certain Transition
Management Services Agreement by and between Tenet and ClinicalVentures and
dated July 29, 2003, ClinicalVentures will manage the day-to-day operations of
Tenet and the conduct of its business, pending the closing of the Transaction.
Payment of Purchase Price
ClinicalVentures will pay the purchase price for the Acquired Assets by:
* Tendering cash at closing in the amount of $339,000 ($50,000 of such
amount having been deposited into an escrow account, concurrently with
the execution of the Asset Purchase Agreement); and
* Accepting assignment of and responsibility for the Assumed Obligations
and Liabilities.
Employees and Associates
Following the closing of the Transaction, ClinicalVentures is obligated to
extend offers of employment to all but two of our current employees, for
compensation and terms deemed appropriate by ClinicalVentures.
ClinicalVentures also will assume Tenet's rights and obligations in and to
continuing Maintenance Agreements and all customer accounts (with the exception
of those accounts receivable included as part of the Excluded Assets). It is
anticipated that there will be no interruption in the performance by
ClinicalVentures of the Maintenance Agreements.
Indemnification
The parties have agreed to indemnify each other for a period of one year
from the date of closing of the Transaction for liabilities directly or
indirectly relating to, resulting from or arising out of any untrue
representation, misrepresentation, breach of warranty or non-fulfillment of any
covenant, agreement or other obligation by or of the indemnifying party under
the Asset Purchase Agreement. The indemnification obligations will not
terminate at the end of the one year period as to any item as to which an
indemnified person has made a claim by delivering notice of the claim before the
expiration of the indemnification period. For the purposes of the
indemnification provisions of the asset purchase agreement, the representations
and warranties of the parties in the agreement will survive the closing for a
period of one year. No claim for indemnification can be made unless the amount
of all claims for which a party seeks indemnification exceeds $20,000, and no
claims for indemnification can be made against any party in amounts exceeding
$500,000. Indemnification as provided in the Asset Purchase Agreement will be
the exclusive remedy of the parties with respect to claims arising under the
Asset Purchase Agreement or with respect to the Transaction, except for claims
for fraud, for failure to make any payments due under the Asset Purchase
Agreement, or for a violation of Seller's covenant not to compete as set forth
in the Asset Purchase Agreement.
Representations and Warranties
The Transaction contemplates that the Acquired Assets will be sold on an
"as is, where is" basis. We made limited representations and warranties to
ClinicalVentures in the Asset Purchase Agreement and will renew them at the
closing, including those relating to:
* Corporate organization and similar corporate matters;
* Authorization, execution, delivery, performance and enforceability
of, and any required consents, approvals and authorizations relating
to, the Asset Purchase Agreement and the related agreements;
13
* Absence of conflict with, violation or breach of, or default under
the articles of incorporation, bylaws and contracts and applicable
laws in connection with the Transaction, the Asset Purchase Agreement
and the related agreements;
* Absence of undisclosed liabilities and material adverse events that
would prevent the consummation of the Transaction;
* Status of Acquired Assets;
* Accuracy of reports filed by Tenet with the Securities and Exchange
Commission;
* Status of Intellectual Property Rights;
* Absence of Material Adverse Changes; and
* Absence of Obligation to Pay Broker Fees and Expenses.
ClinicalVentures made limited representations and warranties to us in the
Asset Purchase Agreement and will renew them at the closing, including
those relating to:
* Corporate organization and similar corporate matters;
* Authorization, execution, delivery, performance and enforceability
of, and any required consents, approvals and authorizations relating
* to, the Asset Purchase Agreement and the related agreements;
* Absence of conflict with, violation or breach of, or default under the
certificate of incorporation, bylaws and contracts and applicable laws
in connection with the Asset Purchase Agreement and the related
agreements;
* Government consents;
* Fees and Expenses; and
* Satisfactory Completion of Due Diligence.
Pre-Closing Covenants
The parties have agreed that during the period between the execution date
of the Asset Purchase Agreement and the closing of the Transaction or earlier
termination of the Asset Purchase Agreement:
* The parties will promptly advise each other of any event that would
render a representation or warranty untrue or any breach of a
covenant or obligation under the Asset Purchase Agreement;
* The parties will confer with each other regularly and frequently to
report material operational matters and the status of the business;
* The parties will use their reasonable best efforts to satisfy the
conditions to closing of the Transaction;
* ClinicalVentures will promptly advise Tenet of any condition or event
that would adversely affect the Transaction or ClinicalVentures's
ability to conclude the Transaction;
* Tenet will promptly advise ClinicalVentures of any of the following:
14
* Governmental or third-party complaints, investigations, litigation
or hearings related to the business, the Acquired Assets or
Assumed Obligations and Liabilities;
* Material deterioration in Tenet's relationship with a customer,
supplier, distributor, associate or key employee;
* Breach by Tenet of any material agreement to which Tenet is a
party;
* A condition or event which would have a material adverse effect
on the business;
* Pursuant to the Management Services Agreement, ClinicalVentures is
required to maintain the business and to preserve the business
relationships of Tenet with its customers, suppliers, licensors,
licensees, employees, consultants and others with whom it has business
dealings in connection with the business;
* Tenet will file any applications, notifications or other filings for
any necessary regulatory approvals required in connection with the
consummation of the Transaction;
* The parties will use their reasonable efforts to take all actions and
to do all things necessary or advisable, and to remove any impediments
in order to consummate the Transaction, including obtaining all
necessary consents and approvals;
* Tenet will allow ClinicalVentures and its advisors and agents access
at reasonable times to the files, books, records, technology, offices,
accountants and the Acquired Assets;
* The parties will not use or disclose each other's confidential
information except as provided in the Asset Purchase Agreement;
* Tenet will call the Special Meeting and will use its reasonable best
efforts to secure shareholder approval of the Asset Purchase Agreement
and the Transaction at the Special Meeting and Tenet will include in
this Proxy Statement the Board of Directors' recommendation that the
shareholders approve the Transaction and the Asset Purchase Agreement;
and
* Neither party will publicly disclose the Asset Purchase Agreement or
the Transaction except as agreed by the parties or required by law.
The Special Meeting
The Transaction is a sale of substantially all of our operating assets and
certain specified liabilities. Certain of our assets will be retained by Tenet
and excluded from the Transaction. Approval of the shareholders is required
before consummating the Transaction. Tenet has agreed to take all necessary
action to prepare this proxy statement, cause it to be mailed to the
shareholders at the earliest practicable time following the execution date of
the Asset Purchase Agreement and to convene the Special Meeting seeking approval
of the Asset Purchase Agreement and the Transaction as promptly as practicable
(including the filing and mailing of the proxy statement).
A quorum will be deemed present for all purposes at the Special Meeting if
there are represented, either in person or by proxy, a majority of the issued
and outstanding shares of common stock. We will proceed with the Transaction
only if a quorum is present and the Asset Purchase Agreement and Transaction are
approved by the affirmative vote of a majority of all issued and outstanding
shares.
Cumulative Voting and Dissenters' Rights
There is no cumulative voting, each share counts as one vote.
Shareholders are entitled to dissenters' rights in connection with the
Transaction. Dissenters' rights allow shareholders to dissent from the sale of
substantially all of Tenet's assets and to receive a fair cash payment for their
shares. In connection with a disposition of all or substantially all of the
assets of a Utah corporation (other than in the ordinary course of the
corporation's business), a dissenting shareholder, after complying with the
15
procedures described in the section titled "Dissenters' Rights As A Result of
the Sale of Substantially All of Tenet's Assets," on page 25 below, is entitled
to payment from the corporation of the fair value of the shareholder's shares.
The fair value is estimated by the corporation. However, if the shareholder is
unwilling to accept the corporation's estimate, the shareholder may provide the
corporation with an estimate of the fair value and demand payment of that
amount. If the corporation is unwilling to pay that amount, the corporation is
required to apply for judicial determination of the fair value.
The Closing
The closing of the Transaction is expected to occur following the
satisfaction or waiver of all of the conditions to each party's obligations
under the Asset Purchase Agreement. The parties anticipate that the closing will
occur promptly following receipt of the requisite shareholder approval at the
Special Meeting.
Conditions to Closing
The Asset Purchase Agreement provides that the obligation of
ClinicalVentures to consummate the Transaction is subject to the satisfaction
or waiver of the following conditions:
* Tenet shall have performed in all material respects all of its
covenants and obligations in the Asset Purchase Agreement;
* The representations and warranties of Tenet shall be true and
correct in all material respects as of the closing date;
* All liens and encumbrances on the Acquired Assets shall be
removed, except for the liens relating to the Assumed Obligations
and Liabilities;
* There will be no material adverse effect on the business of Tenet
and Tenet's base of customers purchasing on a continuing basis
shall not have been reduced by more than 15%;
* All actions taken by Tenet in connection with the Transaction,
and all required certificates, opinions, instruments and other
documents will be reasonably satisfactory to ClinicalVentures;
* There shall be no threatened, instituted or pending litigation
concerning the ownership or operation by Tenet of any material
portion of the acquired assets or the business or seeking the
divestiture by Tenet of any of the acquired assets; and there
shall be no other legal restraints by any governmental authority
applicable to the acquired assets that could result in
such consequences; and
* Tenet shall have delivered the acquired assets and delivered all
other documents required to be delivered to ClinicalVentures under
the Asset Purchase Agreement.
The obligation of Tenet to close the Transaction is subject to the
satisfaction or waiver of the following conditions:
* ClinicalVentures shall have performed in all material respects all
of its covenants and obligations in the Asset Purchase Agreement;
* The representations and warranties of ClinicalVentures shall be true
and correct in all material respects as of the closing date;
* ClinicalVentures shall have delivered the purchase price and all
other documents to be delivered by it under the Asset Purchase
Agreement; and
* All actions taken by ClinicalVentures in connection with the
Transaction, and all required certificates, opinions, instruments
and other documents will be reasonably satisfactory to Tenet.
The obligation of Tenet and ClinicalVentures to consummate the closing is
subject to the satisfaction or waiver by both parties of the following
conditions:
16
* The execution of the Management Services Agreement on or before
July 31, 2003. Upon execution of the Management Services Agreement,
all conditions to the closing (except the shareholder vote) shall
be deemed to be satisfied or waived.
* No provision of any applicable law or regulation and no judgment,
injunction, order or decrees shall prohibit, restrain, enjoin or
restrict the consummation of the Transaction;
* No lawsuits or proceedings shall be pending or threatened against
either party which might restrict or materially adversely affect
the operation of Tenet's business or the consummation of the
Transaction;
* The parties shall have received all authorizations, consents and
approvals of governmental agencies and third parties required to
carry out the Transaction; and
* The shareholders of Tenet holding a majority of the issued and
outstanding common stock of Tenet shall have approved the Asset
Purchase Agreement and the Transaction, and no shareholder of
Tenet shall have threatened or commenced any action to prevent
or restrict the Transaction.
Impact of Management Services Agreement on the Conditions to Closing
As a result of the execution of the Management Services Agreement, all
conditions to the closing are deemed to have been satisfied or waived, except
for the requirement of receipt of the requisite vote of Tenet shareholders to
approve the Asset Purchase Agreement and the Transaction.
Covenant Against Competition
Pursuant to the Asset Purchase Agreement, Tenet has agreed that for a
period of one year following the closing date of the Transaction and thereafter
until the earlier of (i) the fifth anniversary of the closing date of the
Transaction; (ii) such date as the License Agreement has been terminated, or
(iii) such date as ClinicalVentures has failed to sell any products for which a
royalty would be payable to Tenet under the License Agreement for a period of
three consecutive quarters, Tenet will not contact any of the healthcare
organizations that were customers of Tenet prior to the closing date for the
purpose of soliciting orders or establishing relationships for any business
enterprise that competes with ClinicalVentures in the marketing of healthcare
information management systems and in providing computerized patient tracking
and information management systems for use in hospitals and other health care
facilities, with a focus on emergency departments, urgent care sites, ambulatory
care departments and same day surgery facilities.
Termination
The parties may terminate the Asset Purchase Agreement by mutual agreement.
In addition, either party may terminate the Asset Purchase Agreement if:
* Shareholders holding a majority of our issued and outstanding
Common Stock do not vote in favor of the Transaction and the Asset
Purchase Agreement; or
* The other party has committed a material breach of its
representations, warranties or covenants in any material respect
and has not cured the breach within 15 business days following
receipt of notice of termination given by the other party.
OUR MANAGEMENT FOLLOWING THE TRANSACTION
Effective upon closing of the Transaction, our directors and executive
officers will be as follows:
Name Age Position with the Company
----------------------------------------------------------------
Jerald L. Nelson 60 Chairman of the Board, Director,
President, Corporate Treasurer
Fred J. Andereson 57 Director, Chief Operating Officer
and Corporate Secretary
Eric J. Nickerson 50 Director
Jerald L. Nelson. Jerald L. Nelson has served as a director, president and
chief operating officer of the Company since December 1993. Effective July 10,
1996, Dr. Nelson was appointed Chairman of the Board of Directors, and
17
relinquished his positions as President and Chief Operating Officer. On June 5,
2001 the board elected Dr. Nelson to the position of Corporate Secretary, a
position Dr. Nelson held until May 2, 2003. The Board re-elected Dr. Nelson as
President, effective May 2, 2003. Dr. Nelson received his Ph.D. in Economics
from North Carolina State University in 1974. From 1974 to 1984, Mr. Nelson
worked or consulted with several Fortune 500 firms, including US Industries,
TransWorld Airlines, GTE, Xerox, Pitney Bowes and General Foods. From 1984
until December 1993, Mr. Nelson worked with various businesses as an investment
banker and business advisor. He has also consulted with or served on the Board
of Directors of numerous Utah firms including Arrow Dynamics, Beacon Financial,
Interwest Home Medical, Gentner Communications and One-2-One Communications,
where he also served as chairman and chief executive officer.
Eric J. Nickerson. Eric J. Nickerson has served as a director since June of
1990. Mr. Nickerson was a member of the faculty of the United States Military
Academy at West Point, New York from 1989 to 1993. In June 1993, Mr. Nickerson
retired as a United States Air Force officer. Currently, Mr. Nickerson is a
private investor and directs personal accounts and two investing partnerships:
"Third Century II" and "Z Fund."
Fred J. Anderson. Fred J. Anderson has served as a director since May 23, 2003.
The Board elected Mr. Anderson to serve as Tenet's Chief Operating Officer and
Corporate Secretary effective May 2, 2003. Mr. Anderson served as Tenet's
Chairman of the Board from May 1992 until July 1995, when he resigned to manage
his family's land and livestock interests. Mr. Anderson also served as the Chief
Financial Officer of Tenet from 1986 until 1996. From 1980 until 1984, Mr.
Anderson served as Vice President for Mountain States Resources. He received
his BS in Accounting and an MBA from Utah State University.
OUR BUSINESS FOLLOWING THE TRANSACTION
If the Asset Purchase Agreement and Transaction are approved and
consummated, management and the Board of Directors of Tenet will actively seek
another operating business or business opportunity for Tenet to acquire, invest
in or participate in. We cannot estimate at this time what form any such
transaction might take, and there can be no assurances that Tenet will be able
to negotiate and complete any such transaction. Even if such a transaction is
completed, there can be no assurances that the market price of Tenet's common
stock will improve thereafter. Tenet estimates that following the closing it
will have sufficient capital to meet its obligations pending completion of such
a transaction for a period of at least five years. No efforts have been or will
be made before the closing to implement our new business purpose.
The role of Tenet's management following a purchase or other transaction
cannot be stated with any certainty. Although it will be management's intent to
scrutinize closely the management of a prospective target business in connection
with its evaluation of a business combination with a target business, there can
be no assurance that the assessment of management will prove to be correct.
The time and costs required to select and evaluate a target business
(including conducting a due diligence review) and to structure and consummate
the business combination (including negotiating and documenting relevant
agreements and preparing requisite documents for filing pursuant to applicable
corporate and securities laws) cannot be determined at this time. Any costs
incurred in connection with the identification and evaluation of a prospective
target business with which a business combination is not ultimately consummated
will result in a loss to us and reduce the amount of capital available to
otherwise complete a business combination or for the resulting entity to
utilize.
As a general rule, federal and state tax laws and regulations have a
significant impact upon the structuring of acquisitions and business
combinations. We expect that Tenet will evaluate the possible tax consequences
of any prospective business combination and will endeavor to structure a
business combination so as to achieve the most favorable tax treatment to us,
the target business and our respective shareholders. There can be no assurance
that the other parties to a transaction or the Internal Revenue Service or
relevant state tax authorities will ultimately assent to Tenet's tax treatment
of a particular business transaction. To the extent the Internal Revenue
Service or any relevant state tax authorities ultimately prevail in
recharacterizing the tax treatment of a business combination, there may be
adverse tax consequences to Tenet, the target business, and their respective
shareholders.
18
A potential business transaction might be carried out by purchasing the
securities of a target company or business. However, we do not intend to engage
primarily in trading or selling securities. Specifically, we expect that Tenet
will conduct its business so as to avoid being classified as an "investment
company" under the Investment Company Act of 1940, and therefore avoid
application of the costly and restrictive registration and other provisions of
the Investment Company Act and related regulations.
Section 3(a) of the Investment Company Act excepts from the definition of
an "investment company" an entity which does not engage primarily in the
business of investing, reinvesting or trading in securities, or which does not
engage in the business of investing, owning, holding or trading "investment
securities" (defined as "all securities other than government securities or
securities of majority-owned subsidiaries") the value of which exceeds 40% of
the value of its total assets (excluding government securities, cash or cash
items). Tenet intends to implement our business plan in a manner which will
result in the availability of this exception from the definition of an
investment company. Consequently, Tenet's acquisition of a company or business
through the purchase and sale of investment securities will be limited.
Although Tenet intends to act to avoid classification as an investment company,
the provisions of the Investment Company Act are extremely complex and it is
possible that Tenet may be classified as an inadvertent investment company.
Tenet will vigorously resist classification as an investment company, and
endeavor to take advantage of any exemptions or exceptions from application of
the Investment Company Act, which allows an entity a one-time option during any
three-year period to claim an exemption as a "transient" investment company. The
necessity of asserting any such resistance, or making any claim of exemption,
could be time consuming and costly, or even prohibitive, given our limited
resources.
Tenet will continue to be subject to the reporting requirements under the
Exchange Act. Among other things, those requirements include the obligation, in
the event significant acquisitions take place, to furnish information including
audited financial statements for the acquired company covering one, two or three
years depending upon the relative size of the acquisition. Consequently,
acquisition prospects that do not have or are unable to obtain the required
audited financial statements may not be deemed appropriate for acquisition by
our board of directors so long as the reporting requirements of the Exchange Act
are applicable. Various impediments to an acquisition of a business or company
or a merger may arise such as appraisal rights afforded the shareholders of a
prospective acquisition or merger partner under the laws of the state of
organization of the prospective acquisition company. This may prove to be a
deterrent to a particular combination.
SECURITIES EXCHANGE REPORTING AND OTCBB MARKET LISTING
Following the Transaction, we intend to maintain our status as a reporting
company under the Securities Exchange Act of 1934, as well as the listing of our
common stock with the National Association of Securities Dealers' Over the
Counter Bulletin Board (the "OTCBB").
ACCOUNTING TREATMENT
The Transaction will be treated as a purchase under generally accepted
accounting principles. Upon consummation of the Transaction, we will recognize
receipt of cash in the amount of $339,000, remove the net assets sold from the
consolidated balance sheet, and record the gain or loss on the Transaction, net
of Transaction and other related costs, including applicable state and federal
income taxes, in our consolidated statements of earnings.
UNAUDITED PRO FORMA FINANCIAL STATEMENTS
The following unaudited pro forma condensed consolidated financial
statements are presented to illustrate the effects of the sale of our consulting
business to Delta Healthcare Group, Inc. (the "Delta Disposition"), and the
effects of the consummation of the Transaction, on our historical financial
position and operating results. (The Delta Disposition and the Transaction are
collectively referred to in these unaudited pro forma condensed consolidated
financial statements as the "Dispositions.")
The following unaudited pro forma condensed consolidated balance sheet of
Tenet at March 31, 2003 gives effect to the Dispositions as if they had occurred
on that date. The unaudited pro forma condensed consolidated statements of
operations for the nine months ended March 31, 2003 and for the year ended June
30, 2002 give effect to the Dispositions as if they had occurred as of the
beginning of the earliest period presented.
19
The unaudited pro forma condensed consolidated financial statements have
been derived from, and should be read in conjunction with, our historical
consolidated financial statements, including the accompanying notes. Those
financial statements are included in our Quarterly Report on Form 10-QSB for the
three months ended March 31, 2003 and our Annual Report on Form 10-KSB for the
year ended June 30, 2002, included with this Proxy Statement as Exhibits G and
D, respectively.
The unaudited pro forma condensed consolidated financial statements are
presented only for informational purposes. As a result, the accompanying
unaudited pro forma condensed consolidated financial statements are not
necessarily indicative of our financial position or results of operations that
would have occurred had the Dispositions been consummated as of the dates
indicated.
20
Tenet Information Services, Inc.
Condensed Consolidated Balance Sheet
as of March 31, 2003
(UNAUDITED)
Pro forma Pro forma
adjustments for for
Tenet Delta Disposition Transaction Pro-Forma
(a) (b) (c) Tenet
----------- --------------- ------------ ----------
ASSETS
Current Assets
Cash $ 116,265 $ - $ 189,000 (7) $ 305,265
Accounts receivable 138,236 (97,219) (1,2) (15,317)(8) 25,700
Work performed
in excess of 42,216 (6,847) (3) (35,369)(8) 0
billings
Prepaid expenses 0 0 0 0
----------- --------- ---------- -----------
Total Current
Assets 296,717 (104,066) 138,314 330,965
Property and
Equipment
Equipment 136,058 (22,950) (3) (104,608) (8) 8,500
Less:
Accumulated
depreciation (120,031) 17,157 (3) 97,874 (8) (5,000)
----------- --------- --------- -----------
Net Property and
Equipment 16,027 (5,793) (6,734) 3,500
Other Assets
Trademarks & deposits 3,575 (1,425) (3) 0 2,150
----------- --------- --------- -----------
Total Other Assets 3,575 (1,425) 0 2,150
Total Assets $ 316,319 $(111,284) $ 131,580 $ 336,615
========== ========= ========= ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 149,306 $ (89,168) (4,5) (8,337)(9) $ 51,801
Accrued expenses 83,365 (29,680) (4,5) (22,143)(9) 31,542
Accrued interest 10,649 0 0 10,649
Amounts due to related
parties 48,071 (4,952) (5) 0 43,119
Deferred revenue 132,325 0 (132,325)(10) 0
Billings in excess of
costs and estimted
earnings on uncompleted
contracts 106,635 (56,325) (4) (50,310)(10) 0
Total Current
Liabilities 530,351 (180,125) (213,115) 137,111
Stockholders' Equity
Common stock, $0.001 19,336 0 0 19,336
par value, 100,000
shares authorized;
19,065,892 shares
outstanding
Additional paid-in
capital 4,853,896 0 0 4,853,896
Retained deficit (5,087,264) 68,841 (6) 344,695 (11) (4,673,728)
----------- --------- ---------- -----------
Total Stockholders'
Equity (214,032) 68,841 344,695 199,504
----------- --------- ---------- -----------
Total Liabilties and
Stockholders' Equity $ 316,319 $(111,284) $ 131,580 $ 336,615
========== ========= ========== ===========
See accompanying Notes to Unaudited Pro Forma Condensed Consolidated Balance
Sheet
21
Tenet Information Services, Inc. and Subsidiary
Notes To Unaudited Pro Forma Condensed Consolidated Balance Sheet
As of March 31, 2003
(Unaudited)
(a) Reflects Tenet's historical financial position at March 31, 2003.
(b) Pro forma adjustments to record the Delta Disposition as of March 31, 2003
reflect:
(1) consideration paid by Delta to Tenet in the form of a note receivable
in the amount of $25,700;
(2) the exclusion of $124,719 in receivables related to our consulting
business. We collected the receivables before the consummation of the Delta
Disposition;
(3) the exclusion of various assets related to the consulting business;
(4) the exclusion of various liabilities related to the consulting
business;
(5) consideration paid by Delta to Tenet in the form of debt forgiveness
of i) accounts payable of $38,551 of expenses owed by Tenet to Frank C.
Overfelt, a former director and executive officer of Tenet, ii) accrued expenses
of $10,527 of vacation and compensation amounts owed by Tenet to Mr. Overfelt,
and iii) amounts due to related parties of $4,952 in a note payable owed by
Tenet to a company owned by Mr. Overfelt, for a total forgiveness of debt by
Delta of $54,030;
(6) the gain recognized on the consummation of the Delta Disposition.
(c) Pro forma adjustments to record the Transaction as of March 31, 2003
reflect:
(7) consideration paid by ClinicalVentures to Tenet in the form cash
totaling $339,000 less $150,000 that we estimate would be required to pay
expenses associated with completion of various contracts to be assumed
by ClinicalVentures pursuant to the Transaction;
(8) the exclusion of various assets to be acquired by ClinicalVentures
upon closing of the Transaction;
(9) the exclusion of various liabilities to be assumed by ClinicalVentures
upon closing of the Transaction;
(10) the recognition of completion of various contracts associated with the
assets to be acquired by ClinicalVentures upon closing of the Transaction;
(11) the gain recognized on the consummation of the Transaction.
22
Tenet Information Services, Inc. and Subsidiary
Pro Forma Condensed Consolidated Statements of Operations
For the Year Ended June 30, 2002
(Unaudited)
Pro Forma Pro Forma
adjustments adjustments
for Delta for
Tenet Diposition Transaction Pro Forma
(a) (b) (c) Tenet
--------- ---------- ---------- --------
Revenue $ 717,005 $ (249,463) $ (467,542) $ 0
Expenses
Cost of Revenue 365,132 (139,927) (225,205) 0
Selling, general, 178,015 (196,163) 61,608 43,460
and administrative
expenses
Software development 104,658 0 (104,658) 0
--------- ---------- ---------- --------
Total Expenses 647,805 (336,090) (268,255) 43,460
--------- ---------- ---------- --------
Net Gain / (Loss) 69,200 86,627 (199,287) (43,460)
from Operations
Other Income /
(Expense)
Interest expense (20,446) 0 15,646 (4,800)
Interest income 511 0 0 511
--------- ---------- ---------- --------
Total Other (19,935) 0 15,646 (4,289)
Income/(Expense)
Gain / (Loss) before 49,265 86,627 (183,641) (47,749)
income taxes and
extraordinary item
Income taxes 0 0 0 0
Gain / (Loss) before 49,265 86,627 (183,641) (47,749)
extraordinary item
Forgiveness of debt 21,625 0 0 21,625
--------- ---------- ---------- --------
Net Income / (Loss) $ 70,890 $ 86,627 $ (183,641) $(26,124)
========= ========== ========== ========
See accompanying Notes to Unaudited Pro Forma Condensed Consolidated Statements
of Operations
23
Tenet Information Services, Inc. and Subsidiary
Pro Forma Condensed Consolidated Statements of Operations
For the Nine Months Ended March 31, 2003
(Unaudited)
Pro Forma Pro Forma
adjustments adjustments
for Delta for
Tenet Diposition Transaction Pro Forma
(a) (b) (c) Tenet
--------- ---------- ---------- --------
Revenue $ 663,061 $ (239,692) $ (423,369) $ 0
Expenses
Cost of Revenue 355,002 (225,222) (129,780) 0
Selling, general, 204,207 (60,102) (110,085) 34,020
and administrative
expenses
Software 88,254 0 (88,254) 0
development
--------- ---------- ---------- --------
Total Expenses 647,463 (285,324) (328,119) 34,020
--------- ---------- ---------- --------
Net Gain / (Loss) 15,598 45,632 (95,250) (34,020)
from Operations
Other Income /
(Expense)
Interest expense (13,811) 0 10,211 (3,600)
Interest income 0 0 0 0
--------- ---------- ---------- --------
Total Other (13,811) 0 10,211 (3,600)
Income/(Expense)
--------- ---------- ---------- --------
Gain / (Loss) before
income taxes and 1,787 45,632 (85,039) (37,620)
extraordinary item
Income taxes 0 0 0 0
--------- ---------- ---------- --------
Gain / (Loss) before 1,787 45,632 (85,039) (37,620)
extraordinary item
Forgiveness of debt 0 0 0 0
--------- ---------- ---------- --------
Net Income / (Loss) $ 1,787 $ 45,632 $ (85,039) $(37,620)
========= ========== ========== ========
See accompanying Notes to Unaudited Pro Forma Condensed Consolidated Statements
of Operations
Tenet Information Services, Inc. and Subsidiary
Notes To Unaudited Pro Forma Condensed Consolidated Statements of Operations
For the Nine Months Ended March 31, 2003 and
the Year Ended June 30, 2002
(Unaudited)
(a) Reflects Tenet's historical operating results for the nine months ended
March 31, 2003 and for the year ended June 30, 2002.
(b) Pro forma adjustments to record the Delta Disposition for the nine months
ended March 31, 2003 and for the year ended June 30, 2002.
(c) Pro forma adjustments to record the Transaction for the nine months ended
March 31, 2003 and for the year ended June 30, 2002.
24
FEDERAL INCOME TAX CONSEQUENCES
The proposed sale of operating assets of Tenet by itself will not produce
any separate and independent federal income tax consequences to the shareholders
of Tenet.
Any gain or loss on the sale from the Transaction will be taxable to Tenet.
We will recognize gain or loss based on the difference between the amount of the
purchase price allocated to the assets and our tax basis in the assets. For
purposes of determining the amount realized with respect to specific assets, the
total amount realized by us will generally be allocated among the assets
according to the rules prescribed under Section 1060(a) of the Internal Revenue
Code of 1986, as presently in effect. Our basis in the assets sold is less than
the cost of the assets, as adjusted for certain temporary differences, such as
depreciation, deferred profit on inter-company sales and asset and liability
provisions. The determination of whether gain or loss is recognized will be made
with respect to each of the assets included in the Transaction. Accordingly, we
may recognize gain on the sale of some of the assets and a loss on the sale of
others, depending on the amount of consideration allocated to an asset as
compared with the basis of that asset. However, it is anticipated that we will
have no tax liability in connection with the Transaction, due to our excess net
operating loss carry forwards.
DISSENTERS' RIGHTS AS A RESULT OF THE SALE
OF SUBSTANTIALLY ALL OF TENET'S ASSETS
Our shareholders will have dissenters' rights under Utah law in connection
with the Transaction. As a result of the Transaction shareholders who oppose
the Transaction will have the right to receive payment for the value of their
shares as set forth in sections 16-10(a)-1301 et. seq. of the Utah Code. A copy
of these sections is attached as Exhibit C to this proxy statement. The material
requirements for a shareholder to properly exercise his or her rights are
summarized below. However, these provisions are very technical in nature, and
the following summary is qualified in its entirety by the actual statutory
provisions that should be carefully reviewed by any shareholder wishing to
assert such rights.
Under the Utah Code, such dissenters' rights will be available only to
those shareholders of the Company who
(i) object in writing to the proposed Transaction prior to or at the
Special Meeting before the vote on the matter is taken, which
objection must notify Tenet that the shareholder intends to demand
payment for his, her or its shares if the proposed action is
effectuated; and
(ii) do not vote any of their shares in favor of the proposed
Transaction at the Special Meeting.
Failure to vote against the proposal to approve the Transaction and the Asset
Purchase Agreement will not constitute a waiver of your appraisal rights.
However, voting against the proposal to approve the Transaction and the Asset
Purchase Agreement is not sufficient to satisfy the notice requirements you must
satisfy under Utah law in order to perfect your dissenters' rights. In order to
be entitled to exercise your dissenters' rights, you must have been a
shareholder with respect to the shares for which payment is demanded as of the
date of the proposed corporate action creating dissenters' rights is approved by
the shareholders; that is, prior to the Special Meeting.
Within ten days after the effective date of the Transaction, Tenet will
send to each shareholder who has satisfied both of the foregoing conditions a
written notice in which Tenet will notify such shareholders of their right to
demand payment for their shares and will supply a form for dissenting
shareholders to demand payment. Shareholders will have 30 days to make their
payment demands or lose such rights. If required in the notice, each dissenting
shareholder must also certify whether or not he or she acquired beneficial
ownership of such shares before or after the date of the first announcement to
the news media of the proposed transaction.
Upon receipt of each demand for payment, Tenet will pay each dissenting
shareholder the amount that Tenet estimates to be the fair value of such
shareholder's shares, plus interest from the date of the completion of the
Transaction to the date of payment. With respect to any dissenting shareholder
who does not certify that he or she acquired beneficial ownership of the shares
prior to the first public announcement of the transaction, Tenet may, instead of
making payment, offer such payment if the dissenter agrees to accept it in full
satisfaction of his or her demand. "Fair value" means the value of the shares
immediately before the effectuation of the Transaction, excluding any
appreciation or depreciation in anticipation of such events.
25
Any dissenter who does not wish to accept the payment or offer made by
Tenet must notify Tenet in writing of his or her own estimate of the fair value
of the shares within 30 days after the date Tenet makes or offers payment. If
the dissenting shareholder and Tenet are unable to agree on the fair value of
the shares, then Tenet will commence a proceeding with the Utah courts within 60
days after receiving the dissenter's notice of his, her or its own estimate of
fair value. If Tenet does not commence such a proceeding within the 60-day
period, it must pay each dissenter whose demand remains unresolved the amount
demanded by such dissenter. If a proceeding is commenced, the court will
determine the fair value of the shares and may appoint one or more appraisers to
help determine such value. All dissenting shareholders must be a party to the
proceeding, and all such shareholders will be entitled to judgment against Tenet
for the amount of the fair value of their shares, to be paid on surrender of the
certificates representing such shares. The judgment will include an allowance
for interest (at a rate determined by the court) to the date of payment.
The costs of the court proceeding, including the fees and expenses of any
appraisers, will be assessed against Tenet unless the court finds that the
dissenters acted arbitrarily, vexatiously or not in good faith in demanding
payment at a higher amount than that offered by Tenet. Both Tenet and the
dissenters must bear their own respective legal fees and expenses, unless the
court requires one party to pay such legal fees and expenses because of the
conduct of such party. The loss or forfeiture of appraisal rights simply means
the loss of the right to receive a cash payment from Tenet in exchange for
shares. In such event the shareholder would still hold the appropriate number of
shares of Tenet.
===============================================================================
Recommendation of the Board of Directors
The Board of Directors has determined that the Transaction is in the best
interests of Tenet. The Board of Directors has unanimously approved the Asset
Purchase Agreement and the Transaction and unanimously recommends that you vote
in favor of the proposal to approve the Asset Purchase Agreement and the
Transaction.
Vote Required
The Transaction will constitute a sale of substantially all of our assets.
The Board of Directors has determined that we will proceed with the Transaction
only if the Asset Purchase Agreement and the Transaction are approved by a
majority of all issued and outstanding shares.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
FOR THE PROPOSAL TO APPROVE THE ASSET PURCHASE AGREEMENT
AND THE TRANSACTION.
PROPOSAL #2
APPROVAL OF THE WRITTEN CONSENT RESOLUTIONS
Our Board of Directors has unanimously approved, and recommends that our
shareholders approve, resolutions authorizing our shareholders to act by the
written consent of fewer than all shareholders entitled to vote with respect to
the action, to the fullest extent permitted by applicable Utah corporate law
(the "Written Consent Resolutions").
Currently, Section 704 of the Utah Revised Business Corporation Act (the
"Revised Act") permits action to be taken by the written consent of shareholders
having not less than the minimum number of votes that would be necessary to
authorize or take the action at a meeting at which all shares entitled to vote
thereon were present and voted (subject to specified restrictions, including but
not limited to the election of directors of a corporation). However, Section
1704(4) of the Revised Act specifies that the provisions of Section 704 may not
operate to permit a corporation in existence prior to July 1, 1992 (and thus
having been subject to the provisions of the Utah Business Corporation Act which
only permitted action by written consent of all shareholders entitled to vote on
an issue) to take action by written consent of fewer than all shareholders
entitled to vote with respect to a matter, until a resolution providing
otherwise is approved by the shareholders, either by unanimous written consent
or at a duly convened meeting.
26
In compliance with Section 1704(4) of the Revised Act, the Board of
Directors recommends that the shareholders approve and adopt the following
Written Consent Resolutions:
RESOLVED: That the shareholders of the corporation resolve to permit
any action which may be taken at any annual or special meeting of
shareholders to be taken without a meeting, as permitted by Section 704 of
the Utah Revised Business Corporation Act (the "Revised Act").
RESOLVED FURTHER: That to the maximum extent permitted by Section 704
of the Revised Act, without regard to the limitations of Section 1704(4) of
the Revised Act, any action which may be taken at any annual or special
meeting of shareholders may be taken without a meeting, and without prior
notice, if one or more consents in writing, setting forth the action so
taken, shall be signed by the holders of outstanding shares having not less
than the minimum number of votes that would be necessary to authorize or
take the action at a meeting at which all shares entitled to vote thereon
were present and voted.
RESOLVED FURTHER: That to the extent the bylaws of the corporation
may contain any provision inconsistent with the foregoing resolutions or
permit action to be taken by a written consent of the shareholders only if
signed by all shareholders, then such bylaw provisions are hereby amended
to permit the taking of action by the written consent of shareholders in
the manner provided in Section 704 of the Act and in the preceding
resolutions.
Generally, adoption of the Written Consent Resolutions may make it easier
for our shareholders to govern the company. Allowing shareholders to take
action by the written consent of fewer than all of the shareholders entitled to
vote with respect to a particular action will make it practical for our
shareholders to act without the necessity and expense of holding a meeting of
shareholders, particularly given that Tenet is subject to the disclosure
requirements and proxy solicitation rules and regulations under the Securities
Exchange Act of 1934. Moreover, the Written Consent Resolutions will likely
better enable our shareholders to initiate corporate action independently of our
management, because our shareholders will not be required to call a special
meeting in those circumstances where it is not practical to obtain the written
consent of all shareholders entitled to vote on the action, as would be the case
without adoption of the Written Consent Resolutions. Approval of the Written
Consent Resolutions promotes the notion that there should be no distinction
between action taken by less than unanimous written consent of the shareholders
or action taken at a meeting in which other shareholders present and voting
could not preclude the taking of the action in any event. In such cases little
is gained by requiring Tenet to incur the expense of holding a meeting.
On the other hand, approval of the Written Consent Resolutions will at
times enable the holders of a simple majority of the outstanding common stock to
take shareholder action without affording other shareholders the opportunity to
consider and vote on the matter at a meeting of shareholders. Moreover, the
Written Consent Resolutions may have the effect of making less difficult
shareholder actions that do not have the support of the Board of Directors. For
example, the Written Consent Resolutions may have the effect of enabling a
person to make a tender offer or otherwise attempt to gain control of Tenet even
if such person were unwilling or unable to submit its proposals to a vote of the
shareholders at a meeting. Conversely, requiring the written consents of all
shareholders entitled to vote in connection with an acquisition or other attempt
to take control of Tenet may make such acquisition or attempt to take control
more difficult or delay such actions by a person or group acquiring a
substantial percentage of the outstanding shares of our common stock. Finally,
the Written Consent Resolutions may also enable a holder who controls or holders
who control a majority of our common stock to use the written current procedure
to take shareholder action unilaterally.
The Board of Directors has determined that the potential benefits which may
result following adoption of the Written Consent Resolutions outweigh the
potential risks described above. The proposal to approve and adopt the Written
Consent Resolutions is not made in response to any efforts of which we are aware
to accumulate Tenet's stock or to obtain control of Tenet. Adoption of the
Written Consent Resolutions may make us a more attractive target for acquisition
by an outsider by making it less difficult for such person to obtain control of
Tenet, however.
27
The Board of Directors has determined that it would be advantageous to
Tenet and its shareholders to adopt the Written Consent Resolution in order to
facilitate shareholder governance of the corporation while simultaneously making
such governance more efficient and less expensive.
Vote Required
Approval and adoption of the Written Consent Resolutions require the
affirmative vote of a majority of the shares of common stock voted at the
Special Meeting. Unless you specify otherwise on your signed, dated proxy, your
shares will be voted in favor of approval and adoption of the Written Consent
Resolutions.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE APPROVAL
AND ADOPTION OF THE WRITTEN CONSENT RESOLUTIONS
PROPOSAL #3
APPROVAL AND ADOPTION OF THE AMENDED AND RESTATED ARTICLES
General
Our Board of Directors has unanimously approved, and recommends that the
shareholders approve and adopt, an amendment to and restatement of our Articles
of Incorporation, which would (1) effect a one for twenty reverse stock split of
our common stock, (2) reference our shareholders' right to act by less than
unanimous written consent of all shareholders entitled to vote with respect to
the action, as authorized under Utah corporate law, (3) eliminate those
provisions no longer necessary or appropriate under Utah corporate law, and (4)
consolidate our Articles of Incorporation, as restated and amended to date, into
a single document.
The actual text of the Amended and Restated Articles is attached hereto as
Exhibit B. We strongly urge you to carefully read the Amended and Restated
Articles in its entirety before voting. The summary of the Amended and Restated
Articles provided in this proxy statement is qualified in its entirety by
reference to the full text of the Amended and Restated Articles in Exhibit B.
1. 1 for 20 Reverse Split of our Common Stock
The Board of Directors recommends that our shareholders approve and adopt
an amendment to our Articles of Incorporation to effect a reverse split of our
issued and outstanding common stock. The reverse split will combine every group
of 20 outstanding shares of the common stock held by any shareholder into one
share of common stock. If this amendment is approved by our shareholders, the
Board of Directors will have the authority to effect the reverse stock split by
filing the Amended and Restated Articles with the Division. If this amendment is
adopted, there will be no change in the number of authorized shares of common
stock and no change in the per share par value of the common stock.
We will not issue scrip or fractional shares, or certificates for fractional
shares, in connection with the reverse stock split. Any fractional shares that
may result will be redeemed in cash based on the fair market value of our common
stock. Shares held by shareholders affiliated with one another will be
aggregated for this purpose to the extent commercially practicable. For
purposes of the payment for fractional shares, our Board of Directors has
determined that the fair market value of our common stock is $ per pre-
split share. We estimate that Tenet will pay an aggregate of approximately $
to holders of fractional shares of common stock after the reverse split.
Reasons for the Proposed Reverse Split
The Board of Directors believes that the current per-share market price of
our common stock may impair the acceptability of our common stock to certain
institutional investors and other members of the investing public.
Theoretically, the number of shares outstanding should not, by itself, affect
the marketability of the stock, the type of investor who acquires it, or our
reputation in the financial community. In practice this is not necessarily the
case, as certain investors view low-priced stock as unattractive or, as a matter
of policy, are precluded from purchasing low-priced stock because of the greater
trading volatility sometimes associated with such securities. Accordingly, one
purpose of the reverse stock split is to help raise our reputation in the
financial community.
28
In approving the proposed reverse stock split, our Board of Directors
considered that Tenet's common stock may not appeal to brokerage firms that are
reluctant to recommend lower-priced securities to their clients. Investors may
also be dissuaded from purchasing lower-priced stocks because the brokerage
commissions, as a percentage of the total transaction, tend to be higher for
such stocks. Moreover, the analysts at many brokerage firms do not monitor the
trading activity or otherwise provide coverage of lower-priced stocks. Also,
the Board believes that most investment funds are reluctant to invest in lower-
priced stocks.
An additional purpose of the reverse stock split is to increase the market
price of our common stock in order to meet the listing criteria of national
securities exchanges such as the NASDAQ SmallCap Market ("NASDAQ"). Our common
stock is presently eligible for quotation on the National Association of
Securities Dealers' Over the Counter Bulletin Board (the "OTCBB"), which was
established for securities that do not meet the NASDAQ listing requirements, and
is not presently listed on any securities exchange. In order to be listed on a
securities exchange or NASDAQ, we must meet the listing standards of the
securities exchange or NASDAQ and have our listing application approved by the
securities exchange or NASDAQ. NASDAQ and each securities exchange has its own
listing requirements and application process. However, the listing standards of
NASDAQ and each securities exchange generally require that all applicants have a
minimum per share closing trading price on their common stock.
Our Board of Directors believes that it is important to provide our
shareholders with the best possible market for trading our common stock. The
OTCBB is generally considered less efficient and less liquid than NASDAQ or any
securities exchange. Consequently, if it were listed on a securities exchange or
NASDAQ, selling our common stock could be easier because larger quantities of
shares might be bought and sold, transactions might be executed more
efficiently, and securities analysts' and news media coverage might be
increased.
These factors could result in higher prices and lower spreads in the bid
and ask prices for shares of our common stock. A listing on a securities
exchange could also improve our ability to raise additional capital through
equity or debt financing and, to the extent the stock price increases as a
result of or in connection with such listing, ownership dilution to shareholders
might be reduced if we issue equity in financing or other transactions, since
less shares will need to be issued in order to raise a specific amount of
capital.
We cannot assure you that the reverse stock split will accomplish these
objectives or that we will seek to have our Common Stock listed on NASDAQ or any
securities exchange. While we expect that the reduction in the outstanding
shares of common stock will increase the market price of the common stock, we
cannot assure you that the reverse stock split will increase the market price of
the common stock by a multiple equal to the reverse split ratio of twenty or
result in any permanent increase in the market price (which can be dependent
upon many factors, including, but not limited to, our business and financial
performance and prospects). Should the market price decline after the reverse
stock split, the percentage decline may be greater, due to the smaller number of
shares outstanding, than it would have been prior to the reverse stock split.
Additionally, there can be no assurance that by meeting the listing requirements
for minimum trading price our stock will be listed on a securities exchange such
as NASDAQ. In some cases, the stock price of companies that have effected
reverse stock splits has subsequently declined back to pre-reverse split levels.
There are other reasons why a reverse stock split may be perceived
negatively in the marketplace. In addition to the fact that the number of shares
available for trading is reduced, which generally has the effect of reducing
liquidity, round lots (i.e., lots in multiples of 100 shares) may be converted
into odd lots due to the split, which may in turn increase transaction costs for
shareholders. We cannot assure you that the market price of our common stock
immediately after the effective date of the proposed reverse stock split will be
maintained for any period of time or that the ratio of post and pre-split shares
will remain the same after the reverse stock split is effected, or that the
reverse stock split will not have an adverse effect on our stock price due to
the reduced number of shares outstanding after the reverse stock split.
Effect of the Reverse Split Generally
Upon the effectiveness of the reverse stock split, you will own fewer
shares than you owned prior to the reverse split. The number of post-split
shares will be determined by dividing the number of shares owned immediately
prior to the effective time of the reverse stock split by twenty. Thus, if you
owned 1,000 shares of our common stock prior to the reverse split, then, after
the effective time of the reverse split, you will own 50 shares of our common
stock.
29
The reverse stock split will simultaneously apply to all outstanding shares
of our common stock. On , we had 19,336,213 issued and outstanding shares
of our common stock. Accordingly, if the Record Date was the effective time of
the reverse stock split, then we would have approximately 966,811 issued and
outstanding shares of our common stock on a post-split basis. The reverse stock
split will affect all shareholders uniformly and will not materially change
their proportionate ownership interests (except to the extent we redeem
fractional shares, as more specifically described herein), nor will the reverse
split alter the respective voting rights of holders of our common stock. The
common stock issued pursuant to the reverse stock split will remain fully paid
and non-assessable.
Because the number of authorized shares of our common stock will not be
reduced, the overall effect of the reverse stock split will be an increase in
authorized but unissued shares of our common stock. These shares may be issued
by the Board of Directors in its discretion. Any future issuance will have the
effect of diluting the percentage of stock ownership and voting rights of the
present holders of our common stock.
If approved by our shareholders at the Special meeting, we will file the
Amended and Restated Articles with the Division shortly after the closing date
of the Transaction. However, if for any reason the Transaction is not completed
as currently anticipated, we may proceed with the filing of the Amended and
Restated Articles. The reverse stock split will become effective upon the
filing of the amendment with the Division (the "Effective Date"). At the
Effective Date, each certificate representing our common stock prior to the
reverse stock split will be deemed for all corporate purposes to evidence
ownership of post-split shares. There is no "issuance" resulting from the
reverse stock split.
Promptly after the Effective Date, you will be notified that the reverse
stock split has been effected. Our stock transfer agent, Interwest Transfer,
whom we refer to as the exchange agent, will implement the exchange of stock
certificates representing outstanding shares of common stock. You will be asked
to surrender to the exchange agent certificates representing your pre-split
shares in exchange for certificates representing your post-split shares in
accordance with the procedures to be set forth in a letter of transmittal which
we will send. You will not receive a new stock certificate representing your
post-split shares until you surrender your outstanding certificate(s)
representing your pre-split shares, together with the properly completed and
executed letter of transmittal to the exchange agent.
PLEASE DO NOT DESTROY ANY STOCK CERTIFICATE OR SUBMIT ANY CERTIFICATES UNTIL YOU
ARE REQUESTED TO DO SO.
Summary of Federal Income Tax Consequences of the Reverse Split
The following is a summary of certain material federal income tax
consequences of the reverse stock split; however, this does not purport to be a
complete discussion of all of the possible federal income tax consequences of
the reverse stock split. It does not discuss any state, local, foreign or
minimum income or other U.S. federal tax consequences. Also, it does not address
the tax consequences to shareholders who are subject to special tax rules, such
as banks, insurance companies, regulated investment companies, personal holding
companies, foreign entities, nonresident alien individuals, broker-dealers and
tax-exempt entities. This discussion is based on the provisions of the United
States federal income tax law as of the date hereof, which is subject to change
retroactively as well as prospectively. This summary also assumes that the pre-
split shares were, and the post-split shares will be, held as "capital assets,"
as defined in the Internal Revenue Code of 1986, as amended (generally, property
held for investment). Your tax treatment may vary depending upon your own
particular facts and circumstances.
You should recognize no gain or loss upon your exchange of your pre-split
shares for post-split shares pursuant to the reverse stock split. In general,
shareholders who receive cash upon redemption of their fractional share
interests as a result of the reverse stock split will recognize gain or loss
based on their adjusted basis in the fractional share interests redeemed. The
federal income tax liability, if any, generated by the receipt of cash in lieu
of a fractional interest should not be material in amount in view of the low
value of the fractional interest.
The aggregate tax basis of the post-split shares received in the reverse
stock split (including any fraction of a post-split share deemed to have been
received) will be the same as your aggregate tax basis in the pre-split shares
you exchanged. Your holding period for the post-split shares will include the
period during which the you held the pre-split shares surrendered in the reverse
stock split.
30
We believe that the reverse stock split will qualify as a
"recapitalization" under Section 368(a)(1)(E) of the Internal Revenue Code. As a
result, we will not recognize any gain or loss as a result of the reverse stock
split.
SHAREHOLDERS ARE ADVISED TO CONSULT THEIR OWN TAX ADVISORS FOR MORE DETAILED
INFORMATION REGARDING THE EFFECTS OF THE PROPOSED REVERSE SPLIT ON THEIR
INDIVIDUAL TAX STATUS
Authorized Shares; Future Financings.
Upon effectiveness of the proposed reverse stock split, the number of
authorized shares of common stock that are not issued or outstanding would
increase from approximately 80,663,787 shares to approximately 99,033,189
shares. Tenet will continue to have 100,000,000 shares of authorized common
stock and 1,000,000 shares of authorized preferred stock. Authorized but
unissued shares will be available for issuance, and Tenet may issue such shares
in financings or otherwise. If Tenet issues additional shares, the ownership
interest of holders of Tenet's common stock will likely be diluted. Also, the
issued shares may have rights, preferences or privileges senior to those of
Tenet's common stock.
Accounting Matters.
The proposed reverse stock split will not affect the par value of Tenet's
common stock. As a result, on the effective date of the reverse stock split, the
stated capital on Tenet's balance sheet attributable to Tenet's common stock
will be reduced to 1/20 of its present amount, and the additional paid-in
capital account shall be credited with the amount by which the stated capital is
reduced. The per share net income or loss and net book value of Tenet's common
stock will be increased because there will be fewer shares of Tenet's common
stock outstanding.
Potential Anti-Takeover Effect.
Although the increased proportion of unissued authorized shares of common
stock to issued shares could, under certain circumstances, have an anti-takeover
effect (for example, by permitting issuances that would dilute the stock
ownership of a person seeking to effect a change in the composition of the
Tenet's Board or contemplating a tender offer or other transaction for the
combination of Tenet with another company), the reverse stock split proposal is
not being proposed in response to any effort of which Tenet is aware to
accumulate Tenet's shares of common stock or obtain control of Tenet, nor is it
part of a plan by management to recommend a series of similar amendments to
Tenet's Board of Directors and shareholders.
Effect Upon Outstanding Options and Warrants.
Currently, Tenet has no outstanding stock options or warrants exercisable
for shares of our common stock.
2. Approval and Adoption of the Written Consent Resolutions
Pending approval and adoption by the shareholders of the Written Consent
Resolutions at the Special Meeting, the Board of Directors recommends that the
shareholders approve and adopt an amendment to our Articles of Incorporation
which expressly references the right of our shareholders' to take action by the
written consent of fewer than all shareholders, to the extent permitted under
applicable Utah corporate laws. The Board of Directors believes that including
such amendment in our Articles of Incorporation will have the effect of
affording our management and shareholders more durable and accessible evidence
of our shareholders' intent to be governed by Section 704 of the Act. However,
failure by the shareholders to adopt the Amended and Restated Articles will have
no effect on the shareholders' election to approve and adopt the Written Consent
Resolutions.
3. Elimination of Provisions No Longer Necessary or Appropriate Under
Utah Corporate Law.
A final purpose of the approval and adoption of the Amended and Restated
Articles is to simplify our Articles of Incorporation by consolidating various
amendments and eliminating obsolete provisions of our Articles of Incorporation
as currently restated and amended. In addition to the amendments specifically
described above, our Board of Directors recommends that we further amend our
Articles of Incorporation as follows in order to make our Articles consistent
with the Act.
31
A. Deletion of Article II, Duration of Tenet
Article II of our Articles of Incorporation currently provides that Tenet
shall exist perpetually unless earlier dissolved according to law. We have
omitted Article II from the Amended and Restated Articles. Pursuant to Section
302 of the Act, every Utah corporation has perpetual duration until dissolved as
provided in the Act, making this Article unnecessary.
B. Modification of Article III, the Corporate Purpose of Tenet
Article III currently provides that Tenet is organized (1) to develop,
construct and market computer related information and testing services for use
in the medical and health fields and to engage in any other business resulting
from such activities and (2) to engage in any other acts, activities and
pursuits for which a corporation may be organized under the Utah Business
Corporation Act. We have omitted from Article III of the Amended and Restated
Articles the language related to the development, construction and marketing of
computer related information and testing services for use in the medical and
health fields and other business resulting from such activities. Omitting this
language will make our Articles of Incorporation consistent with the fact that,
upon completion of the Transaction, we will have no specific business purpose
until we identify and complete an acquisition or similar transaction. The Act
currently provides that it is sufficient for the Articles of Incorporation to
provide that the purpose of Tenet is to engage in any lawful act or activity for
which corporations may be organized under the Act. The proposed amendment to
Article III is consistent with this requirement.
C. Deletion of Article VI, Acquisition by Tenet of Its Own Shares
Article VI of our Articles of Incorporation currently provides that Tenet
has the right to purchase, take, receive or otherwise acquire, hold, own,
pledge, transfer or otherwise dispose of its own shares, subject to the
limitation that Tenet's purchase of its own shares must be made only to the
extent of unreserved and unrestricted earned surplus and capital surplus
available for that purpose. We have omitted Article VI in its entirety from the
Amended and Restated Articles, because this provision does not provide
additional rights to, nor does it impose additional restrictions on, Tenet in
connection with the acquisition of its own stock not currently provided in the
Act.
D. Deletion of Article VII, Distributions to Shareholders
Article VII of our Articles currently provides that our Board of Directors
may distribute, out of stated capital or capital surplus of the corporation, a
portion of its assets, in cash or other property, subject to the provisions of
the Utah Business Corporation Act, as amended. We have omitted Article VII in
its entirety from the Amended and Restated Articles, because this provision does
not provide Tenet with additional rights, nor does it impose on Tenet additional
restrictions, in connection with distributions to our shareholders not currently
provided in the Act.
E. Additional Modifications
In addition to the amendments set forth above, in the Amended and Restated
Articles we have further modified our Articles of Incorporation by deleting the
phrase "Utah Business Corporation Act" in each provision where it appears,
substituting therefore the "Utah Revised Business Corporation Act," and by
renumbering the Articles to account for the deletion of old articles and the
insertion of new articles.
Other than the specific amendments named herein, the remaining provisions
of our Articles of Incorporation, as currently in effect, will not be changed as
a result of the approval and adoption of the Amended and Restated Articles.
Vote Required
Approval of the Amended and Restated Articles requires the affirmative vote
of a majority of the outstanding shares of our common stock as of the record
date for the Special Meeting. Unless you specify otherwise, your returned
signed proxy will be voted FOR approval and adoption of the Amended and Restated
Articles.
32
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL TO APPROVE AND ADOPT
THE AMENDED AND RESTATED ARTICLES.
PROPOSAL #4
ELECTION OF THE DIRECTOR NOMINEES
General
The number of authorized directors on our Board of Directors may be varied
by the Board of Directors, but may not be less than three. Currently, the
number of authorized directors on the Board of Directors is set at three, and
each position on the Board is currently filled. The Board of Directors has
determined that it is in the best interests of Tenet and its shareholders to
nominate each of the current directors, being Mr. Jerald L. Nelson, Mr. Eric J.
Nickerson and Mr. Fred Anderson, for reelection at the Special Meeting.
The Board of Directors has nominated Mr. Jerald L. Nelson, Mr. Eric J.
Nickerson and Mr. Fred Anderson (the "Director Nominees") for election as
directors at the Special Meeting. Each of Messrs. Nelson, Nickerson and
Anderson will be elected to serve for a one year term expiring at Tenet's annual
meeting in 2004, until his respective successor is duly elected and qualified or
until his earlier resignation. There are no family relationships among any of
Tenet's directors or executive officers. Unless you specify otherwise, your
returned signed proxy will be voted FOR each of the Director Nominees. In the
event a Director Nominee is unable to serve, your proxy may vote for another
person nominated by the Board of Directors to fill that vacancy. The Board of
Directors has no reason to believe that any of its Director Nominees will be
unavailable.
Vote Required
A plurality of the votes represented at the meeting is required to elect a
director.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE DIRECTOR
NOMINEES LISTED ABOVE.
Directors
Set forth below is the principal occupation of, and certain other
information regarding, the Director Nominees.
Jerald L. Nelson. Jerald L. Nelson has served as a director, president and
chief operating officer of the Company since December 1993. Effective July 10,
1996, Dr. Nelson was appointed Chairman of the Board of Directors, and
relinquished his position as President and Chief Operating Officer. On June 5,
2001, the board elected Dr. Nelson to the position of Corporate Secretary, a
position which Dr. Nelson held until May 2, 2003. The Board re-elected Dr.
Nelson as President of the Company effective May 2, 2003. Dr. Nelson received
his Ph.D. in Economics from North Carolina State University in 1974. From 1974
to 1984, Mr. Nelson worked or consulted with several Fortune 500 firms,
including US Industries, TransWorld Airlines, GTE, Xerox, Pitney Bowes and
General Foods. From 1984 until December 1993, Mr. Nelson worked with various
businesses as an investment banker and business advisor. He has also consulted
with or served on the Board of Directors of numerous Utah firms including Arrow
Dynamics, Beacon Financial, Interwest Home Medical, Gentner Communications and
One-2-One Communications, where he also served as chairman and chief executive
officer.
Eric J. Nickerson. Eric J. Nickerson has served as a director since June
of 1990. Mr. Nickerson was a member of the faculty of the United States
Military Academy at West Point, New York from 1989 to 1993. In June 1993, Mr.
Nickerson retired as a United States Air Force officer. Currently, Mr. Nickerson
is a private investor and directs personal accounts and two investing
partnerships: "Third Century II" and "Z Fund."
Fred J. Anderson. Fred J. Anderson has served as a director since May 23,
2003. The Board elected Mr. Anderson to serve as Tenet's Chief Operating
Officer and Corporate Secretary effective May 2, 2003. Mr. Anderson served as
Tenet's Chairman of the Board from May 1992 until July 1995, when he resigned to
manage his family's land and livestock interests. Mr. Anderson also served as
the Chief Financial Officer of Tenet from 1986 until 1996. From 1980 until
1984, Mr. Anderson served as Vice President for Mountain States Resources. He
received his BS in Accounting and an MBA from Utah State University.
33
Board Meetings and Committees
During the fiscal year ended June 30, 2003 the Board of Directors held 5
board meetings either in person or telephonically. Each of the Director Nominees
attended at least 75% of the meetings of the Board of Directors. The Board of
Directors currently has no standing committees.
Directors, Executive Officers Promoters, and Control Persons of Tenet
Information regarding the current directors and executive officers of Tenet
is set forth under the heading "Directors," on page 33.
Compensation of Directors
Each outside director is entitled to receive a $200 stipend per month.
However, during the fiscal year ended June 30, 2003, Tenet failed to pay this
fee to any director. Such amounts have been accrued on a monthly basis as an
obligation owed by Tenet to its directors.
34
OTHER INFORMATION
Executive Compensation
The following table sets forth information for the fiscal years ended June
30, 2003, 2002 and 2001 regarding the compensation of each executive officer of
Tenet who served as the chief executive officer of Tenet at any time during the
2003 fiscal year (the "Named Executive officers").
Summary Compensation Table
Long-Term Compensation
----------------------------------
Annual Compensation Awards Payouts
------------ -------------- -------
Other Restricted Securities
Annual Stock Underlying LTIP All Other
Name and Principal Position Year Salary Bonus Compensation Awards Options Payouts Compensation
--------------------------- ---- -------- ----- ------------ ---------- ---------- ------- ------------
Frank Overfelt(1) 2003 $ 75,123 - - - - - -
President 2002 104,810 - - - - - -
2001 76,360 - - - - - $ 3,600
Jerald L. Nelson (2) 2003 749 - - - - - -
Chairman, President 2002 - - $ 1,000 $ 2,703 - - -
Corporate Treasurer 2001 - - - - - - -
(1) Mr. Overfelt terminated his employment with Tenet and resigned as its
President in May of 2003.
(2) Effective May 3, 2003, the Board of Directors re-appointed Mr. Nelson as
President of Tenet.
Certain Relationships and Related Party Transactions
Since the beginning of the Company's last fiscal year, except as otherwise
provided below, there have been no transactions or series of transactions
between the Company and any executive officer, director or 5% beneficial owner
of the Company's common stock in which one of the foregoing individuals had an
interest of more than $60,000.
Eric J. Nickerson, a director and significant shareholder of Tenet, has
agreed that upon approval by the shareholders of the sale of our assets to
ClinicalVentures as provided herein, he will purchase from ClinicalVentures a
promissory note in the principal amount of $360,000 in exchange for $289,000
in cash, which cash will facilitate payment by ClinicalVentures of the full
purchase price in cash at the closing of the sale of assets. The promissory
note shall be due and payable, without interest, in equal monthly installments
in the amount of $6,000 each, with penalties for non-payment.
ClinicalVentures's obligations under the promissory note will be secured by the
assets of Tenet acquired by ClinicalVentures pursuant to a Security Agreement
by and between Mr. Nickerson and ClinicalVentures, and dated of even date.
Section 16(a) Beneficial Ownership Reporting Compliance
We believe that Fred Anderson, an executive officer of Tenet since May 2,
2003, failed to file a Form 3, as required by Section 16(a) of the Securities
Exchange Act of 1934.
We believe that Eric Nickerson, a director and significant shareholder of
Tenet, may have failed to file one or more Forms 4 in connection with one or
more transactions which occurred during our most recently completed fiscal year,
pursuant to which Third Century Fund II, of which Mr. Nickerson is a Senior
Partner, acquired additional shares of our Common Stock. However, such
transaction or transactions may have qualified for delayed reporting on Form 5.
35
Independent Public Accountants
Hansen, Barnett & Maxwell served as our independent accountants for the
fiscal year ended June 30, 2003 and 2002 and has been selected by our Board of
Directors to serve in such capacity for the current year. We incurred the
following expenses to Hansen, Barnett & Maxwell associated with the fiscal years
ended June 30, 2003 and 2002:
Fiscal Year ended Fiscal Year Ended
June 30, 2003(1) June 30, 2002
------------- -------------
Audit Fees(2) $ 13,000 $ 12,000
Audit-Related Fees $ 0 $ 0
Tax Fees $ 0 $ 0
All Other Fees $ 0 $ 0
Total $ 13,000 $ 12,000
(1) Estimated. We anticipate that audit fees associated with the 2003
fiscal year will be slightly more than those audit fees associated with the 2002
fiscal year.
(2) Audit Fees consisted of fees incurred for the audit of our consolidated
financial statements and related quarterly reviews, as well as any other
services normally provided by Hansen, Barnett & Maxwell in connection with
statutory or regulatory filings or engagements for those periods.
A representative of Hansen, Barnett & Maxwell is not expected to be present
at the Special Meeting to make a statement or to respond to questions.
SHAREHOLDER PROPOSALS
We anticipate that we will hold our next annual meeting of the shareholders
on November 12, 2004, and subsequent annual meetings on the second Friday of
each November thereafter. The deadlines below assume that we will deliver the
proxy statement related to the November 2004 annual meeting of shareholders on
or about October 22, 2004.
If you wish to submit proposals to be included in Tenet's year 2004 proxy
statement, we must receive them on or before June 24, 2004. Please address your
proposals to Corporate Secretary, Tenet Information Services, Inc., 53 West 9000
South, Sandy, Utah, 84070.
If you wish to raise a matter before the shareholders at the year 2004
annual meeting, you must notify the Corporate Secretary in writing by not later
than September 7, 2004. Please note that this requirement relates only to
matters you wish to bring before your fellow shareholders at the annual meeting.
It is separate from the SEC's requirements to have your proposal included in the
proxy statement.
Receipt by Tenet of any such proposal from a qualified shareholder in a
timely manner will not guarantee its inclusion in Tenet's proxy materials or its
presentation at the 2004 annual meeting because there are other requirements in
the proxy rules.
36
ANNUAL REPORT
We have filed our Annual Report on Form 10-KSB for the year ended June 30,
2002. A copy of the Annual Report on Form 10-KSB, along with our Quarterly
Reports on Form 10-QSB for the three month periods ended September 30, 2002,
December 31, 2002, and March 31, 2003, as filed with the Securities and Exchange
Commission, are included with, but are not deemed a part of, this proxy
soliciting material. Our reports and other filings also may be obtained from
the SEC's on-line database, located at www.sec.gov.
We will provide without charge to each person solicited, upon written
request of any such person, additional copies of our Annual Report on Form 10-
KSB, including the consolidated financial statements and the financial statement
schedules required to be filed with the Securities and Exchange Commission
pursuant to Rule 13a-1 under the Securities Exchange Act of 1934. Direct any
such correspondence to Jerald L. Nelson, President, Tenet Information Services,
Inc., 53 West 9000 South, Sandy, Utah 84070.
By Order of the Board of Directors
/s/ Jerald L. Nelson
Jerald L. Nelson, President
Sandy, Utah
July 29, 2003
37
SIDE 1
PROXY
TENET INFORMATION SYSTEMS, INC.
SPECIAL MEETING IN LIEU OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD AUGUST , 2003
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Jerald L. Nelson and Fred Anderson and each
of them, as proxies, with full power of substitution, and hereby authorizes them
to represent and vote, as designated on the reverse, all shares of common stock
of Tenet Information Services, Inc., a Utah corporation ("Tenet"), held of
record by the undersigned, on July , 2003, at the Special Meeting in lieu
of Annual Meeting of Shareholders (the "Special Meeting") to be held on
, , 2003 at a.m., local time, at
located at , or at any adjournment or postponement
thereof, upon the matters set forth on the reverse, all in accordance with and
as more fully described in the accompanying Notice of Special Meeting in lieu of
Annual Meeting of Shareholders and Proxy Statement, receipt of which is hereby
acknowledged.
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" PROPOSALS 1, 2 AND 3 AND "FOR" ELECTION OF THE DIRECTOR NOMINEES
NAMED ON THE REVERSE. PLEASE COMPLETE, SIGN, AND DATE THIS PROXY WHERE
INDICATED AND RETURN PROMPTLY IN THE ACCOMPANYING PREPAID ENVELOPE.
(To be Signed on Reverse Side.)
SIDE 2
The Board of Directors recommends that you vote "FOR" Items 1, 2, 3 and 4,
below.
1. To consider and vote upon a proposal to approve the sale to MediServe
Information Systems, Inc. ("MediServe") of substantially all of the
operating assets and the assignment of certain liabilities of Tenet (the
"Transasction"), as well as the terms and conditions governing the
Transaction as set forth in the Asset Purchase Agreement dated July 29,
2003 by and between Tenet and MediServe.
FOR AGAINST ABSTAIN
/ / / / / /
2. To consider and approve resolutions authorizing the shareholders of Tenet
to take action by written consent of fewer than all of the shareholders
entitled to vote with respect to the action, to the fullest extent
permitted by Utah corporate law.
FOR AGAINST ABSTAIN
/ / / / / /
3. To consider and approve amendments to and a restatement of the Articles of
Incorporation of Tenet, which amendments will include the following:
a. a one-for-twenty reverse stock split of the outstanding shares of
Tenet's common stock, to take effect upon the filing of the Amended
and Restated Articles with the Utah Department of Commerce, Division
of Corporations and Commercial Code;
b. reference to the right of Tenet's shareholders to take action by the
written consent of fewer than all of the shareholders entitled to vote
with respect to the action, to the fullest extent permitted by Utah
corporate law;
c. an elimination of those provisions in the Articles of Incorporation
that Tenet's Board of Directors deems no longer necessary or
appropriate under current Utah corporate law; and
d. a restatement of Tenet's Articles of Incorporation by incorporating in
a single document the amendments approved and adopted by Tenet's
shareholders at the Special Meeting, as well as all prior provisions
still in effect.
FOR AGAINST ABSTAIN
/ / / / / /
4. To elect the following nominees to the Board of Directors of Tenet: Jerald
L. Nelson, Eric J. Nickerson, and Fred Anderson (the "Nominees"), each to
serve a one-year term expiring at Tenet's annual meeting to be held in the
year 2004 and until their successors are duly elected and qualified.
FOR all Nominees
Withhold Authority to vote for the Nominees listed below (To
withhold authority for one or more individual Nominees,
cross out the name of each such person)
Jerald L. Nelson
Eric J. Nickerson
Fred Anderson
o Abstain
Please mark, sign, date, and return this proxy card using the enclosed envelope.
Signature Date Signature Date
Note: Please sign above exactly as the shares are issued. When shares are
held by co-tenants or joint tenants, both should sign. When signing as an
attorney, 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.
2
Exhibit A
ASSET PURCHASE AGREEMENT
BETWEEN
TENET INFORMATION SERVICES, INC.
("Seller")
and
CLINICALVENTURES, LLC
("Buyer")
Dated July 29, 2003
A-1
ARTICLE I ASSETS TO BE ACQUIRED BY BUYER AND RETAINED BY SELLER 1
1.1 Assets to be Acquired by Buyer 1
1.2 Assets Being Retained by Seller 2
1.3 Nonassignable Rights 2
1.4 Books and Records 2
ARTICLE II CONSIDERATION PAYABLE FOR ACQUIRED ASSETS 2
2.1 Consideration for the Acquired Assets 2
2.2 Allocation of Purchase Price 3
2.3 Taxes 3
ARTICLE III THE CLOSING 3
3.1 Closing 3
3.2 Seller's Obligations at Closing 3
3.3 Obligations of Buyer at the Closing 4
ARTICLE IV CONDITIONS TO CLOSING 5
4.1. Conditions To Each Party's Obligations 5
4.2 Conditions to the Obligations of Seller 5
4.3 Conditions to Obligations of Buyer 6
4.4 Satisfaction of Conditions on Execution of
Management Agreement 7
ARTICLE V COVENANTS, OBLIGATIONS AND RIGHTS OF THE PARTIES 7
5.1 Conduct of Business Pending the Closing 7
5.2 Notification of Changes by Seller 7
5.3 Notification of Changes by Buyer 8
5.4 Best Efforts to Satisfy Conditions 8
5.5 Seller Shareholder Approval 8
5.6 Seller Shareholder Voting Agreements 8
5.7 Employees 9
5.8 Cooperation 9
5.9 Access to Information 9
5.10 Additional Actions 9
5.11 Further Assurances 9
5.12 Publicity 9
i
5.13 Confidentiality and Noncompetition 10
5.14 Expenses 11
5.15 Management Agreement; Escrow of Funds 11
5.16 Payment of Obligations; Rights to Offset 11
5.17 Covenants Regarding Seller Products 11
5.18 Covenant Regarding Sharp Rees Stealy Corporation 12
ARTICLE VI REPRESENTATIONS AND WARRANTIES 12
6.1 Representations and Warranties of Seller 12
6.2 Representations and Warranties of Buyer 14
ARTICLE VII TERMINATION OF AGREEMENT 16
7.1 Termination 16
7.2 Effect of Termination 16
ARTICLE VIII INDEMNIFICATION 16
8.1 Indemnification 16
8.2 Indemnification Procedures 16
8.3 Cooperation of the Parties 17
8.4 Exclusive Remedy 17
8.5 Limitation and Termination of Indemnification
Obligations 18
ARTICLE IX MISCELLANEOUS PROVISIONS 18
9.1 Governing Law, Jurisdiction and Venue 18
9.2 Assignment; Binding Upon Successors and Assigns 18
9.3 Severability 18
9.4 Counterparts 18
9.5 Amendment and Waivers 18
9.6 Attorneys' Fees 19
9.7 Notices 19
9.8 Construction of Agreement 20
9.9 Further Assurances 20
9.10 Absence of Third Party Beneficiary Rights 20
9.11 Entire Agreement 20
ii
List of Exhibits
Exhibit A Listing of Acquired Assets
Exhibit B Listing of Excluded Assets
Exhibit C Listing of Assumed Obligations and Liabilities
and Retained Liabilities
Exhibit D Allocation of Purchase Price
Exhibit E Form of Bill of Sale
Exhibit F Form of Assignment and Assumption Agreement
Exhibit G Seller Voting Agreement
Exhibit H Continuing Employees of Seller
Exhibit I Management Services Agreement
Exhibit J Description of Seller's Intellectual Property
Rights
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (the "Agreement") is made and entered into
effective as of the 29th day of July, 2003 (the "Agreement Date"), by and
between Tenet Information Services, Inc., a Utah corporation ("Seller") and
ClinicalVentures, LLC, a Delaware corporation ("Buyer"). Seller
and Buyer are sometimes referred to herein individually as a "Party" and
collectively as the "Parties."
Recitals
A. Seller conducts a business involved in providing computerized patient
tracking and information management systems for use in hospitals and other
health care facilities, with a focus on emergency departments, urgent care
sites, ambulatory care departments and same day surgery facilities (the
"Business").
B. Buyer provides integrated clinical information management systems for
clinicians and the healthcare community.
C. On the terms and subject to the conditions set forth in this
Agreement, Buyer desires to acquire from Seller, substantially all of the
operating assets of Seller, including all assets utilized in the operation of
the Business (the "Acquired Assets" as defined in Section 1.1 below). In
connection with such acquisition Buyer is willing to assume certain liabilities
and contractual obligations relating to the Business and the Acquired Assets
(the "Assumed Obligations and Liabilities" as defined in Section 2.1.1 below).
D. Seller is willing to sell the Acquired Assets to Buyer upon the terms
and conditions and for the consideration set forth herein, and believes that its
participation in the transactions contemplated by this Agreement is in the best
interests of Seller and its shareholders.
E. The Parties desire to enter into this Agreement in order to set forth
and establish their rights and obligations with respect to the transactions
contemplated hereby.
Agreement
NOW THEREFORE, intending to be legally bound, and in consideration of the
above-recited premises and the mutual promises, covenants and conditions
contained herein, the Parties hereto agree as follows:
Article I
Assets to be Acquired by Buyer and Retained by Seller
1.1 Assets to be Acquired by Buyer. Subject to the terms and conditions
of this Agreement, at the Closing (as defined in Section 3.1 below), Seller
shall convey, transfer, assign and deliver to Buyer, and Buyer shall purchase,
acquire and accept from Seller, all of Seller's rights, title and interests in
and to all assets owned by Seller as of the date of the Closing, other than the
Excluded Assets (as defined below), including all assets, rights and interests
used in the operation of the Business, and including without limitation those
items listed in Exhibit A attached hereto (collectively, the "Acquired Assets").
1
1.2 Assets Being Retained by Seller. Notwithstanding any provision to the
contrary contained in this Agreement, the Acquired Assets will not include, and
Seller will retain all rights and interests in, and all obligations with respect
to, all of those items referenced in Exhibit B attached hereto (collectively,
the "Excluded Assets"). The Excluded Assets will not be sold, conveyed,
transferred, assigned or delivered to Buyer at the Closing.
1.3 Nonassignable Rights. Nothing herein shall be deemed to require the
transfer of any assets which by their terms or operation of law cannot be
transferred; provided, however, that Seller shall cooperate with Buyer to seek
to obtain any necessary consents or approvals for the transfer of all Acquired
Assets contemplated to be transferred pursuant to the terms of this Agreement.
In the event that the transfer of any of the Acquired Assets is not consummated
as of the Closing, Seller, as the Party retaining such Acquired Assets, shall
hold such Acquired Assets in trust for the use and benefit of Buyer, and take
such other action as may be reasonably requested by Buyer, in order to place
Buyer, insofar as is reasonably possible, in the same position as would have
existed had Seller's interests in such assets been transferred to Buyer as
contemplated hereby. As and when any such Acquired Asset becomes transferable,
such transfer shall be effectuated forthwith. The Parties agree that, as of the
Closing, Buyer shall be deemed to have acquired Seller's entire rights, title
and interests in and to all of the Acquired Assets, together with all powers and
privileges incident thereto and all duties, obligations and responsibilities
incident thereto, which Buyer is entitled to acquire or required to assume
pursuant to the terms of this Agreement.
1.4 Books and Records. Seller shall retain its corporate books and
records, shareholder records and ledgers, financial statements, employment
records and tax records. All other historical books and records of the
Business, including the corporate books and records of all subsidiaries of
Seller, records of customers and sales and copies of employment records relating
to those employees of Seller who become employees of Buyer at the Closing, shall
be transferred to Buyer as part of the Acquired Assets, provided that Seller
shall be entitled to retain a copy of any historical records which are
transferred to Buyer as provided herein. Following the Closing, each Party
shall have the right to reasonable access to historical records of the other to
the extent required to respond to tax audits or fulfill its other legal
obligations.
Article II
Consideration Payable for Acquired Assets
2.1 Consideration for the Acquired Assets. The consideration payable for
the Acquired Assets (the "Purchase Price") will consist of the those payments,
obligations and undertakings set forth below:
2.1.1 Assumption of Obligations and Liabilities. From and after
the Closing, Buyer shall assume, become responsible for, and undertake to pay,
defend, discharge and perform as and when due or required all of those debts,
obligations and liabilities of Seller arising from or relating to the Business
as listed in Exhibit C attached hereto (the "Assumed Obligations and
Liabilities"), but excluding the Retained Liabilities (as defined in Exhibit C
attached hereto), and subject to the other limitations and exceptions
specifically provided for herein.
2
2.1.2 Cash Payment at Closing. At the Closing, Buyer will pay to
Seller the sum of $339,000, in immediately available funds, by bank cashier's
check or a wire transfer to an account of Seller as designated by Seller prior
to the Closing.
2.2 Allocation of Purchase Price. The Purchase Price shall be allocated
among the Acquired Assets as set forth on Exhibit D attached hereto, all as
required by Section 1060 of the Internal Revenue Code of 1986, as amended, and
that allocation shall be reported by both the Buyer and Seller on Internal
Revenue Service Form 8594, Asset Acquisition Statement, which will be filed with
the Buyer's and Seller's Federal Income Tax Return for the tax year that
includes the Closing Date. The allocation set forth on Exhibit D shall be
conclusive and binding upon Buyer and Seller for all purposes, and neither Party
shall file any tax return or other document with, or make any statement or
declaration to, any governmental authority that is inconsistent with such
allocation.
2.3 Taxes. Seller shall be responsible for and shall pay any and all
sales, use, transfer, gross receipts, federal excise and similar taxes levied or
imposed as a result of the transfer of the Acquired Assets as contemplated by
this Agreement.
Article III
The Closing
3.1 Closing. Subject to termination of this Agreement as provided
elsewhere herein, the closing of the transactions contemplated hereby (the
"Closing") shall take place at the offices of Snell & Wilmer LLP, Gateway Tower
West, 15 West South Temple, Suite 1200, Salt Lake City, Utah 84101, or at such
other location as may be mutually agreed upon by the Parties, at 10:00 a.m.,
local time, upon the date of satisfaction or waiver of the last to be fulfilled
of the conditions to the Closing as set forth in Article 4 hereof that by their
terms are not to occur at the Closing, or on such later date as the Parties may
mutually agree upon (the "Closing Date"). No Party shall be required to proceed
with the Closing if as of July 31, 2003, the Management Agreement (as defined in
Section 5.15) has not been executed.
3.2 Seller's Obligations at Closing. At the Closing, Seller will deliver
to Buyer the following:
3.2.1 Bill of Sale. An executed Bill of Sale in the form attached
hereto as Exhibit E (the "Bill of Sale"), conveying to Buyer legal title, and
the respective rights, title and interests of Seller in and to the Acquired
Assets, free and clear of all liens, claims, charges and encumbrances, except as
otherwise provided in this Agreement.
3.2.2 Possession of Acquired Assets. Simultaneously with delivery
of the Bill of Sale, Seller will take such steps as may be necessary to put
Buyer in possession and operating control of the Acquired Assets and the
Business.
3
3.2.3 Consents, Assignments, Waivers. Executed assignments of all
permits and agreements which are to be transferred, releases of all liens,
encumbrances and security interests in respect of the Acquired Assets that are
to be obtained at or prior to the Closing, and all third-party and governmental
consents obtained by Seller in connection with the transfer of the Acquired
Assets.
3.2.4 Assignment and Assumption of Obligations and Liabilities.
An executed Assignment and Assumption of Obligations and Liabilities in the form
attached hereto as Exhibit F (the "Assumption Agreement"), pursuant to which
Seller will assign to Buyer, and Buyer will assume, the Assumed Obligations and
Liabilities.
3.2.5 Intellectual Property Assignments. Executed assignments of
rights to Intellectual Property in a form acceptable to Buyer and its counsel.
3.2.6 Resolutions. A copy of resolutions of the Seller's Board of
Directors and shareholders, certified by Seller's corporate secretary, approving
this Agreement and the transactions contemplated hereby, and authorizing the
execution, delivery and performance by Seller of this Agreement and the other
documents referred to herein that are to be executed by Seller.
3.2.7 Seller Certificate. A certificate of Seller, executed by an
executive officer of Seller, certifying: (i) as to the accuracy of Seller's
representations and warranties at and as of the Closing, as referenced in
Section 4.3.1 below; (ii) that Seller has performed or complied with all of the
covenants, agreements, terms and conditions to be performed or complied with by
Seller at or prior to the Closing as provided herein, as referenced in Section
4.3.3 below; and (iii) no event or condition has occurred as would have a
material adverse effect on the Business or the Acquired Assets, taken as a whole
(a "Material Adverse Effect on the Business").
3.2.8 Evidence of Removal of Liens. Evidence that all liens and
encumbrances on the Acquired Assets that are to be removed as of the Closing as
provided in Section 4.3.4 below, are or will be timely removed.
3.2.9 Other Items. Such other certificates, documents,
endorsements and instruments as: (i) may be necessary to vest in Buyer the
respective rights, title and interests of Seller in and to the Acquired Assets,
free and clear of all liens, claims, charges and encumbrances (except as
otherwise provided in this Agreement); (ii) may be necessary to allow Buyer to
assume and receive the benefit of all Assumed Agreements; or (iii) Buyer or its
counsel may reasonably request, consistent with the terms of this Agreement.
3.3 Obligations of Buyer at the Closing. At the Closing, Buyer shall
deliver to Seller the following:
3.3.1 Cash Payment. Buyer will deliver to Seller the cash payment
referenced in Section 2.1.2 above.
4
3.3.2 Assumption Agreement. Buyer will deliver to Seller a
counterpart of the Assumption Agreement executed by Buyer.
3.3.3 Resolutions. Buyer will deliver to Seller copies of
resolutions of the Board of Directors of Buyer, authorizing the execution,
delivery and performance of this Agreement, the the Agreement Assignments and
the other documents referred to herein to be executed by Buyer, certified by an
officer of Buyer.
3.3.4 Officer Certificate. Buyer will deliver to Seller a
certificate executed by an executive officer of Buyer, certifying: (i) as to
the accuracy of Buyer's representations and warranties at and as of the Closing,
as referenced in Section 4.2.1 below; and (ii) that such entity has complied
with all of the covenants, agreements and conditions to be performed or complied
with at or prior to the Closing, as referenced in Section 4.2.3 below.
3.3.5 Other Items. Buyer will deliver to Seller such other
certificates, documents, endorsements and instruments as may be necessary or
reasonably requested by Seller to document and establish the assumption by Buyer
of the Assumed Obligations and Liabilities.
Article IV
Conditions to Closing
4.1. Conditions To Each Party's Obligations. The respective obligations of
each Party to proceed with the Closing will be subject to the fulfillment (or
waiver by the Parties) at or prior to the Closing Date of the following
conditions:
4.1.1 Seller Shareholder Vote. The Seller Shareholder Vote (as
defined in Section 5.5 below) shall have been obtained, and no shareholder of
Seller shall have threatened or commenced any action to prevent or restrict
transactions contemplated by this Agreement.
4.1.2 No Restraints or Litigation. No action, suit or proceeding
instituted by any governmental entity will be pending and no statute, rule,
regulation, order, decree, judgment or injunction will be in effect which
prohibits, restrains, enjoins or restricts the consummation of the transactions
contemplated by this Agreement. There shall be no lawsuits or proceedings
pending or, to the best knowledge of either of the Parties, threatened, against
either of them, nor shall either of the Parties have received any written or
oral notice of any such action, suit, proceeding or investigation, which might
materially restrict or adversely affect the operation of the Business or the
transactions contemplated by this Agreement.
4.1.3 Authorizations and Consents. The Parties shall have
received all authorizations, consents and approvals of governmental authorities
and agencies required to carry out the transactions contemplated hereby.
4.2 Conditions to the Obligations of Seller. The obligation of Seller to
proceed with the Closing is subject to the satisfaction at or prior to the
Closing of the following conditions (any or all of which may be waived by
Seller):
5
4.2.1 Representations and Warranties of Buyer. The
representations and warranties of Buyer as set forth in Section 6.2 below shall
be true and accurate in all material respects on and as of the Closing Date,
except for changes contemplated by this Agreement and except for those
representations and warranties that address matters only as of a particular date
(which shall remain true and correct as of such particular date), with the same
force and effect as if they had been made at the Closing Date, and Seller shall
have received a certificate to such effect executed by an officer of Buyer.
4.2.2 Performance of Covenants by Buyer. Buyer shall have
performed and complied in all material respects with all of its covenants
contained in this Agreement required to be performed by it at or prior to the
Closing, and Seller will have received a certificate to such effect signed by an
officer of Buyer.
4.2.3 Approval of Actions and Documents. All actions to be taken
by Buyer in connection with the consummation of the transactions contemplated
hereby and all certificates, opinions, instruments, and other documents required
to effect the transactions contemplated hereby will be reasonably satisfactory
in form and substance to Seller.
4.3 Conditions to Obligations of Buyer. The obligations of Buyer to
proceed with its obligations at the Closing are subject to the satisfaction at
or prior to the Closing of the following conditions, any or all of which may be
waived by Buyer:
4.3.1 Representations and Warranties of Seller. The
representations and warranties of Seller as set forth in Section 6.1 below shall
be true and accurate in all material respects on and as of the Closing Date,
except for changes contemplated by this Agreement and except for those
representations and warranties that address matters only as of a particular date
(which shall remain true and correct as of such particular date), with the same
force and effect as if they had been made at the Closing Date, and Buyer shall
have received a certificate to such effect executed by an officer of Seller.
4.3.2 Performance of Seller Covenants. Seller shall have
performed and complied in all material respects with all of its covenants
contained in this Agreement required to be performed by it at or prior to the
Closing, and Buyer shall have received a certificate to such effect signed by an
officer of Seller.
4.3.3 Removal of Liens. All liens and encumbrances on the
Acquired Assets shall have been removed, except for liens relating to Assumed
Obligations and Liabilities.
4.3.4 Approval of Actions and Documents. All actions to be taken
by Seller in connection with the consummation of the transactions contemplated
hereby and all certificates, instruments, and other documents required to effect
the transactions contemplated hereby will be reasonably satisfactory in form and
substance to Buyer.
4.3.5 Absence of Material Adverse Effect. No event shall have
occurred since the Agreement Date as would have a Material Adverse Effect on the
Business, and Seller's base of customers purchasing Seller's products or
services on a continuing basis shall not have been reduced by more than 15% from
the number of such customers existing as of the Agreement Date.
6
4.4 Satisfaction of Conditions on Execution of Management Agreement. Upon
the execution of the Management Agreement as set forth in Section 5.15 below,
all conditions to the Closing as set forth in Sections 4.1, 4.2 and 4.3 above
shall be deemed to have been satisfied or waived, except for the receipt of the
Seller Shareholder Vote as referenced in Section 4.1.1 above.
Article V
Covenants, Obligations and Rights of the Parties
5.1 Conduct of Business Pending the Closing. From the Agreement Date and
until the earliest of (i) the Closing Date, (ii) the termination of this
Agreement, or (iii) the execution of the Management Agreement, Seller will
continue to conduct the Business as currently conducted. During such period,
Seller will conduct the Business in accordance with the following requirements.
5.1.1 No Transactions Outside Ordinary Course. Seller will not
engage in any practice, or take any action or enter into any transaction outside
the ordinary course of business, without the prior written consent of Buyer.
5.1.2 Maintain Current Relationships. Seller will use its best
efforts to maintain its Business, licenses and operations, and relationships
with its employees, distributors, associates, suppliers, licensors, licensees
and customers in accordance with past custom and practice.
5.2 Notification of Changes by Seller. Seller will promptly advise Buyer
in writing of any of the following occurring subsequent to the Agreement Date
and prior to the Closing Date or earlier termination of this Agreement:
5.2.1 Breach of Representations and Warranties. Any event that
would render any representation or warranty of Seller contained in Section 6.1
of this Agreement, if made on or as of the date of such event or the Closing
Date, untrue or inaccurate in any material respect.
5.2.2 Violation of Covenants Regarding Conduct of Business. Any
event contrary to the requirements of Section 5.1 above, or the other covenants
made by Seller in Article V of this Agreement.
5.2.3 Governmental and Third Party Actions. Any governmental or
third party complaints, investigations, litigation or hearings (or
communications indicating that any may be contemplated) relating to the Business
or the Acquired Assets or Assumed Obligations and Liabilities.
5.2.4 Material Deterioration of Relationships. Any material
deterioration in Seller's relationship with any customers, suppliers,
distributors, associates or key employees.
7
5.2.5 Breach of Agreements. Any breach by Seller of any
agreement, covenant or warranty hereunder, or of any material contract or
agreement to which Seller is a party.
5.2.6 Material Adverse Effects. Any condition or event which
would have a Material Adverse Effect on the Business.
5.3 Notification of Changes by Buyer. Buyer will promptly advise Seller
in writing of any of the following occurring subsequent to the Agreement Date
and prior to the Closing Date or earlier termination of this Agreement:
5.3.1 Breach of Representations and Warranties. Any event that
would render any representation or warranty of Buyer contained in Section 6.2 of
this Agreement, if made on or as of the date of such event or the Closing Date,
untrue or inaccurate in any material respect.
5.3.2 Violation of Covenants. Any event contrary to the covenants
made by Buyer in Article V of this Agreement.
5.3.3 Material Adverse Effects. Any condition or event which
would have a material adverse effect on, or prevent Buyer from performing its
obligations under, this Agreement or any other agreement hereunder to which it
is a Party.
5.4 Best Efforts to Satisfy Conditions. Each Party hereto will use its
reasonable best efforts to satisfy, or to cause the satisfaction, of those
conditions to the Closing which are within its control, or which it can
reasonably influence.
5.5 Seller Shareholder Approval. Seller will call a meeting of the
Seller's shareholders (the "Seller Shareholder Meeting"), to be held as promptly
as reasonably practicable, to submit this Agreement and the transactions
contemplated hereby for the consideration and approval of the Seller's
shareholders. Seller will use its reasonable best efforts to secure the
approval of this Agreement and the transactions contemplated hereby by the vote
of its shareholders as provided in this Section 5.5. For purposes of the Seller
Shareholder Meeting, a quorum will be deemed to be present and the meeting may
proceed and a vote of the shareholders taken if there are represented in person
or by proxy at the meeting a majority of the issued and outstanding shares of
Seller eligible to vote at the meeting. If a quorum is present, the approval of
this Agreement and the transactions contemplated hereby will be effective upon
receipt of the affirmative vote of a majority of the issued and outstanding
shares of Sellers' Common Stock. Such specified vote approving this Agreement
and the contemplated transactions is referred to herein as the "Seller
Shareholder Vote." The proxy statement relating to the Seller Shareholder
Meeting will include a statement to the effect that Seller's Board of Directors
has recommended that Seller's shareholders approve this Agreement and the
transactions contemplated hereby. Such meeting will be called, held and
conducted, and any proxies will be solicited, in compliance with applicable law.
Subject to the fiduciary obligations of Seller's directors, Seller's Board of
Directors will not take any action to revoke, modify, invalidate or withdraw the
Seller Shareholder Vote.
8
5.6 Seller Shareholder Voting Agreements. Concurrently with the execution
of this Agreement, shareholders of Seller holding a majority of the outstanding
shares of Seller's Common Stock will sign and deliver to Buyer a Voting
Agreement in the form of Exhibit G attached hereto (the "Seller Voting
Agreement"), pursuant to which such shareholders will agree to approve the
execution, delivery and performance of this Agreement and the transactions
contemplated thereby.
5.7 Employees. Promptly after the Closing, Buyer shall extend to all
employees of Seller except those identified in Exhibit H attached hereto offers
of employment with Buyer, for such compensation and upon such terms and
conditions as Buyer may determine to be appropriate.
5.8 Cooperation. Subject to compliance with applicable law, from the
Agreement Date until the Closing Date, the Parties hereto will confer with each
other on a regular and frequent basis to report operational matters of
materiality and the general status of ongoing operations of the Business.
5.9 Access to Information. Seller will allow Buyer and Buyer's agents
reasonable access to the files, books, records, technology and offices of Seller
including, without limitation, any and all information relating to the Acquired
Assets, the Assumed Obligations and Liabilities and the Business. Seller will
cause its accountants to cooperate with Buyer and Buyer's agents in making
available all financial information reasonably requested by them. Buyer shall
have the right to inspect at all reasonable times during business hours all of
the Acquired Assets.
5.10 Additional Actions. Subject to the terms and conditions of this
Agreement, each of the Parties hereto agrees to use all reasonable efforts to
take, or cause to be taken, all action and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations, or
to remove any impediments or delays, to consummate and make effective the
transactions contemplated by this Agreement, subject, however, to the Seller
Shareholder Vote.
5.11 Further Assurances. Each Party hereto agrees to use all reasonable
efforts to obtain all consents and approvals and to do all other things
necessary for the consummation of the transactions contemplated by this
Agreement. The Parties agree to take such further action to deliver or cause to
be delivered to each other at the Closing and at such other times thereafter as
is reasonably agreed by such additional agreements or instruments as any of them
may reasonably request for the purpose of carrying out this Agreement and
agreements and transactions contemplated hereby and thereby. The Parties will
afford each other access to all information, documents, records and personnel
who may be necessary for any Party to comply with laws or regulations (including
without limitation the filing and payment of taxes and handling tax audits), to
fulfill its obligations with respect to indemnification hereunder or to defend
itself against suits or claims of others.
5.12 Publicity. Neither of the Parties will issue or cause the publication
of any press release or other public announcement with respect to this Agreement
or the transactions contemplated hereby without the prior written consent of the
other Party hereto, except as may be required by applicable securities laws or
rules or other legal requirement. In the event of a required disclosure without
the other Party's prior consent, the disclosing Party will use reasonable
efforts to provide a copy of the required disclosure to the other Party in
advance of the disclosure, and will give due consideration to such comments as
such other Party may have, prior to such disclosure.
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5.13 Confidentiality and Noncompetition.
5.13.1 Existing Agreements. The Parties may have previously
entered into or may in the future enter into one or more agreements obligating
one or both of the Parties to maintain as confidential certain information
disclosed by or received from a Party. The obligations of confidentiality and
other provisions set forth in any such confidentiality agreements shall be in
addition to, and shall not restrict or be restricted by, the confidentiality
provisions of this Agreement. The confidentiality provisions of this Agreement
shall in no way relieve the parties from any obligations arising under, or
modify, such other confidentiality agreements.
5.13.2 Duty of Seller to Maintain Confidentiality. Seller has
confidential and proprietary information relating to the Business, including
information described in the definition of Intellectual Property, which will
become property of Buyer upon the Closing. Seller acknowledges that such
information is essential to the continued success of the Business and
achievement of the value of the Acquired Assets, and will be of importance to
the business activities and plans of Buyer after the Closing. Seller further
acknowledges that the unauthorized disclosure of such confidential information
to others or the unauthorized use of such information by others would cause
substantial loss and harm to Buyer. Accordingly, Seller agrees that from and
after the Closing it will not use or disclose any of such confidential
information, except as may be required by law or by any listing agreement with a
national securities exchange, and will require its executive officers to
likewise refrain from any unauthorized use or disclosure of any such
confidential information.
5.13.3 Duty of Buyer to Maintain Confidentiality. Buyer has
obtained, and prior to the Closing will obtain, access to information that is
confidential and proprietary to Seller. Prior to the Closing, Buyer will not
use such information for any purpose other than to evaluate whether to proceed
with the Closing, to prepare to conduct the Business upon the Closing, and to
carry out its obligations under the Management Agreement. In the event the
Closing does not occur as contemplated herein, then upon the termination of this
Agreement Buyer will return to Seller all confidential and proprietary
information of Seller, and will refrain from using or disseminating any such
information which has not entered the public domain, through no fault of Buyer.
5.13.4 Seller Agreement Not to Compete. Seller agrees that for a
period of one year from and after the Closing Date, and thereafter until the
earlier of (i) the fifth anniversary of the Closing Date, (ii) such date as the
license agreement previously entered into between Seller and Buyer has been
terminated, or (iii) such date as Buyer has failed to sell any products for
which a royalty would be payable to Seller under the license agreement
previously entered into between Buyer and Seller for a period of three
consecutive quarters, Seller will refrain from contacting any of the healthcare
organizations that were customers of Seller prior to the Closing for the purpose
of soliciting orders or establishing relationships for any business enterprise
that competes with the Business in the marketing of healthcare information
management systems. In the event that a court of competent jurisdiction
determines that the foregoing covenant is unenforceable because of its duration,
it shall be shortened to a period of two years following the Closing Date, or
such shorter date as such court may determine to be the maximum period for which
such covenant would be enforceable.
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5.13.5 Remedy and Right to Injunction. The Parties agree that
damages in the event of a breach of this Section 5.13 would be difficult if not
impossible to ascertain, and it is therefore agreed that a Party, in addition to
and without limiting any other remedy or right it may have, shall be entitled,
as a matter of course, and without being required to post a bond, to obtain an
injunction from any court of competent jurisdiction restraining any further such
violation, as well as to recover from the breaching Party any and all costs and
expenses sustained or incurred by the Party in obtaining such an injunction and
recovery, including without limitation reasonable attorneys' fees and
disbursements. Each Party's right to obtain an injunction (and to recover such
costs and expenses) shall be cumulative and in addition to any other rights and
remedies to which such Party may be entitled, including the right to recover
damages.
5.14 Expenses. Whether or not the Closing occurs as contemplated herein,
the Parties agree that each Party will be responsible for its own fees, costs
and expenses incurred by such Party with respect to the negotiation, execution
and performance of this Agreement and the consummation of the transactions
contemplated hereby, including without limitation, legal, accounting, consulting
and advisory fees and expenses incurred in due diligence activities.
5.15 Management Agreement; Escrow of Funds. At any time following the
Agreement Date, when the Parties may mutually determine to be appropriate, the
Parties will execute a Transition Management Services Agreement in the form
attached hereto as Exhibit I (the "Management Agreement") and the Buyer will
thereafter assume the management responsibilities for the Business as provided
for therein. Concurrently with the execution of the Management Agreement, Buyer
will deposit into an escrow account, on terms reasonably approved by Seller,
$________ of the Purchase Price referenced in Section 2.1.2 above, to be
released to Seller at the Closing, or returned to Buyer if this Agreement is
terminated prior to Closing. Upon execution of the Management Agreement, Buyer
may hire employees of Seller as contemplated herein and undertake to relocate
the facilities to be utilized by the Business, with the terms and location
thereof to be subject to Seller's prior written consent, which will not be
unreasonably withheld.
5.16 Payment of Obligations; Rights to Offset. If Buyer is asked to pay
any of Seller's obligations which are retained by Seller and not assumed by
Buyer hereunder, then if Buyer gives Seller written notice of such outstanding
obligation, and of the request or demand made on Buyer to pay such obligation,
then if Seller fails to pay such obligation within thirty days following the
receipt of such notice, Buyer may, but shall not be required to, pay such
obligation. In the event Buyer makes any such payment of an obligation of
Seller, then Buyer shall have the right, in addition to any other remedies it
may have against Buyer, to offset from any sums otherwise payable to Buyer,
whether pursuant to this Agreement or otherwise, the amount of such payment.
5.17 Covenants Regarding Seller Products. During the Payment Period, Buyer
will not reduce the initial license fees charged with respect to Seller Products
as to which payments are to be made to Seller as provided in Section 2.1.4
above, without the prior written consent of Seller. Furthermore, Seller shall
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have the right, at any time during the Payment Period and for a period of 90
days thereafter, during normal business hours and on at least three days prior
notice, and in no event more frequently than once in each twelve month period,
to inspect and audit Buyer's books and records with respect to sales and
licenses of Seller Products within the Payment Period (provided that Buyer shall
not be required to maintain records for any period for more than three years)
and the License Payments applicable thereto. In the event any such inspection
or audit reflects that Buyer has not paid all required License Payments, Buyer
will promptly pay the deficiency to Seller upon written notice thereof from
Seller. If any such audit or inspection indicates that Buyer has underpaid by
more than 3% any required License Payments, Buyer will pay Seller's reasonable
costs and expenses associated with such audit or inspection. Seller may conduct
any inspection or audit as referenced above through any officer or employee of
Seller, or through a certified public accountant hired or engaged by Seller (but
not a person hired on a contingent fee arrangement, whereby the fee is based on
the discrepancies uncovered).
5.18 Covenant Regarding Sharp Rees Stealy Corporation. Notwithstanding any
other provisions in this Agreement, the Parties hereto covenant and agree that
if, at any time during the term of the Management Agreement or within one year
following the Closing, Buyer enters into an agreement with Sharp Rees Stealy
Corporation ("SRS") with respect to the provision of services or products, and
SRS asserts a right to reduce the amount payable with respect thereto (or to
demand a refund of amounts previously paid to Seller) as a result of funds
previously paid to Seller with respect to similar products or services, then the
Parties agree to share equally in the liability relating thereto, up to a
maximum amount of $25,000 to be assumed by each Party (i.e., to the extent Buyer
is required to accept a lesser payment than that originally established with SRS
as a result of a claim as referenced above, Seller will pay to Buyer an amount
equal to one-half of such claim, up to a maximum payment by Seller of $25,000),
and either Party shall have the right to contest any such claim made by SRS.
The Parties understand and acknowledge that the foregoing arrangement is
applicable only if Buyer does future business with SRS. Buyer is not otherwise
assuming any responsibility for any outstanding obligations owed by Seller to
SRS, nor is Buyer assuming any warranty or responsibility with respect to
products or services previously provided by Seller to SRS.
Article VI
Representations and Warranties
6.1 Representations and Warranties of Seller. Seller hereby represents
and warrants to Buyer that each of the following statements is true and correct:
6.1.1 Organization; Good Standing; Qualification.
Seller is a corporation duly organized, validly existing and in
good standing under the laws of the State of Utah, and has all requisite
corporate power and authority to own, lease and operate its properties and to
carry on the Business as now being conducted.
6.1.2 Authorization and Validity.
(a) Corporate Power and Authority. Seller has the full
corporate power and authority to enter into and perform its obligations under
this Agreement, and all other agreements and instruments contemplated hereby to
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which Seller is or is intended to be a party (the "Seller Ancillary
Agreements"), subject to receipt of the Seller Shareholder Vote. The execution,
delivery and performance by Seller of this Agreement and the Seller Ancillary
Agreements have been duly and validly approved and authorized by Seller's Board
of Directors, and no other corporate proceedings on the part of Seller are
necessary to authorize this Agreement or the Seller Ancillary Agreements or to
consummate the transactions contemplated hereby or thereby, other than the
receipt of the Seller Shareholder Vote. The Seller's Board of Directors has
determined the transactions contemplated by this Agreement to be in the best
interests of Seller and its shareholders, and will recommend that its
shareholders approve the Agreement and the transactions contemplated hereby.
(b) Validity. This Agreement has been, and each of the Seller
Ancillary Agreements is, or upon execution will be, duly and validly executed
and delivered by Seller and, assuming the due authorization, execution and
delivery hereof and thereof by the other Party hereto and any other parties
thereto, constitutes, or upon execution will constitute, valid and binding
obligations of Seller, enforceable against Seller in accordance with their
respective terms, (i) subject to receipt of the Seller Shareholder Vote and (ii)
except as such enforceability may be subject to the effects of bankruptcy,
insolvency, reorganization, moratorium and other laws relating to or affecting
the rights of creditors and of general principles of equity (the "Enforceability
Exceptions").
6.1.3 No Conflict. Neither the execution, delivery and
performance of this Agreement or the Seller Ancillary Agreements, nor the
consummation of the transactions contemplated hereby or thereby nor compliance
with the provisions hereof or thereof will conflict with, or result in any
violations of, or cause a default (with or without notice or lapse of time, or
both) under, or give rise to a right of termination, amendment, cancellation or
acceleration of any obligation contained in, or the loss of any material benefit
under, or result in the creation of any lien, security interest, charge or
encumbrance upon any of the material properties or assets of Seller or the
Seller Subsidiaries, under any term, condition or provision of (i) their
articles or certificate of incorporation or bylaws, or (ii) any loan or credit
agreement, note, bond, mortgage, indenture, lease, license or other material
agreement, judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to Seller or any Seller Subsidiary or any of their properties or
assets, except for such violations, breaches, defaults, or rights of
termination, cancellation or acceleration, or losses as to which requisite
waivers or consents have been obtained.
6.1.4 Representations Regarding Acquired Assets. Except as
otherwise specifically provided herein, the Acquired Assets include all of the
assets required for, or utilized by Seller in, the operation of the Business.
At the Closing, the Acquired Assets will be transferred to Buyer free and clear
of all liens, claims and encumbrances, except as otherwise specifically provided
herein. Except as otherwise specifically provided herein, the Acquired Assets
are being sold "As Is, Where Is."
6.1.5 Disclosure. Seller has delivered to Buyer a disclosure
package consisting of copies of each report filed by Seller with the Securities
and Exchange Commission ("SEC") within the three year period prior to the
Agreement Date (collectively, the "Seller Disclosure Package"). As of their
respective filing dates, and except as otherwise disclosed by Seller to Buyer in
writing, the information provided in the documents filed by Seller with the SEC
and included in the Seller Disclosure Package did not, insofar as it related to
the Business or the Acquired Assets, contain any untrue statement of a material
fact or omit to state any material fact necessary in order to make the
statements contained therein, in light of the circumstances under which such
statements were made, not misleading in any material respect as of such dates.
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6.1.6 Status of Seller Intellectual Property Rights.
(a) Seller owns or is licensed or is otherwise entitled to
exercise, all rights to all patents, trademarks, tradenames, service marks,
copyrights, trade secrets and other intellectual property rights, and any
applications or registrations therefore, and all inventions, computer software
programs, technology, know-how, and documentation currently used in the Business
as conducted by Seller, without any conflict with or infringement of the rights
of others.
(b) Exhibit J attached hereto lists: (i) all copyrights,
patents, patent applications, trademarks, service marks, trade names, and other
company, product or service identifiers owned by or licensed to Seller
("Seller's Intellectual Property Rights"); (ii) all licenses, sublicenses and
other agreements to which Seller is a party and pursuant to which any other
party is authorized to use, or exercise any of Seller's Intellectual Property
Rights; and (iii) all parties to whom Seller has delivered copies of source code
relating to any of the software programs developed by Seller and utilized in any
of the products or services offered in the Business, whether pursuant to an
escrow arrangement or otherwise, or parties who have the right to receive such
source code (including conditional recipients under an escrow agreement).
Seller has delivered to Buyer copies of all licenses, sublicenses and other
arrangements identified in clause (iii) above.
(c) Except as otherwise set forth in Exhibit J, Seller is the
owner or exclusive licensee of, with all right, title and interest in and to
(free and clear of any liens, encumbrances or security interests), the Seller's
Intellectual Property Rights and has the exclusive rights to use, sell, license,
assign, transfer, convey or dispose thereof or the products, programs, processes
and materials covered thereby.
6.1.7 Absence of Certain Changes or Events. Seller is not aware
of any event or occurrence relating to the Acquired Assets or Business, or
Seller's relationships with its distributors, associates, vendors, customers or
governmental agencies, or the violation of any covenant or agreement that is
likely to have a Material Adverse Effect on the Business that has not been
disclosed to Buyer.
6.1.8 Fees and Expenses. Neither Seller nor any of the Seller
Subsidiaries has paid or become obligated to pay any fee or commission to any
broker, finder or intermediary in connection with the transactions contemplated
by this Agreement.
6.2 Representations and Warranties of Buyer. Buyer hereby represents and
warrants to Seller that each of the following representations, warranties and
statements is true and correct:
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6.2.1 Organization; Good Standing; Qualification. Buyer is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware, and has all requisite corporate power and authority to
own, lease and operate its properties and to carry on its business as now being
conducted.
6.2.2 Corporate Power and Authority. Buyer has the requisite
corporate power and authority to enter into and perform its obligations under
this Agreement, and all other agreements and instruments contemplated hereby to
which such entity is or is intended to be a party (the "Buyer Ancillary
Agreements"). The execution, delivery and performance by Buyer of this
Agreement and the Buyer Ancillary Agreements have been duly and validly approved
and authorized by all necessary corporate action on the part of the Buyer's
Board of Directors, and no other corporate proceedings on the part of Buyer is
necessary to authorize this Agreement and the Buyer Ancillary Agreements or to
consummate the transactions contemplated hereby or thereby.
6.2.3 Validity. This Agreement and each of the Buyer Ancillary
Agreements are, or upon execution will be, duly and validly executed and
delivered by Buyer and, assuming the due authorization, execution and delivery
hereof and thereof by Seller, constitute, or upon execution will constitute,
valid and binding obligations of Buyer, enforceable against such Parties in
accordance with their respective terms, except for the Enforceability
Exceptions.
6.2.4 No Conflict. Neither the execution, delivery and
performance of this Agreement, nor the Buyer Ancillary Agreements, nor the
consummation of the transactions contemplated hereby or thereby nor compliance
with the provisions hereof or thereof will conflict with, or result in any
violations of, or cause a default (with or without notice or lapse of time, or
both) under, or give rise to a right of termination, amendment, cancellation or
acceleration of any obligation contained in, or the loss of any material benefit
under, or result in the creation of any lien, security interest, charge or
encumbrance upon any of the Acquired Assets, under any term, condition or
provision of (i) their articles of incorporation or bylaws, or (ii) any loan or
credit agreement, note, bond, mortgage, indenture, lease or other material
agreement, judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to Buyer or the Acquired Assets, as the case may be.
6.2.5 Government Consents. No consent, approval, order or
authorization of or registration, designation, declaration or filing with, any
governmental entity is required to be obtained by Buyer in connection with the
execution, delivery and performance of this Agreement, the Buyer Ancillary
Agreements, or the consummation of the transactions contemplated hereby or
thereby, except for such filings, authorizations, orders and approvals which, if
not obtained or made, would not (A) materially impair the ability of Buyer to
perform its obligations under this Agreement or any Buyer Ancillary Agreement or
(B) prevent the consummation of any of the transactions contemplated by this
Agreement.
6.2.6 Fees and Expenses. Buyer has not paid or become obligated
to pay any fee or commission to any broker, finder or intermediary in connection
with the transactions contemplated by this Agreement.
6.2.7 Due Diligence. Buyer has completed its due diligence review
of the Business and the Acquired Assets, and is satisfied with the results
thereof.
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Article VII
Termination of Agreement
7.1 Termination. This Agreement may be terminated at any time prior to
the Closing as set forth below:
7.1.1 Mutual Agreement. This Agreement may be terminated at any
time prior to the Closing by the mutual written agreement of the Parties hereto.
7.1.2 For Failure of Closing. This Agreement may be terminated by
either Party hereto if by July 31, 2003, the parties have not executed the
Management Agreement, or (ii) the Seller Shareholder Vote is not obtained at the
Seller Shareholder Meeting, provided that the right to terminate this Agreement
under this Section 7.1.2 shall not be available to any Party whose failure to
fulfill any obligation under this Agreement has been the cause of, or resulted
in, the failure of the Closing (or execution of the Management Agreement) to
occur on or before the applicable date.
7.1.3 For Failure of Conditions. Either Party may terminate this
Agreement by giving written notice of termination to the other Party, if prior
to the Closing such other Party has breached any of its material
representations, warranties, or covenants contained in this Agreement in any
material respect, and the breach, if curable, has continued without cure for a
period of fifteen (15) business days following the date of receipt of the
termination notice by the breaching Party.
7.2 Effect of Termination. If this Agreement is terminated as provided
above, all rights and obligations of the Parties hereunder shall terminate
without liability of either Party to the other Party; provided, however, that
nothing herein will relieve either Party from liability for the willful breach
of any of its representations, warranties, covenants or agreements set forth in
this Agreement prior to such termination.
Article VIII
Indemnification
8.1 Indemnification. Each Party (as an "Indemnifying Party") agrees to
defend, indemnify and hold harmless other Party (as an "Indemnified Party"), and
each of the Indemnified Party's shareholders, affiliates, officers, directors,
employees, agents, successors and assigns (an Indemnified Party and such related
persons being referred to herein as the "Indemnified Persons") for, from and
against each claim, loss, liability, cost and expense (including without
limitation, interest, penalties, costs of preparation and investigation, and the
reasonable fees, disbursements and expenses of attorneys, accountants and other
professional advisors) (collectively "Losses"), directly or indirectly relating
to, resulting from or arising out of any untrue representation,
misrepresentation, breach of warranty or non-fulfillment of any covenant,
agreement or other obligation by or of the Indemnifying Party pursuant to this
Agreement.
8.2 Indemnification Procedures. An Indemnified Person shall promptly
notify an Indemnifying Party of any claim, demand, action or proceeding for
which indemnification will be sought under Section 8.1 above and, if such claim,
demand, action or proceeding is a third party claim, demand, action or
proceeding, the Indemnifying Party will have the right at its expense to assume
the defense thereof using counsel reasonably acceptable to the Indemnified
Party. The Indemnified Persons shall have the right to participate, at their
own expense, with respect to any such third party claim, demand, action or
proceeding. In connection with any such third party claim, demand, action or
proceeding, the Indemnifying Party and Indemnified Persons shall cooperate with
each other and provide each other with access to relevant books and records in
their possession. No such third party claim, demand, action or proceeding shall
be settled without the prior written consent of the Indemnified Persons. If a
firm written offer is made to settle any such third party claim, demand, action
or proceeding and the Indemnifying Party proposes to accept such settlement and
Indemnified Party refuses to consent to such settlement, then: (i) the
Indemnifying Party shall be excused from, and the Indemnified Persons shall be
solely responsible for, all further defense of such third party claim, demand,
action or proceeding; and (ii) the maximum liability of the Indemnifying Party
relating to such third party claim, demand, action or proceeding shall be the
amount of the proposed settlement if the amount thereafter recovered from the
Indemnified Persons on such third party claim, demand, action or proceeding is
greater than the amount of the proposed settlement. Whether or not an
Indemnifying Party shall have assumed the defense of any such third party claim,
action, demand or proceeding, no Indemnified Person shall admit any liability
with respect to, or settle, compromise or discharge, any such claim, demand,
action or proceeding without the Indemnifying Party's prior written consent,
which shall not be unreasonably withheld. If Buyer is entitled to
indemnification as provided herein, Buyer shall be entitled to deduct any Losses
from any amount owing to Seller pursuant to this Agreement, or otherwise.
16
8.3 Cooperation of the Parties. The Parties hereto shall cooperate with
each other in the resolution of any claim or liability with respect to which an
Indemnifying Party is obligated to indemnify any Indemnified Persons hereunder,
including by making commercially reasonable efforts to mitigate or resolve any
such claim or liability. In the event that an Indemnified Party shall fail to
make such commercially reasonable efforts to mitigate or resolve any claim or
liability, then notwithstanding anything else to the contrary herein, the
Indemnifying Party shall not be required to indemnify any person for any losses
that could reasonably be expected to have been avoided if the Indemnified Party
had made such efforts.
8.4 Exclusive Remedy. The Parties acknowledge and agree that, after the
Closing their sole and exclusive remedy with respect to any and all claims
relating to this Agreement and the transactions contemplated hereby (other than
(i) for fraud, (ii) a failure to make payments required hereunder, or (iii) for
a violation of Seller's covenant not to compete as set forth in Section 5.13.4
above), shall be pursuant to the indemnification provisions set forth in this
Article VIII. In furtherance of the foregoing, the Parties hereby waive, from
and after the Closing, to the fullest extent permitted under applicable law, any
and all rights, claims and causes of action (other than causes of action arising
from (i) fraud, (ii) a failure to make payments required hereunder, or (iii) for
a violation of Seller's covenant not to compete as set forth in Section 5.13.4
above), any Indemnified Persons may have against an Indemnifying Party under or
based upon any federal, state, local or other statute, law, ordinance, rule,
regulation or otherwise (except pursuant to the indemnification provisions set
forth in this Article VIII).
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8.5 Limitation and Termination of Indemnification Obligations. The
indemnification obligations set forth in this Article VIII shall terminate on
the date which is one year following the Closing; provided that such obligations
shall not terminate (i) as to any item as to which the Indemnified Persons shall
have, before the expiration of such one year period, previously made a claim by
delivering a notice of such claim (stating in reasonable detail the basis of
such claim) to the Indemnifying Party, or (ii) as to any claim relating to a
breach of a covenant, which requires performance following the Closing Date.
All of the representations and warranties of the Parties contained in this
Agreement shall survive the Closing for a period of one year. All of the
covenants of the Parties made herein and to be fulfilled following the Closing
Date shall continue following the Closing Date, in accordance with their terms.
No claim for indemnification shall be made by any Party under this Article VIII
unless the amount of all such claims as to which such Party seeks
indemnification exceeds $20,000, and no claims for indemnification shall be made
against any Party in amounts exceeding $500,000.
Article IX
Miscellaneous Provisions
9.1 Governing Law, Jurisdiction and Venue. The internal laws of the State
of Arizona (irrespective of its choice of law principles) will govern the
validity of this Agreement, the construction of its terms, and the
interpretation and enforcement of the rights and duties of the Parties hereto.
In the event of any claim or dispute arising hereunder, the Parties consent to
the exclusive jurisdiction and venue of the federal and state courts residing in
Phoenix, Arizona.
9.2 Assignment; Binding Upon Successors and Assigns. Neither Party hereto
may assign any of its rights or obligations hereunder without the prior written
consent of the other Parties hereto. This Agreement will be binding upon and
inure to the benefit of the Parties hereto and their respective successors and
permitted assigns.
9.3 Severability. If any provision of this Agreement, or the application
thereof, will for any reason and to any extent be invalid or unenforceable, the
remainder of this Agreement will remain in full force and effect and the
application of such provisions to other persons or circumstances will be
interpreted so as reasonably to effect the intent of the Parties hereto. The
Parties further agree to replace such void or unenforceable provision of this
Agreement with a valid and enforceable provision that will achieve, to the
extent possible, the economic, business and other purposes of the void or
unenforceable provision.
9.4 Counterparts. This Agreement may be executed in any number of
counterparts, each of which will be an original as regards any Party whose
signature appears thereon and all of which together will constitute one and the
same instrument. This Agreement will become binding when one or more
counterparts hereof, individually or taken together, will bear the signatures of
each of the Parties reflected hereon as signatories.
9.5 Amendment and Waivers. Any term or provision of this Agreement may be
amended and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or prospectively)
only by a writing signed by the Parties. The waiver by a Party of any breach
hereof or default in the performance hereof will not be deemed to constitute a
waiver of any other default or any succeeding breach or default. This Agreement
may be amended by the Parties hereto any time before or after approval of the
Seller's shareholders, but after such approval no amendment will be made which
by applicable law requires the further approval of the Seller's shareholders
without obtaining such further approval.
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9.6 Attorneys' Fees. Should suit be brought to enforce or interpret any
part of this Agreement, the prevailing Party will be entitled to recover, as an
element of the costs of suit and not as damages, reasonable attorneys' fees to
be fixed by the court (including without limitation, costs, expenses and fees on
any appeal).
9.7 Notices. Any notice or other communications pursuant to this
Agreement will be in writing and will be deemed given if delivered personally,
telecopied, sent by nationally-recognized overnight courier or mailed by
registered or certified mail (return receipt requested), postage prepaid, to the
Parties at the following addresses (or at such other address for a Party as will
be specified by like notice):
(i) If to Seller:
Tenet Information Services, Inc.
53 West 9000 South
Sandy, Utah 84070
Attn: President
Telecopier: (801) 568-0906
Telephone: (801) 568-0899
With a copy to:
Snell & Wilmer LLP
Gateway Tower West
15 West South Temple, Suite 1200
Salt Lake City, UT 84101
Attention: Chris Anderson
Telecopier: (801) 257-1800
Telephone: (801) 257-1900
(ii) If to Buyer:
ClinicalVentures, LLC
3225 South Hardy Drive, Suite 101
Tempe, Arizona 85282
Attn: President
Telecopier: (480) ___-____
Telephone: (308) ___-____
With a copy to:
The Cavanagh Law Firm
1850 North Central Avenue, Suite 2400
Phoenix, Arizona 85004-4527
Attention: K. Bellamy Brown
Telecopier: (602) 322-4100
Telephone: (602) 322-____
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All such notices and other communications will be deemed to have been
received (a) in the case of personal delivery, on the date of such delivery, (b)
in the case of a telecopy, when the Party receiving such copy will have
confirmed receipt of the communication, (c) in the case of delivery by
nationally-recognized courier, on the business day following dispatch by
overnight courier service (on the third business day following dispatch in the
case of international deliveries), and (d) in the case of mailing, on the third
business day following such mailing.
9.8 Construction of Agreement. This Agreement has been negotiated by the
respective Parties hereto and their attorneys and the language hereof will not
be construed for or against either Party. A reference to a Section or an
exhibit will mean a Section in, or exhibit to, this Agreement unless otherwise
explicitly set forth. The titles and headings herein are for reference purposes
only and will not in any manner limit the construction of this Agreement which
will be considered as a whole.
9.9 Further Assurances. Each Party agrees to cooperate fully with each
other Party and to execute such further instruments, documents and agreements
and to give such further written assurances as may be reasonably requested by
such other Party to evidence and reflect the transactions described herein and
contemplated hereby and to carry into effect the intents and purposes of this
Agreement.
9.10 Absence of Third Party Beneficiary Rights. Except as otherwise
specifically provided herein, no provisions of this Agreement are intended, nor
will be interpreted, to provide or create any third party beneficiary rights or
any other rights of any kind in any client, customer, affiliate, stockholder or
partner of any Party hereto or any other person or entity, and all provisions
hereof will be personal solely between the Parties to this Agreement.
9.11 Entire Agreement. This Agreement and the exhibits and schedules
hereto constitute the entire understanding and agreement of the Parties hereto
with respect to the subject matter hereof and supersede all prior and
contemporaneous agreements or understandings, inducements or conditions, express
or implied, written or oral, between the Parties with respect hereto. The
express terms hereof control and supersede any course of performance or usage of
the trade inconsistent with any of the terms hereof.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY BLANK. SIGNATURES OF THE
PARTIES APPEAR ON THE NEXT PAGE.]
20
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of
the Agreement Date.
"Seller" "Buyer"
Tenet Information Services, Inc. ClinicalVentures, LLC
By: /s/ Jerald L. Nelson By: /s/ Bruce A. Mortensen
Name: Jerald L. Nelson Name: Bruce A. Mortensen
Title: President Title: President
[SIGNATURE PAGE TO ASSET PURCHASE AGREEMENT]
EXHIBIT A
Listing of Acquired Assets to be Transferred by Seller to Buyer
The Acquired Assets to be transferred by Seller to Buyer at the Closing are
to consist of all assets of Seller except for the Excluded Assets, and include,
without limitation, the following:
1. EDNet patient tracking and information management system, including source
code, copyrights, trademarks, product development and support related
inventory, documentation, and software
2. ARCNet patient tracking and information management system, including source
code, copyrights, trademarks, product development and support related
inventory, documentation, and software
3. Rightrs of Seller under IntelliChart Agreement with Delta Consulting
4. The following accounts receivable:
Date Num Name Memo Due
EDNET Accounts
06/12/2003 0703-60 Cottonwood EDNet Support for the $ 15,575.00
Hospital period of July 1, 2003 to
June 30, 2004
06/12/2003 0703-61 Daniel EDNet Support for the 15,575.00
Freeman period of July 1, 2003 to
Memorial June 30, 2004
Hospital
05/01/2003 0503-22 El Centro EDNet Support for the 520.00
Regional period June 9, 2003 -
Medical June 8, 2004 for
Center discharge instruction
module only
06/02/2003 0603-52 Pioneers EDNet Support for the 2,500.00
Memorial period June 16, 2003 to
Hospital July 15, 2003
06/12/2003 0703-67 Sharp Rees EDNet Support for the 15,575.00
Stealy period of July 1, 2003 to
Corporation June 30, 2004
05/14/2003 0503-23 Sparrow EDNet Support for the 19,300.00
Hospital period JUNE 1, 2003 TO
MAY 31, 2004
06/12/2003 0703-64 St. Mary EDNet Support for the 15,575.00
Medical period of July 1, 2003 to
Center June 30, 2004
06/12/2003 0703-66 Tri City EDNet Support for the 10,383.36
Medical period of July 1, 2003 to
Center June 30, 2004
07/__/2003 Maricopa Quarterly Maintenance 8,000.00
Medical (estimated)
Center
A-1
5. The following items:
Item Description Quantity
Computers
Laptop Micron Transport NX 400Mhz, 256MB 1
Ram
Laptop Micron Transport NX 333Mhz, 256MB 1
Ram
Laptop Micron Transport NX 266Mhz, 64MB 1
Ram
Desktop PC Generic 1.8Ghz, 512MB, 20 & 13GB HD 1
& CD
Desktop PC Generic 2.4Ghz, 512MB, 20GB HD & CD 1
Desktop PC Generic 1.8Ghz, 512MB, 20GB HD & CD 1
Desktop PC Generic 1.8Ghz, 512MB, 20GB HD, CD 1
& CDW
Desktop PC as Generic 1.6Ghz, 1024MB, 3-60GB HD & 1
Server 2-8.5GB SCSI HD
Desktop PC as Generic 400Mhz, 512MB, 20GB HD & CD 1
Server
Desktop PC as 1
Firewall
Desktop PC as Bug Tracking 1
Source Control
Software As is, where is
installed on
above
Paradyne Modem 1
3Com Ethernet 1
Switch
Palm Hub Ethernet 1
Printer
HP Laser 5L 1
Miscellaneous
Compaq Ipaq 1
H3835
Viewsonic 1
Projector PJ875
Furniture
Desk Light Maple 36X72 1
Chair Executive mid back w/wheels 2
Desk Dark Brown 36X72 1
Credenza Dark Brown 18X66
Chair Executive mid back w/wheels 1
Chair Guest leg based 2
Computer Tables 2
Desk Light Maple 36X72 1
Credenza Light Maple 18X72 1
Hutch Light Maple 1
Chair Executive mid back w/wheels 1
Desk Dark Dark Brown 30X66 1
Fridge Small 1
Chair Executive mid back w/wheels 1
Desk Light Maple 36X66 1
Credenza Light Maple 18X66 1
Book Shelf Dark Brown 1
Chair Executive mid back w/wheels 1
Filling Cabinet 1
6. Of the workstations being used by employees contemplated being hired by
Buyer, the flowing items currently being used as workplace equipment are
the personal property of the individuals noted, and so will not be acquired
by Buyer, and Buyer will have no rights with respect thereto:
A-2
.. Dell Latitude Pentium 4 Laptop Computer, docking station, monitor, and
accessories (Peter Bowen)
.. IBM Desk Star 80 gigabyte hard drive (Aaron Mangum)
.. Microsoft Intellimouse optical wireless mouse (Aaron Mangum)
.. Keytronics keyboard (Aaron Mangum)
.. Viewsonic 17" VA 800 flat panel display (Clement J. Schlimgen)
7. All records related to existing and prospective EDNet customers
The Parties understand and acknowledge that Seller has previously sold to
Delta Healthcare Consulting Group, Inc. ("Delta") the assets relating to the
consulting services business previously conducted by Seller, pursuant to an
Agreement for Sale and Purchase of Assets dated May 23, 2003 (the "Prior Sale
Agreement"), a copy of which has been provided to Buyer. Accordingly, the
Acquired Assets will not include any of the assets sold to Delta pursuant to the
Prior Sale Agreement.
A-3
EXHIBIT B
Listing of Excluded Assets
The Excluded Assets to be retained by Seller after the Closing shall be the
following items:
1. Those books and records that Section 1.4 of the Agreement provides are to
be retained by Seller.
2. All amounts payable to Seller by Delta Healthcare Consulting Group, Inc.
("Delta") pursuant to that certain Agreement for Sale and Purchase of
Assets dated May 23, 2003 (the "Prior Sale Agreement"), and all rights and
interests in the Promissory Note and Security Agreement issued by Delta
pursuant to the Prior Sale Agreement.
3. All amounts payable to Seller by Buyer pursuant to that certain License
Agreement dated July 18, 2003 (the royalty payment obligations arising
under the License Agreement will continue, although Buyer will, from and
after the Closing, own all of Seller's underlying rights and interests with
respect to the Licensed Software).
4. All rights under the Prior Sale Agreement.
5. All cash on hand at the Closing.
6. The following accounts receivable and cash equivalents:
Date Num Name Memo Due
EDNET Accounts
04/01/2003 0403-57 Maricopa EDNet Upgrade 20% 6,000.00
Medical balance due for SQL
Center upgrade completed Friday
3/4/03
04/07/2003 0403-70 Maricopa Out of Pocket Expenses - 2,060.83
Medical At Cost to Customer
Center
03/19/2003 0303-57 Childrens Consulting Revenue, Out
Hospital of Scope hours through 3- 875.00
of 19-03
Pittsburg
h
04/29/2003 0403-78 Childrens Out of Pocket Expenses - 3,358.39
Hospital At Cost to Customer
of
Pittsburg
h
04/29/2003 0403-79 Childrens Consulting Revenue 16,475.00
Hospital Professional Fees March
of 15, 2003 through April
Pittsburg 25, 2003
h
05/14/2003 0503-25 Childrens Consulting Revenue - 2,501.25
Hospital PROFESSIONAL FEES APRIL
of 26 - MAY 9, 2003
Pittsburg
h
06/01/2003 0503-28 Childrens Consulting Revenue 1,013.25
Hospital Professional Fees
of 5/15/03 to 5/23/03
Pittsburg
h
01/21/2003 0103-60 Texas Dial/7twr 400.00
Childrens
Hospital
B-1
01/29/2003 0103-76 Texas Annual Software 16,100.00
Childrens Maintenance & Support
Hospital for IntelliChart
01/29/2003 0103-77 Texas IntelliChart Project - 9,850.00
Childrens Milestone Payment #8
Hospital
02/18/2003 0203-86 Texas Diagnostic Imaging-fees 4,075.00
Childrens
Hospital
04/01/2003 0403-60 Texas Staffing Study for 7,196.25
Childrens Diagnostic Imaging
Hospital Department
04/29/2003 0403-80 Texas Consulting Revenue - 10,806.25
Childrens DIAGNOSTIC IMAGING STUDY
Hospital
05/14/2003 0503-26 Texas Consulting Revenue 2,294.00
Childrens DIAGNOSTIC IMAGING STUDY
Hospital
05/14/2003 0503-27 Texas Out of Pocket Expenses - 538.30
Childrens At Cost to Customer -
Hospital DIAGNOSTIC IMAGING
06/02/2003 0603-17 Texas Out of Pocket Expenses - 1,107.43
Childrens At Cost to Customer
Hospital
06/02/2003 0603-18 Texas Consulting Revenue 1,910.40
Childrens DIAGNOSTIC IMAGING STUDY
Hospital
7. 1 desk with secretary return and matching high-back executive chair
8. 2 utility tables currently located in Reception Area
9. 1 lateral legal sized file cabinet
10. 2 4-drawer letter sized file cabinets
11. 1 Panasonic KX-F1070 multi-function plain paper fax machine
12. 1 Xerox Phaser 860 DP printer
13. Aurora 82ASB shredder
14. Computer in Reception Area
15. Refrigerator in Kitchen Area
16. Trade show booth
17. Binding machine
18. Respiratory Care Management System ("RCMS") information management system,
including source code, copyrights, trademarks, product development and
support related inventory, documentation, and software
B-2
EXHIBIT C
Listing of Assumed Obligations and Liabilities
And Retained Liabilities
A. At the Closing, Buyer will assume and become responsible for the
payment and/or satisfaction of the following Assumed Obligations and
Liabilities:
Maintenance Support Contracts
Last Contract Contract
Invoice Invoice Beginning Ending Contract
Date Number Name Date Date Amount
---------------------------------------------------------------------------------
ANNUAL SUPPORT
09/01/2001 0901-41 Alta View 10/1/2002 9/30/2003 $ 18,000.00
Hospital
05/17/2002 0702-60 Cottonwood 7/1/2003 6/30/2004 15,575.00
Hospital
05/17/2002 0702-61 Daniel 7/1/2003 6/30/2004 15,575.00
Freeman
Memorial
Hospital
12/02/2002 1202-53 Eisenhower 1/1/2003 12/31/2003 24,200.00
Medical
Center
05/17/2002 0702-68 El Centro 6/9/2003 6/8/2004 508.00
Regional
Medical
Center
02/03/2003 0203-81 Huntington 3/17/2003 3/16/2004 5,917.00
Memorial
Hospital
09/01/2001 0901-42 Mercy 10/1/2002 9/30/2003 17,356.00
Hospital &
Medical
Center
02/03/2003 0203-80 Parkview 3/1/2003 2/28/2004 15,606.00
Memorial
Medical
Center
02/03/2003 0203/83 Parkview 3/1/2003 2/28/2004 11,264.00
North
08/27/2002 0802-19 Parkview 9/19/2002 9/18/2003 5,582.00
Noble
05/17/2002 0702-67 Sharp Rees 7/1/2003 6/30/2004 15,575.00
Stealy
Corporation
07/01/2002 0702-50 Sherman 8/1/2003 7/31/2004 13,000.00
Hospital
04/01/2002 0402-54 Sparrow 6/1/2003 5/31/2004 19,300.00
Hospital
05/17/2002 0702-64 St. Mary 7/1/2003 6/30/2004 15,575.00
Medical
Center
02/03/2003 0203-84 Summit 3/12/2003 3/11/2004 19,767.00
Medical
Center
05/17/2002 0702-66 Tri City 7/1/2003 6/30/2004 15,575.00
Medical
Center
02/03/2003 0203-82 Whitley 3/17/2003 3/16/2004 5,917.00
Memorial
Hospital
12/31/2002 1202-90 Sparrow 11,000.00
Hospital
(St. Law,
Mason)
Monthly
Support
06/02/2003 0603-52 Pioneer 6/6/2003 7/15/2003 1,250.00
Memorial
Per patient visit support
07/01/2003 Maricopa 1/1/2003 12/31/2003
Medical 33,000.00
Center (estimated)
billed
quarterly,
Next
payment to
be billed
on
7/1/2003
after per-
patient
visit data
is
available
for 2Q 2003
B. The Retained Liabilities that will be retained by Seller and not
assumed by Buyer are the following (the following tables will be updated as of
closing date):
Trade Debt
Airborne Express 4.01
American Express Centurion 28,870.39
Bank
Beneficial Life Insurance 120.00
Bluewater Properties 3,809.41
Computer Solutions, Inc 199.00
Donald Ballash 29,467.85
Emergency Nurses Association 57.00
Eric J. Nickerson 7,800.00
First USA Bank, NA 3,298.66
Hansen Barnett & Maxwell 6,213.00
Jerald L. Nelson 7,600.00
Mount Olympus Waters 60.12
Quality Warehouse Center 100.00
Qwest 298.81
Sandy City 14.36
Snell & Wilmer LLP 1,493.57
Tel America 305.36
The Hartford Insurance Co 487.59
The Standard Insurance Co 125.21
Other Obligations
Accrued Payroll 12,113.00 to be paid
at final
payroll
Accrued Vacations 10,614.00 assumes no
vacations
until
7/31/2003
Accrued Payroll - DWB 5,889.00
Pension liability DWB 12,254.50
Accrued FICA Taxes 1,533.82 to be paid
at final
payroll
Accrued Federal W/H Taxes 857.00 to be paid
at final
payroll
Accrued State W/H Taxes 2,233.61 to be paid
at final
payroll
Accrued State Unempl Tax 100.51 to be paid
at final
payroll
Accrued Federal Unemploy Tax 563.34 to be paid
at final
payroll
Flexible Spending Acct -3,268.11 needs
investigation
Sales & Excise Tax Payable 19,288.42
Int. Payable - Jerald Nelson 10,648.95
Robert Cihos 5,311.89
AC Land & Services 11,371.37
Note Payable - Jerald Nelson 26,436.43
EDNet Installation Contracts
Project Percent Approxima
Complete te
Contract
Value
Sparrow SQL Upgrade & 90% 72,900
licenses
C-3
EXHIBIT D
Allocation of Purchase Price
Generally, Buyer will allocate the Purchase Price as follows:
EdNet / ARCNet Software $239,778.00
Accounts Receivable $ 85,166.00
Computer Equipment $ 4,134.00
Office Furniture $ 1,654.00
Customer List $ 8,268.00
__________
$339,000.00
D-1
EXHIBIT E
FORM OF
BILL OF SALE
In consideration of the Purchase Price, as defined in that
certain Asset Purchase Agreement (the "Purchase Agreement") by and
between Tenet Information Services, Inc., a Utah corporation
("Seller"), and ClinicalVentures Information Systems, Inc., a Delaware
corporation ("Buyer"), dated as of July ___, 2003, Seller does
hereby grant, bargain, transfer, sell, assign, convey and deliver
to Buyer, all of Seller's right, title and interest in and to the
Acquired Assets (the "Property") as defined in the Purchase
Agreement.
Buyer hereby acknowledges that Seller is making no
representation or warranty with respect to the Property being
conveyed hereby except as specifically set forth in the Purchase
Agreement. As set forth in the Purchase Agreement, Seller
represents and warrants that the Acquired Assets (as defined in
the Purchase Agreement) are being transferred to Buyer free and
clear of all liens, claims and encumbrances, except as otherwise
specifically provided in the Purchase Agreement. Seller for
itself, its successors and assigns hereby covenants and agrees
that, at any time and from time to time forthwith upon the written
request of Buyer, Seller will do, execute, acknowledge and deliver
or cause to be done, executed, acknowledged and delivered, each
and all of such further acts, deeds, assignments, transfers,
conveyances, powers of attorney and assurances as may reasonably
be required by Buyer in order to assign, transfer, set over,
convey, assure and confirm unto and vest in Buyer, its successors
and assigns, title to the Property sold, conveyed, transferred and
delivered by this Bill of Sale.
This Bill of Sale may be executed in one or more
counterparts (and by different parties or separate counterparts),
each of which shall be deemed an original and all of which, when
taken together, shall constitute one instrument. Telecopied
counterpart signature pages will be conclusive evidence of
execution.
Executed at Salt Lake City, Utah, effective this _____ day
of __________, 2003.
TENET INFORMATION SERVICES, INC.
a Utah corporation
By:____________________________
Name
Title:
ACCEPTED:
CLINICALVENTURES, LLC
a Delaware corporation
By:____________________________
Name
Title:
E-1
EXHIBIT F
FORM OF
ASSIGNMENT AND ASSUMPTION AGREEMENT
THIS ASSIGNMENT AND ASSUMPTION AGREEMENT (the "Assumption")
is made by Tenet Information Services, Inc., a Utah corporation
("Assignor"), in favor of ClinicalVentures, LLC, a Delaware
corporation ("Assignee"). This Assumption is delivered
pursuant to that certain Asset Purchase Agreement (the "Asset
Purchase Agreement") by and between Assignor and Assignee, dated
as of July ___, 2003. Capitalized terms used but not otherwise
defined herein shall have the meanings set forth in the Asset
Purchase Agreement.
RECITALS
WHEREAS, under the Asset Purchase Agreement, Assignor agreed
to sell to Assignee and Assignee agreed to purchase from Assignor
contractual obligations of Assignor with respect to the Acquired
Assets.
WHEREAS, in connection with the transactions contemplated by
the Asset Purchase Agreement, Assignee agreed to assume
contractual obligations of Assignor with respect to the Acquired
Assets.
NOW, THEREFORE, for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the
parties hereby agree as follows:
1. Assignment and Assumption
1.1 Assignor hereby assigns to Assignee, and Assignee
hereby assumes and agrees, subject to the exclusions and
limitations contained in the Asset Purchase Agreement, to perform,
pay, or discharge the Assumed Obligations and Liabilities as
defined in the Asset Purchase Agreement and set forth on Exhibit C
of the Asset Purchase Agreement.
1.2 Assignor is retaining the Retained Liabilities as
defined and set forth on Exhibit C of the Asset Purchase
Agreement.
2. Defenses and Claims. Nothing contained herein shall be
deemed to deprive Assignee of any defenses, setoffs, or
counterclaims which Assignor may have, had, or shall have with
respect to any of the Assumed Obligations and Liabilities (the
"Defenses and Claims"). Assignor hereby transfers, conveys and
assigns to Assignee all Defenses and Claims.
3. Asset Purchase Agreement. Assignee, by its execution of
this Assumption, and Assignor, by its acceptance and consent to
the form of this Assumption, each hereby acknowledged and agrees
that: (a) the terms and provisions of the Asset Purchase
Agreement shall apply to this Assumption, and the terms and
conditions of this Assumption shall be construed consistently
therewith, and (b) neither the representations and warranties nor
the rights (including indemnification) and remedies of any party
under the Asset Purchase Agreement shall be deemed to have been
enlarged or altered in any way by the execution, acceptance and
approval of this Assumption, and this Assumption shall not enlarge
any rights or third parties under any of the Assumed Obligations
and Liabilities.
F-1
4. Applicable Law. This Assumption shall be governed by,
and construed and interpreted in accordance with, the laws of the
State of Arizona, without giving effect to the conflict of laws
rules thereof
5. Effective Date of Assumption. This Assumption shall be
deemed effective for all purposes as of the Closing of the Asset
Purchase Agreement.
IN WITNESS WHEREOF, Assignor and Assignee have caused this
Assumption to be executed by their duly authorized officers as of
the day and year first above written.
"ASSIGNOR"
Tenet Information Services, Inc.,
a Utah corporation
By:____________________________
Name
Title:
"ASSIGNEE"
ClinicalVentures, LLC
a Delaware corporation
By:____________________________
Name
Title:
F-2
EXHIBIT G
VOTING AGREEMENT
REGARDING SHARES OF
TENET INFORMATION SERVICES, INC.
This Voting Agreement Regarding Shares of Tenet Information
Services, Inc. (the "Voting Agreement") is made and entered into
effective as of July ___, 2003 (the "Effective Date"), by and
among ClinicalVentures, LLC, a Delaware corporation
("ClinicalVentures") and each of the undersigned shareholders
(collectively, the "Shareholders" and individually a
"Shareholder") of Tenet Information Services, Inc., a Utah
corporation ("Tenet").
Recitals
A. This Voting Agreement is entered into pursuant to that
certain Asset Purchase Agreement dated as of July ___, 2003, as
such may be amended (the "Acquisition Agreement"), entered into by
and between ClinicalVentures and Tenet. The Acquisition Agreement
provides, among other things, for the acquisition by ClinicalVentures
of those assets of Tenet (the "Assets") relating to its EDNet and
ARCNet businesses, as more specifically described in the
Acquisition Agreement (the "Business"), in accordance with the
terms and conditions set forth in the Acquisition Agreement (the
"Acquisition").
B. As a condition, inducement and incentive to ClinicalVentures's
execution of the Acquisition Agreement, ClinicalVentures has required,
and each of the undersigned Shareholders have agreed to, the
execution of this Voting Agreement by each of the undersigned
parties (who collectively hold a majority of all outstanding
shares of Tenet's Common Stock).
Agreement
NOW THEREFORE, the parties hereto hereby agree as follows:
ARTICLE 1. Voting of Tenet Securities
1.1 Tenet Securities. Exhibit A hereto sets forth all
shares of Tenet capital stock and any other securities of Tenet
owned by each Shareholder, including all securities of Tenet as to
which such Shareholder has sole or shared voting or investment
power, and all rights, options and warrants to acquire shares or
capital stock or other securities of Tenet granted to or held by
such Shareholder (such shares of Tenet capital stock, rights,
options and warrants to acquire shares of Tenet capital stock and
other securities of Tenet are hereinafter collectively referred to
as "Tenet Shares"). As used herein, the term "New Tenet
Securities" means, collectively, any and all shares of Tenet
capital stock, other securities of Tenet and rights, options and
warrants to acquire shares of Tenet capital stock or other
securities of Tenet that a Shareholder may acquire any interest in
(whether of record or beneficially), on or after the Effective
Date of this Voting Agreement and prior to the Expiration Date (as
defined below). All New Tenet Securities will be subject to the
terms of this Voting Agreement to the same extent and in the same
manner as if they were Tenet Shares. The Tenet Shares and the New
G-1
Tenet Securities shall be collectively referred to herein as the
"Tenet Securities." As used herein, the term "Expiration Date"
means the earlier to occur of (i) the closing of the Acquisition;
or (ii) such time as the Acquisition Agreement is terminated in
accordance with its terms.
1.2 Voting Agreement. Each Shareholder hereby agrees
with ClinicalVentures that, prior to the Expiration Date at any meeting
of the shareholders of Tenet, however called, and in any action by
written consent of shareholders of Tenet, unless otherwise
directed or authorized in writing by ClinicalVentures, such Shareholder
will vote all of such Shareholder's Tenet Securities in favor of
the Acquisition, the execution and delivery by Tenet of the
Acquisition Agreement, and the adoption, ratification and approval
of the terms thereof. Each Shareholder further agrees that prior
to the Expiration Date, such Shareholder will not enter into any
agreement or understanding with any person to vote or give
instructions in any manner inconsistent with this Section 1.2.
1.3 Proxy; Further Assurances.
(a) Contemporaneously with the execution of this
Voting Agreement, each Shareholder shall deliver to ClinicalVentures
a proxy in the form attached hereto as Exhibit B, which shall be
irrevocable to the fullest extent permitted by law, with respect
to the Tenet Securities (the "Proxy").
(b) Each Shareholder shall perform such further
acts and execute such further documents and instructions as may
reasonably be required to vest in ClinicalVentures the power to carry
out and give effect to the provisions of this Voting Agreement.
ARTICLE 2. Waiver of Dissenters' Rights
2.1 Waiver of Rights. Each Shareholder hereby waives
any dissenters' rights that such Shareholder may have in
connection with the Acquisition, whether provided in Part 13 of
the Utah Revised Business Corporation Act, or otherwise.
ARTICLE 3. No Solicitation
3.1 Non-Solicitation Agreement. Each Shareholder
covenants and agrees with ClinicalVentures that, during the period
commencing on the date of this Voting Agreement and ending on the
Expiration Date, such Shareholder shall not, directly or
indirectly: (i) solicit or initiate discussions or engage in
negotiations with any person other than ClinicalVentures or take any
action intended, designed or reasonably likely to facilitate the
efforts of any person, other than ClinicalVentures or its affiliates,
relating to the possible acquisition of the Assets or any material
portion thereof ("Acquisition Proposal"), (ii) furnish any
nonpublic information regarding Tenet to any person in connection
with or in response to an Acquisition Proposal or potential
Acquisition Proposal; (iii) engage in discussions with any person
with respect to any Acquisition Proposal; (iv) endorse or
recommend any Acquisition Proposal; or (v) enter into any letter
of intent or other similar document or any contract contemplating
or otherwise relating to any Acquisition Proposal. Each
Shareholder shall immediately cease any existing discussions with
any persons other than ClinicalVentures that relate to any Acquisition
Proposal.
G-2
ARTICLE 4. Obligations as a Director and/or Officer of
Tenet
4.1 No Restriction on Performance of Obligations. If
at any time prior to the Expiration Date a Shareholder or a
representative of a Shareholder is a member of the Board of
Directors of Tenet (a "Director") or an officer of Tenet, nothing
in this Agreement shall limit or restrict any such Director or
officer in acting in such person's capacity as a Director or
officer, as the case may be, of Tenet and in the exercise of such
person's fiduciary duties and responsibilities in such capacity,
it being agreed and understood that this Agreement shall apply to
such Shareholder solely in such Shareholder's capacity as a
shareholder of Tenet and shall not apply to any Director's or
officer's actions, judgments or decisions as a Director or officer
of Tenet. Each Director and officer of Tenet shall be presumed to
be acting in such person's capacity as a Director or officer, as
the case may be, of Tenet absent clear and convincing evidence to
the contrary.
ARTICLE 5. Representations, Warranties and Covenants of
Shareholders
5.1 Representations, Warranties and Covenants of
Shareholders. Each Shareholder represents, warrants and covenants
as follows:
(a) Authority. Such Shareholder has full power
and authority to enter into, execute, deliver and perform
Shareholder's obligations under this Voting Agreement and to make
the representations, warranties and covenants herein contained.
(b) Tenet Securities Owned. The Tenet Shares
currently owned by such Shareholder are as set forth on Exhibit A
attached hereto. All of the Tenet Securities owned by such
Shareholder are, and at all times until and through the Expiration
Date all of the Tenet Securities owned by Shareholder will be,
free and clear of any rights of first refusal, co-sale rights,
security interests, liens, pledges, claims, options, charges or
other encumbrances.
(c) Transfers of Tenet Securities. From the
Effective Date and through and including the Expiration Date, if
such Shareholder sells, transfers, encumbers or otherwise disposes
of any Tenet Securities, such Shareholder shall (i) provide
written notice to ClinicalVentures, as provided herein, immediately prior
to any such sale, transfer, encumbrance or other disposition, and
(ii) if requested by ClinicalVentures, require the purchaser or other
transferee of any such securities to be bound by all of the terms
and obligations of this Voting Agreement.
(d) Further Assurances. Such Shareholder agrees
to execute and deliver any additional documents reasonably
necessary or desirable, in the opinion of ClinicalVentures, to carry out
the purposes and intent of this Voting Agreement.
ARTICLE 6.
Miscellaneous
6.1 Notices. Any notice or other communication
required or permitted to be given under this Voting Agreement will
be in writing, will be delivered personally, by telecopier (with a
hard copy also mailed), or by registered or certified mail,
postage prepaid and will be deemed given upon delivery, if
delivered personally, one business day after transmission by
telecopier with confirmation of receipt, or three (3) days after
deposit in the mails, if mailed, to the following addresses:
G-3
(i) If to ClinicalVentures:
ClinicalVentures, LLC
3225 South Hardy Drive, Suite 101
Tempe, Arizona 85282
Attention: ____________
With a copy to:
____________________
____________________
____________________
(ii) If to Tenet:
Tenet Information Services, Inc
53 West 9000 South
Salt Lake City, Utah 84070
Attention: President
With a copy to:
P. Christian Anderson, Esq.
Snell & Wilmer, LLP
15 West South Temple, Suite 1200
Salt Lake City, Utah 84101
(iii) If to a Shareholder:
To the address for such Shareholder set forth
on Exhibit A hereof,
or to such other address as a party may have furnished to the
other parties in writing pursuant to this Section 6.1.
6.2 Termination. This Voting Agreement shall be
terminated and shall be of no further force and effect upon the
termination of the Acquisition Agreement pursuant to its terms.
G-4
6.3 Counterparts. This Voting Agreement may be
executed in any number of counterparts, each of which will be an
original as regards any party whose signature appears thereon and
all of which together will constitute one and the same instrument.
This Voting Agreement will become binding when one or more
counterparts hereof, individually or taken together, will bear the
signatures of all parties reflected hereon as signatories.
6.4 Assignment; Binding Upon Successors and Assigns.
Neither party hereto may assign any of its rights or obligations
hereunder without the prior written consent of the other party
hereto. This Voting Agreement will be binding upon and inure to
the benefit of the parties hereto and their respective successors
and permitted assigns.
6.5 Waiver and Amendment. The waiver by a party of
any breach hereof or default in the performance hereof will not be
deemed to constitute a waiver of any other default or any
succeeding breach or default. This Voting Agreement may be
amended by the parties hereto upon the execution and delivery of a
written agreement executed by the parties hereto.
6.6 Governing Law. The internal laws of the State of
Utah (irrespective of its choice of law principles) will govern
the validity of this Voting Agreement, the construction of its
terms, and the interpretation and enforcement of the rights and
duties of the parties hereto.
6.7 Severability. If any term, provision, covenant or
restriction of this Voting Agreement is held by a court of
competent jurisdiction to be invalid, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions of
this Voting Agreement will remain in full force and effect and
will in no way be affected, impaired or invalidated. The parties
further agree to replace such invalid or unenforceable term with a
valid and enforceable provision that will achieve, to the greatest
extent possible, the economic, business and other purposes of the
invalid or unenforceable provision.
6.8 Construction of Agreement. This Voting Agreement
has been negotiated by the respective parties hereto and their
attorneys and the language hereof will not be construed for or
against either party. A reference to a Section will mean a
Section in this Voting Agreement unless otherwise explicitly set
forth. The titles and headings herein are for reference purposes
only and will not in any manner limit the construction of this
Voting Agreement which will be considered as a whole.
6.9 Attorneys' Fees. Should suit be brought to
enforce or interpret any part of this Voting Agreement, the
prevailing party will be entitled to recover, as an element of the
costs of suit and not as damages, reasonable attorneys' fees to be
fixed by the court (including without limitation, costs, expenses
and fees on any appeal). The prevailing party will be entitled to
recover its costs of suit, regardless of whether such suit
proceeds to final judgment.
6.10 Specific Performance; Injunctive Relief. The
parties hereto acknowledge that ClinicalVentures will be irreparably
harmed and that there will be no adequate remedy at law for a
violation of any of the covenants or agreements of any Shareholder
set forth herein. Therefore it is agreed that, in addition to any
other remedies that may be available to ClinicalVentures upon any such
violation, ClinicalVentures shall have the right to enforce such
covenants and agreements by specific performance, injunctive
relief or by any other means available to ClinicalVentures at law or in
equity.
G-5
IN WITNESS WHEREOF, the parties hereto have executed this
Voting Agreement as of the date first set forth above.
ClinicalVentures:
ClinicalVentures, LLC
By:_______________________________
Name:____________________________
Title:_____________________________
Shareholders:
Name:____________________________
Signature__________________________
Representative Capacity:______________
Name:____________________________
Signature__________________________
Representative Capacity:_____________
Name:____________________________
Signature__________________________
Representative Capacity:______________
Name:____________________________
Signature__________________________
Representative Capacity:______________
G-6
Name:____________________________
Signature__________________________
Representative Capacity:______________
Name:____________________________
Signature__________________________
Representative Capacity:______________
Name:____________________________
Signature__________________________
Representative Capacity:______________
Name:____________________________
Signature__________________________
Representative Capacity:______________
Name:____________________________
Signature__________________________
Representative Capacity:______________
Name:____________________________
Signature__________________________
Representative Capacity:______________
G-7
EXHIBIT A to VOTING AGREEMENT
LISTING OF SHAREHOLDERS AND SHARES HELD
G-8
EXHIBIT B to VOTING AGREEMENT
IRREVOCABLE PROXY
The undersigned shareholder of Tenet Information Services,
Inc., a Utah corporation (the "Company"), hereby irrevocably (to
the fullest extent permitted by law) appoints and constitutes
ClinicalVentures, LLC, a Delaware corporation ("ClinicalVentures"),
and the President of ClinicalVentures, and each of them,
the attorneys and proxies of the undersigned with full power of
substitution and resubstitution, to the full extent of the
undersigned's rights with respect to (i) the shares of capital
stock of the Company owned by the undersigned as of the date of
this proxy, which shares are specified on the final page of this
proxy, and (ii) any and all other shares of capital stock of the
Company which the undersigned may acquire after the date hereof
until such time as this Proxy terminates in accordance with its
terms. (The shares of the capital stock of the Company referred
to in clauses (i) and (ii) of the immediately preceding sentence
are collectively referred to as the "Shares.") Upon the execution
hereof, all prior proxies given by the undersigned with respect to
any of the Shares are hereby revoked, and during the term herein
no subsequent proxies will be given with respect to any of the
Shares.
This proxy is irrevocable, is coupled with an interest and
is granted in connection with the Voting Agreement, dated as of
the date hereof, between ClinicalVentures, the Company and the
undersigned (the "Voting Agreement"), and is granted in
consideration of ClinicalVentures entering into the Asset Purchase
Agreement, dated as of the date hereof, between ClinicalVentures and
the Company (the "Acquisition Agreement"), which Acquisition Agreement
contemplates the sale by the Company to ClinicalVentures of certain
assets associated with the Company's EDNet and ARCNet businesses
(the "Assets"). Capitalized terms used but not otherwise defined
in this proxy have the meanings ascribed to such terms in the
Acquisition Agreement.
The attorneys and proxies named above will be empowered, and
may exercise this proxy, to vote the Shares at any time until the
Expiration Date (as defined in the Voting Agreement) at any
meeting of the shareholders of the Company, however called, or in
any action by written consent of shareholders of the Company, in
favor of the Sale of the Assets to ClinicalVentures, the execution and
delivery by the Company of the Acquisition Agreement, and the
adoption and approval of the terms thereof and in favor of each of
the other actions contemplated by the Acquisition Agreement and
any action required in furtherance thereof.
The undersigned shareholder may vote the Shares on all other
matters. This Proxy shall be binding upon the heirs, successors
and assigns of the undersigned (including any transferee of any of
the Shares).
G-9
Any obligation of the undersigned hereby shall be binding
upon the heirs, successors and assigns of the undersigned
(including any transferee of any of the Shares).
This Proxy shall terminate upon the Expiration Date.
Dated: , 2003 Name:
Signature:
Title:
Number and Class of Shares of Company
Capital Stock Held:
G-10
EXHIBIT H
Continuing Employees of Seller
The only Continuing Employees of Seller shall be:
Gibb, Linda O.
Nelson, Jerald L.
H-1
EXHIBIT I
TRANSITION MANAGEMENT SERVICES AGREEMENT
This Transition Management Services Agreement (the
"Agreement") is made and entered into effective as of July __,
2003, by and between Tenet Information Services, Inc., a Utah
corporation with principal executive offices at 53 West 9000
South, Salt Lake City, Utah 84070 (the "Company") and ClinicalVentures,
LLC, a Delaware corporation with principal executive offices at
3325 South Hardy Drive, Suite 101, Tempe, Arizona 85282 ("Manager").
RECITALS
A. The Company and Manager are parties to an Asset Purchase
Agreement dated as of July ___, 2003 (the "Purchase Agreement"),
pursuant to which the Company has contracted to sell to Manager
certain of the Company's assets (the "Acquired Assets").
B. The closing of the sale of the Acquired Assets from the
Company to Manager (the "Closing") is scheduled to occur following
the satisfaction of various conditions to the Closing as set forth
in the Purchase Agreement, including approval of the Purchase
Agreement and the transactions contemplated thereby by the
Company's shareholders.
C. The parties desire to enter into this Agreement in order
to provide for the operation and management of the Company, and
the conduct of its business related to the Acquired Assets (the
"Business"), pending the Closing.
AGREEMENT
NOW THEREFORE, in consideration of the foregoing premises
and the mutual covenants and agreements contained herein, the
receipt and legal sufficiency of which are hereby acknowledged,
the parties hereto agree as follows:
1. Definitions. Unless otherwise defined herein, or unless
the context otherwise requires, all capitalized terms used in this
Agreement will have the meanings assigned to them in the Purchase
Agreement.
2. Appointment as Agent. The Company hereby appoints
Manager as its exclusive agent to manage, operate and maintain the
Business for the period commencing from the date hereof and
continuing until the earlier of (i) the Closing, or (ii) the
termination of the Purchase Agreement or abandonment by the
Company and Manager of the transactions contemplated thereby (the
"Transition Period").
I-1
3. Transition Management Services; Duties of Manager.
(a) During the Transition Period, Manager will perform
and provide to the Company the services listed on Exhibit A
attached hereto, and shall have the exclusive duties and
responsibilities indicated therein, and the Company hereby confers
upon the Manager all of the authority, powers and rights required
to carry out and perform such services, duties and
responsibilities.
(b) All actions taken and all services to be provided
by Manager hereunder during the Transition Period shall be
conducted in a manner consistent with the requirements of Section
5.1 of the Purchase Agreement (based on the Company's description
to Manager of what constitutes the ordinary course of business for
the Company's Business).
(c) Manager shall conduct its activities hereunder in
good faith and with the exercise of reasonable care, operating the
Business in a manner consistent with all material legal
requirements, and using its commercially reasonable efforts to
avoid the violation or non-fulfillment of any representations,
warranties or covenants of the Company as set forth in the
Purchase Agreement.
(d) During the Transition Period, all cash and accounts
that are included within Excluded Assets shall be retained,
collected and segregated into separate, identified accounts, and
preserved for the benefit of the Company from and after the
Closing (or the termination of the Transition Period); provided
that such reserved amounts may be utilized as required to retire
Retained Liabilities that become due during the Transition Period,
as required to avoid penalties or additional assessments.
(e) It is intended that during the Transition Period,
all operations of the Company will be funded out of the Company's
available cash reserves and cash flow (i.e., not including the
restricted amounts referenced in paragraph 3(d) above). To the
extent available cash exceeds that required to operate the
Business during the Transition Period, the Manager shall have the
right to retain or withdraw from the Company the amount of such
excess cash as consideration for the payment of its services
hereunder, as provided in Section 5 below. To the extent the cash
flow of the Company during the Transition Period is not sufficient
to meet the Company's operating requirements, then the Manager
will be required to provide or obtain the needed capital for the
benefit of the Company. The Manager may, as it determines in good
faith to be appropriate, provide or obtain additional funding for
the benefit of the Company, on terms it determines to be
reasonable and in the best interests of the Company, provided that
such terms are approved by the Company's President. If for any
reason the Closing does not occur and Manager surrenders
management of the Company back to the Company as provided herein,
the Company shall be responsible for the repayment of any such
funding that has been approved by the Company's President, less
the amount of cash withdrawn from the Company by the Manager as
consideration for its services as provided in Section 5(a) below,
the amount of which shall be the responsibility of the Manager.
I-2
(f) If the Transition Period terminates other than by
reason of the occurrence of the Closing, then the Manager shall at
such time cease all use of, and shall return to the Company, and
shall refrain from unauthorized use of thereafter, all of the
Company's proprietary and confidential information, except as
otherwise permitted under a license agreement entered into with
the Company in a form approved by the Company's President.
4. Term of Agreement. The term of this Agreement shall be
coterminous with the Transition Period. At the conclusion of the
Transition Period, all rights and obligations of the parties
arising hereunder will cease, except as provided in Section 6
below.
5. Compensation of Manager. The Manager will perform its
services hereunder for the purpose of preserving and maintaining
the Business during the Transition Period, and for the following
consideration:
(a) the Manager will retain all revenues related to the
Business received during the term of the Agreement, in excess of
the amounts required to operated the Business and meet the
Company's current obligations during the Transition Period.
(b) The Company will reimburse Manager for reasonable
actual out-of-pocket expenses incurred in the performance of
services under this Agreement. The Company agrees that Manager
may deduct from the income of the Business the amount of all
reasonable expenses incurred in carrying out its responsibilities
hereunder.
6. Indemnification of Manager. If at the end of the
Transition Period the Closing does not occur and management of the
Business is returned to the Company, the Company will indemnify,
defend and hold harmless Manager from all suits, claims, damages,
expenses and liabilities of whatever nature arising from Manager's
good faith performance of its duties hereunder.
7. Independent Contractor. The Manager's relationship with
the Company is that of an independent contractor. The Manager
will use its own discretion in performing the tasks assigned
within the scope of work specified by the Company.
8. Records. Manager agrees to keep complete and accurate
records showing income and expenses in connection with the
operation of the Business during the Transition Period and the
fulfillment of its responsibilities hereunder. The Company shall
have the right at any reasonable time during the Transition
Period, through its representatives, to inspect any records of
Manager relating to the performance of management services
hereunder. During the Transition Period, the records of the
operations of the Company (including records of revenues and
expenses) shall be kept separately from the records of the
operations of Manager. Upon the termination of the Transition
Period, the Manager will provide to the Company all such records
of the Company's operations during the Transition Period, so that
the Company can prepare its financial statements with respect to
such period.
I-3
9. Notices. All notices, requests, demands or other
communications which are required or may be given pursuant to the
terms of this Agreement shall be in writing and shall be deemed to
have been duly given (i) on the date of delivery if personally
delivered by hand, (ii) upon the third day after such notice is
(a) deposited in the United States mail, if mailed by registered
or certified mail, postage prepaid, return requested, or (b) sent
by a nationally recognized overnight express courier, or (iii) by
facsimile upon confirmation that the communication has been
received by the recipient's facsimile machine, to the address for
each party as set forth above, or the facsimile number for such
party as set forth on the signature pager hereof, or such other
address or number as to which a party may give notice as provided
herein.
10. General.
(a) Entire Agreement; No Modifications. Upon
execution by both parties, this Agreement, along with its
Exhibits, and the directly applicable and relevant provisions of
the Purchase Agreement, shall constitute the entire agreement and
understanding between the parties hereto with respect to the
subject matter hereof and shall supersede any and all other prior
or contemporaneous communications. This Agreement shall not be
modified except by a written agreement dated subsequent to the
date of this Agreement and signed on behalf of the parties hereto
by their respective duly authorized representatives.
(b) No Assignment. This Agreement may not be
assigned by either party without the prior written consent of the
other party. Subject to such restriction on assignment, this
Agreement will inure to the benefit of the subsidiaries,
successors, and permitted assigns of the parties.
(c) Governing Law; Jurisdiction; Attorneys' Fees.
This Agreement shall be governed by and construed in accordance
with the laws of the State of Arizona applicable to contracts
entered into and to be performed entirely within such State. The
parties consent to exclusive jurisdiction by the state and federal
courts sitting in the State of Arizona. If either party employs
attorneys to enforce any rights arising out of or relating to this
Agreement, the prevailing party shall be entitled to recover its
reasonable attorneys' fees, costs and other expenses.
(d) Waiver. No waiver of any term or condition of
this Agreement, or any breach of this Agreement or any part
thereof, shall be deemed a waiver of any other terms or conditions
of the Agreement or of any later breach of the Agreement or of any
part thereof.
(e) Severability. If any provision of this
Agreement shall be held by a court of competent jurisdiction to be
illegal, invalid or unenforceable, it shall be modified rather
than voided, if possible, to achieve the intent of the parties
hereto to the extent possible. In any event, the remaining
provisions shall remain in full force and effect.
I-4
(f) Section Headings. The Section headings used
in this Agreement and the attached Exhibits are intended for
convenience only and shall not be deemed to supersede or modify
any provisions of the Agreement.
(g) Counterparts. This Agreement may be signed in
counterparts with the same effect as if the signatures to each
counterpart were upon a single instrument. All counterparts shall
be deemed an original of this Agreement.
(h) Impact on Purchase Agreement. Upon the
Manager's assumption of management of the Business pursuant to
this Agreement, the Company shall be relieved of any further
obligations pursuant to the Purchase Agreement (i) relating to the
operation of the Business, or (ii) regarding the making of
representations or warranties regarding the Business or the status
of the Acquired Assets with respect to any period following such
assumption of management responsibilities. Furthermore, from and
after such assumption of management responsibilities, Manager
shall not be entitled to decline to proceed with the Closing based
on the failure of a condition to the Closing that relates to the
condition or operation of the Business.
IN WITNESS WHEREOF, the parties have duly executed this
Agreement as of the date written above.
THE COMPANY: MANAGER:
Tenet Information Services, Inc. ClinicalVentures, LLC
By: By:
Title:____________________________ Title: _____________________________
Fax Number: Fax Number:
I-5
EXHIBIT A to MANAGEMENT SERVICES AGREEMENT
Description of Transition Management Services
During the Transition Period, Manager shall provide the following
services and fulfill the following duties and responsibilities for
the Business:
1. Oversee and manage the day-to-day operations of the Business
and execute and perform contracts on behalf of the Company in
connection with, and to provide for, the day-to-day operations of
the Business.
2. Take such actions on behalf of the Company as Manager may
determine to be appropriate to provide for the continuation of the
ordinary operations of the Business during the Transition Period.
3. Supervise all employees and handle all personnel matters.
4.
5.
I-6
EXHIBIT J
Description of Seller's Intellectual Property Rights
See description of EDNet and ARCNet information systems in Exhibit
A.
J-1
Exhibit B
ARTICLES OF RESTATEMENT
of the
Articles of Incorporation
of
Tenet Information Services, Inc.
A Utah Corporation
Pursuant to the provisions of the Utah Revised Business Corporation Act
(the "Act"), the Articles of Incorporation of Tenet Information Services, Inc.,
a Utah corporation, are hereby amended and restated to read in their entirety as
follows:
"ARTICLE I
The name of this corporation is Tenet Information Services, Inc.
ARTICLE II
The corporation is organized to engage in any lawful act or activity for
which corporations may be organized under the Utah Revised Business Corporation
Act.
ARTICLE III
This corporation is authorized to issue two classes of shares of stock to
be designated, respectively, "Common Stock" and "Preferred Stock." The total
number of shares that this corporation is authorized to issue is one hundred one
million (101,000,000) shares. The number of shares of Common Stock authorized
is one hundred million (100,000,000) shares. The par value of each share of
Common Stock is one-tenth of one cent ($0.001). The number of shares of
Preferred Stock authorized is one million (1,000,000) shares. The par value of
each share of Preferred Stock is one cent ($0.01).
The shares of Preferred Stock authorized by these Articles of Incorporation
may be issued from time to time in one or more series. To the extent these
Articles of Incorporation, as they may be amended, have not established series
of Preferred Stock and fixed the variations in the relative rights and
preferences between series of Preferred Stock, the Board of Directors is hereby
authorized to (i) divide the Preferred Stock into series; (ii) fix the number of
shares constituting any series so established and the designation of each such
series; and (iii) fix and determine the relative rights and preferences of the
shares of any series so established, all in the manner and within the
limitations set forth in Section 602 of the Utah Revised Business Corporation
Act as currently in effect or as it may hereafter be amended.
For any wholly unissued series of Preferred Stock, the Board of Directors
may change the designation of the series, the number of shares constituting the
series and the relative rights and preferences of the shares of such series, in
the manner and within the limitations set forth above.
B-1
For any series of Preferred Stock having issued and outstanding shares, the
Board of Directors is hereby authorized to increase or decrease the number of
shares of such series when the number of shares of such series was originally
fixed by the Board, but such increase or decrease shall be subject to the
limitations and restrictions stated in the resolution of the Board of Directors
originally fixing the number of shares of such series. If the number of shares
of any series is so decreased, the decrease shall not reduce the number of
shares of such series below the number then issued and outstanding and the
shares constituting such decrease shall resume the status that they had prior to
the adoption of the resolution originally fixing the number of shares of such
series.
Effective upon amendment to and restatement of these Articles of
Incorporation as provided in these Articles of Restatement, each group of twenty
(20) outstanding shares of Common Stock (having a per share par value of $0.001)
shall be automatically combined, converted into and reconstituted as one (1)
share of Common Stock, with a per share par value of $0.001. The corporation
shall deliver to each holder of shares of the corporation's Common Stock (as
constituted immediately prior to the effectiveness of the reverse split
referenced above) a certificate or certificates representing the number of whole
shares held by such holder after giving effect to the reverse stock split, and
will pay to each holder the value (as set forth below), of the fraction of a
share resulting from this reverse split (after aggregating all shares held by
such holder), upon and against surrender to the corporation of the certificates
representing the pre-split shares held by such holder. Payment shall be made
for a fraction of a share at a rate of $0. per pre-split share.
ARTICLE IV
No holder of shares of the capital stock of the corporation shall have any
pre-emptive rights to acquire additional shares of the corporation, whether now
or hereafter authorized.
ARTICLE V
To the fullest extent permitted by the Utah Revised Business Corporation
Act, as now in effect or as it may hereafter be amended, a director of this
corporation shall not be personally liable to the corporation or its
shareholders for monetary damages for breach of fiduciary duty.
ARTICLE VI
To the fullest extent permitted by Section 704 of the Utah Revised Business
Corporation Act, as now in effect or as it may hereafter be amended, without
regard to the limitations of Section 1704(4) of the Act, any action which may be
taken at any annual or special meeting of shareholders of the corporation may be
taken without a meeting, and without prior notice, if one or more consents in
writing, setting forth the action so taken, shall be signed by the holders of
outstanding shares having not less than the minimum number of votes that would
be necessary to authorize or take the action at a meeting at which all shares
entitled to vote thereon were present and voted."
The foregoing amendments to and restatement of the Articles of
Incorporation (the "Articles of Restatement") were adopted by the corporation's
shareholders in accordance with the requirements of the Act, at a special
meeting of the shareholders held on , 2003 (the "Special
Meeting").
B-2
Upon the adoption of the foregoing Articles of Restatement, the corporation
had one class of shares outstanding, designated as Common Stock, of which
__________ shares were outstanding. For the purposes of adopting the Articles
of Restatement, the holders of the outstanding shares of Common Stock voted as a
single voting group.
The outstanding shares of Common Stock were each entitled to one vote on
the Articles of Restatement. shares of Common Stock were represented
at the Special Meeting. ___________ votes were cast in favor of the Articles of
Restatement by the holders of Common Stock, votes were cast against
the Articles of Restatement by the holders of Common Stock, and votes
abstained. The number of votes cast in favor of the Articles of Restatement by
the outstanding shares of Common Stock was sufficient for approval of the
Articles of Restatement by the Common Stock.
IN WITNESS WHEREOF, these Articles of Restatement are hereby executed,
effective as of the __ day of , 2003.
TENET INFORMATION SERVICES, INC.
Jerald L. Nelson, President
B-3
Exhibit C
Utah Code Ann. 16-10a-1301 et seq.
Part 13
Dissenters' Rights
16-10a-1301. Definitions.
For purposes of Part 13:
(1) "Beneficial shareholder" means the person who is a 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 corporation by merger or
share exchange of that issuer.
(3) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under Section 16-10a-1302 and who exercises that right when and
in the manner required by Sections 16-10a-1320 through 16-10a-1328.
(4) "Fair value" with respect to a dissenter's shares, means the value of
the shares immediately before the effectuation of the corporate action to which
the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action.
(5) "Interest" means interest from the effective date of the corporate
action until the date of payment, at the statutory rate set forth in Section 15-
1-1, compounded annually.
(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 the beneficial owner
is recognized by the corporation as the shareholder as provided in Section 16-
10a-723.
(7) "Shareholder" means the record shareholder or the beneficial
shareholder.
16-10a-1302. Right to dissent.
(1) A shareholder, whether or not entitled to vote, is entitled to dissent
from, and obtain payment of the fair value of shares held by him 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) shareholder approval is required for the merger by Section 16-10a-
1103 or the articles of incorporation; or
(ii) the corporation is a subsidiary that is merged with its parent
under Section 16-10a-1104;
(b) consummation of a plan of share exchange to which the corporation is
a party as the corporation whose shares will be acquired;
(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 Subsection 16-10a-1202(1), but not
including a sale for cash pursuant to a plan by which all or substantially
all of the net proceeds of the sale will be distributed to the shareholders
within one year after the date of sale; and
1
(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 Subsection 16-
10a-1202(2).
(2) A shareholder is entitled to dissent and obtain payment of the fair
value of his shares in the event of any other corporate action to the extent the
articles of incorporation, bylaws, or a resolution of the board of directors so
provides.
(3) Notwithstanding the other provisions of this part, except to the extent
otherwise provided in the articles of incorporation, bylaws, or a resolution of
the board of directors, and subject to the limitations set forth in Subsection
(4), a shareholder is not entitled to dissent and obtain payment under
Subsection (1) 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 2,000 shareholders, at the time of:
(a) the record date fixed under Section 16-10a-707 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 16-10a-704 to determine
shareholders entitled to sign writings consenting to the proposed corporate
action; or
(c) the effective date of the corporate action if the corporate action
is authorized other than by a vote of shareholders.
(4) The limitation set forth in Subsection (3) does not apply if the
shareholder will receive for his 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 a 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 2,000 shareholders;
(c) cash in lieu of fractional shares; or
(d) any combination of the shares described in Subsection (4), or cash
in lieu of fractional shares.
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(5) A shareholder entitled to dissent and obtain payment for his shares
under this part may not challenge the corporate action creating the entitlement
unless the action is unlawful or fraudulent with respect to him or to the
corporation.
16-10a-1303. Dissent by nominees and beneficial owners.
(1) A record shareholder may assert dissenters' rights as to fewer than all
the shares registered in his name only if the shareholder dissents with respect
to all shares beneficially owned by any one person and causes the corporation to
receive written notice which states the dissent and the name and address of each
person on whose behalf dissenters' rights are being asserted. The rights of a
partial dissenter under this subsection are determined as if the shares as to
which the shareholder dissents and the other shares held of record by him were
registered in the names of different shareholders.
(2) A beneficial shareholder may assert dissenters' rights as to shares
held on his 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 of
which he is 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
beneficial shareholder must certify to the corporation that both he and the
record shareholders of all shares owned beneficially by him have asserted, or
will timely assert, dissenters' rights as to all the shares unlimited on the
ability to exercise dissenters' rights. The certification requirement must be
stated in the dissenters' notice given pursuant to Section 16-10a-1322.
16-10a-1320. Notice of dissenters' rights.
(1) If a proposed corporate action creating dissenters' rights under
Section 16-10a-1302 is submitted to a vote at a shareholders' meeting, the
meeting notice must be sent to all shareholders of the corporation as of the
applicable record date, whether or not they are entitled to vote at the meeting.
The notice shall state that shareholders are or may be entitled to assert
dissenters' rights under this part. The notice must be accompanied by a copy of
this part and the materials, if any, that under this chapter are required to be
given the shareholders entitled to vote on the proposed action at the meeting.
Failure to give notice as required by this subsection does not affect any action
taken at the shareholders' meeting for which the notice was to have been given.
(2) If a proposed corporate action creating dissenters' rights under
Section 16-10a-1302 is authorized without a meeting of shareholders pursuant to
Section 16-10a-704, any written or oral solicitation of a shareholder to execute
a written consent to the action contemplated by Section 16-10a-704 must be
accompanied or preceded by a written notice stating that shareholders are or may
be entitled to assert dissenters' rights under this part, by a copy of this
part, and by the materials, if any, that under this chapter 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 written notice as provided by this subsection does not affect any action
taken pursuant to Section 16-10a-704 for which the notice was to have been
given.
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16-10a-1321. Demand for payment -- Eligibility and notice of intent.
(1) If a proposed corporate action creating dissenters' rights under
Section 16-10a-1302 is submitted to a vote at a shareholders' meeting, a
shareholder who wishes to assert dissenters' rights:
(a) must cause the corporation to receive, before the vote is taken,
written notice of his intent to demand payment for shares if the proposed
action is effectuated; and
(b) may not vote any of his shares in favor of the proposed action.
(2) If a proposed corporate action creating dissenters' rights under
Section 16-10a-1302 is authorized without a meeting of shareholders pursuant to
Section 16-10a-704, a shareholder who wishes to assert dissenters' rights may
not execute a writing consenting to the proposed corporate action.
(3) In order to be entitled to payment for shares under this part, unless
otherwise provided in the articles of incorporation, bylaws, or a resolution
adopted by the board of directors, a shareholder must have been a shareholder
with respect to the shares for which payment is demanded as of the date the
proposed corporate action creating dissenters' rights under Section 16-10a-1302
is approved by the shareholders, if shareholder approval is required, or as of
the effective date of the corporate action if the corporate action is authorized
other than by a vote of shareholders.
(4) A shareholder who does not satisfy the requirements of Subsections (1)
through (3) is not entitled to payment for shares under this part.
16-10a-1322. Dissenters' notice.
(1) If proposed corporate action creating dissenters' rights under Section
16-10a-1302 is authorized, the corporation shall give a written dissenters'
notice to all shareholders who are entitled to demand payment for their shares
under this part.
(2) The dissenters' notice required by Subsection (1) must be sent no later
than ten days after the effective date of the corporate action creating
dissenters' rights under Section 16-10a-1302, and shall:
(a) state that the corporate action was authorized and the effective
date or proposed effective date of the corporate action;
(b) state an address at which the corporation will receive payment
demands and an address at which 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;
(d) supply a form for demanding payment, which form requests a dissenter
to state an address to which payment is to be made;
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(e) set a date by which the corporation must receive the payment demand
and by which certificates for certificated shares must be deposited at the
address indicated in the dissenters' notice, which dates may not be fewer
than 30 nor more than 70 days after the date the dissenters' notice required
by Subsection (1) is given;
(f) state the requirement contemplated by Subsection 16-10a-1303(3), if
the requirement is imposed; and
(g) be accompanied by a copy of this part.
16-10a-1323. Procedure to demand payment.
(1) A shareholder who is given a dissenters' notice described in Section
16-10a-1322, who meets the requirements of Section 16-10a-1321, and wishes to
assert dissenters' rights must, 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 Subsection 16-10a-1322(2)(d), duly
completed, or may be stated in another writing;
(b) deposit certificates for his certificated shares in accordance with
the terms of the dissenters' notice; and
(c) if required by the corporation in the dissenters' notice described
in Section 16-10a-1322, as contemplated by Section 16-10a-1327, certify in
writing, in or with the payment demand, whether or not he or the person on
whose behalf he asserts dissenters' rights acquired beneficial ownership of
the shares before 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 16-10a-1302.
(2) A shareholder who demands payment in accordance with Subsection (1)
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
exercise of dissenters' rights and has only the right to receive payment for the
shares after the effective date of the corporate action.
(3) A shareholder who does not demand payment and deposit share
certificates as required, by the date or dates set in the dissenters' notice, is
not entitled to payment for shares under this part.
16-10a-1324. Uncertificated shares.
(1) Upon receipt of a demand for payment under Section 16-10a-1323 from a
shareholder holding uncertificated shares, and in lieu of the deposit of
certificates representing the shares, the corporation may restrict the transfer
of the shares until the proposed corporate action is taken or the restrictions
are released under Section 16-10a-1326.
(2) In all other respects, the provisions of Section 16-10a-1323 apply to
shareholders who own uncertificated shares.
16-10a-1325. Payment.
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(1) Except as provided in Section 16-10a-1327, upon the later of the
effective date of the corporate action creating dissenters' rights under Section
16-10a-1302, and receipt by the corporation of each payment demand pursuant to
Section 16-10a-1323, the corporation shall pay the amount the corporation
estimates to be the fair value of the dissenter's shares, plus interest to each
dissenter who has complied with Section 16-10a-1323, and who meets the
requirements of Section 16-10a-1321, and who has not yet received payment.
(2) Each payment made pursuant to Subsection (1) must be accompanied by:
(a) (i) (A) the corporation's balance sheet as of the end of its most
recent fiscal year, or if not available, a fiscal year ending not more than
16 months before the date of payment;
(B) an income statement for that year;
(C) a statement of changes in shareholders' equity for that year
and a statement of cash flow for that year, if the corporation
customarily provides such statements to shareholders; and
(D) the latest available interim financial statements, if any;
(ii) the balance sheet and statements referred to in Subsection (i)
must be audited if the corporation customarily provides audited financial
statements to shareholders;
(b) a statement of the corporation's estimate of the fair value of the
shares and the amount of interest payable with respect to the shares;
(c) a statement of the dissenter's right to demand payment under Section
16-10a-1328; and
(d) a copy of this part.
16-10a-1326. Failure to take action.
(1) If the effective date of the corporate action creating dissenters'
rights under Section 16-10a-1302 does not occur within 60 days after the date
set by the corporation as the date by which the corporation must receive payment
demands as provided in Section 16-10a-1322, the corporation shall return all
deposited certificates and release the transfer restrictions imposed on
uncertificated shares, and all shareholders who submitted a demand for payment
pursuant to Section 16-10a-1323 shall thereafter have all rights of a
shareholder as if no demand for payment had been made.
(2) If the effective date of the corporate action creating dissenters'
rights under Section 16-10a-1302 occurs more than 60 days after the date set by
the corporation as the date by which the corporation must receive payment
demands as provided in Section 16-10a-1322, then the corporation shall send a
new dissenters' notice, as provided in Section 16-10a-1322, and the provisions
of Sections 16-10a-1323 through 16-10a-1328 shall again be applicable.
16-10a-1327. Special provisions relating to shares acquired after announcement
of proposed corporate action.
(1) A corporation may, with the dissenters' notice given pursuant to
Section 16-10a-1322, 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 16-10a-1302 and state that a shareholder who
asserts dissenters' rights must certify in writing, in or with the payment
demand, whether or not he or the person on whose behalf he asserts dissenters'
rights acquired beneficial ownership of the shares before that date. With
respect to any dissenter who does not certify in writing, in or with the payment
demand that he or the person on whose behalf the dissenters' rights are being
asserted, acquired beneficial ownership of the shares before that date, the
corporation may, in lieu of making the payment provided in Section 16-10a-1325,
offer to make payment if the dissenter agrees to accept it in full satisfaction
of his demand.
(2) An offer to make payment under Subsection (1) shall include or be
accompanied by the information required by Subsection 16-10a-1325(2).
16-10a-1328. Procedure for shareholder dissatisfied with payment or offer.
(1) A dissenter who has not accepted an offer made by a corporation under
Section 16-10a-1327 may notify the corporation in writing of his own estimate of
the fair value of his shares and demand payment of the estimated amount, plus
interest, less any payment made under Section 16-10a-1325, if:
(a) the dissenter believes that the amount paid under Section 16-10a-
1325 or offered under Section 16-10a-1327 is less than the fair value of the
shares;
(b) the corporation fails to make payment under Section 16-10a-1325
within 60 days after the date set by the corporation as the date by which it
must receive the payment demand; or
(c) the corporation, having failed to take the proposed corporate action
creating dissenters' rights, does not return the deposited certificates or
release the transfer restrictions imposed on uncertificated shares as
required by Section 16-10a-1326.
(2) A dissenter waives the right to demand payment under this section
unless he causes the corporation to receive the notice required by Subsection
(1) within 30 days after the corporation made or offered payment for his shares.
16-10a-1330. Judicial appraisal of shares -- Court action.
(1) If a demand for payment under Section 16-10a-1328 remains unresolved,
the corporation shall commence a proceeding within 60 days after receiving the
payment demand contemplated by Section 16-10a-1328, and petition the court to
determine the fair value of the shares and the amount of interest. If the
corporation does not commence the proceeding within the 60-day period, it shall
pay each dissenter whose demand remains unresolved the amount demanded.
(2) The corporation shall commence the proceeding described in Subsection
(1) in the district court of the county in this state where the corporation's
principal office, or if it has no principal office in this state, the county
where its registered office is located. If the corporation is a foreign
corporation without a registered office in this state, it shall commence the
proceeding in the county in this state where the registered office of the
domestic corporation merged with, or whose shares were acquired by, the foreign
corporation was located.
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(3) The corporation shall make all dissenters who have satisfied the
requirements of Sections 16-10a-1321, 16-10a-1323, and 16-10a-1328, whether or
not they are residents of this state whose demands remain unresolved, parties to
the proceeding commenced under Subsection (2) as an action against their shares.
All such dissenters who are named as parties must be served with a copy of the
petition. Service on each dissenter may be by registered or certified mail to
the address stated in his payment demand made pursuant to Section 16-10a-1328.
If no address is stated in the payment demand, service may be made at the
address stated in the payment demand given pursuant to Section 16-10a-1323. If
no address is stated in the payment demand, service may be made at the address
shown on the corporation's current record of shareholders for the record
shareholder holding the dissenter's shares. Service may also be made otherwise
as provided by law.
(4) The jurisdiction of the court in which the proceeding is commenced
under Subsection (2) is plenary and exclusive. The court may appoint one or more
persons as appraisers to receive evidence and recommend decision on the question
of fair value. The appraisers have the powers described in the order appointing
them, or in any amendment to it. The dissenters 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) is entitled to judgment:
(a) for the amount, if any, by which the court finds that the fair value
of his shares, plus interest, exceeds the amount paid by the corporation
pursuant to Section 16-10a-1325; or
(b) for the fair value, plus interest, of the dissenter's after-acquired
shares for which the corporation elected to withhold payment under Section 16-
10a-1327.
16-10a-1331. Court costs and counsel fees.
(1) The court in an appraisal proceeding commenced under Section 16-10a-
1330 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 that the dissenters acted arbitrarily, vexatiously,
or not in good faith in demanding payment under Section 16-10a-1328.
(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 or all dissenters if the
court finds the corporation did not substantially comply with the
requirements of Sections 16-10a-1320 through 16-10a-1328; 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 part.
(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 those counsel reasonable fees to be paid out of the amounts awarded the
dissenters who were benefited.
Exhibit D
Tenet Information Services, Inc.
Annual Report on Form 10-KSB
for the Fiscal Year Ended June 30, 2002
D-1
Exhibit E
Tenet Information Services, Inc.
Quarterly Report on Form 10-QSB
for the Fiscal Quarter Ended September 30, 2002
E-1
Exhibit F
Tenet Information Services, Inc.
Quarterly Report on Form 10-QSB
for the Fiscal Quarter Ended December 31, 2002
F-1
Exhibit G
Tenet Information Services, Inc.
Quarterly Report on Form 10-QSB
for the Fiscal Quarter Ended March 31, 2003
G-1