SCHEDULE 14A
(Rule 14a-101)
AMENDMENT NO. 2
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. 1)
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.
[ ] 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:
5) Total fee paid:
[ ] 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 , 2003, at , local time.
Shareholders will vote on the following six items of business:
1. Approval of that certain Asset Purchase Agreement by and between Tenet and
ClinicalVentures, L.L.C. ("ClinicalVentures") and dated August 1, 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. Clinical Ventures
will pay Tenet a cash payment of $339,000 and assume liability for
completion of all outstanding maintenance contracts for which Tenet has
unrecognized revenue of $63,963 as payment for all assets purchased;
2. Approval of a resolution authorizing our shareholders to take action by
the written consent of fewer than all of the shareholder entitled to vote
with respect to the action, to the fullest extent permitted by Utah
corporate law (the "Written Consent Resolution") and approval of an
amendment to the Articles of Incorporation allowing such action;
3. Approval of a resolution authorizing a one-for-twenty reverse stock split
of the outstanding shares of our common stock, (the "Reverse Stock Split
Resolution") to take effect upon the filing of the Amended and Restated
Articles with the Utah Department of Commerce, Division of Corporations
and Commercial Code and approval of an amendment to the Articles of
incorporation allowing such action;
4. Approval of amendments to our Articles of Incorporation, which amendments
will include the following:
a. Elimination of Articles VI of our Articles of
Incorporation, which provides that Tenet may
acquire its own shares. All rights and
restrictions in Article VI are provided to Tenet in
the Utah Revised Business Corporations Act (the
"Act") making this Article unnecessary, and
b. Elimination of Article VII of our Articles of
Incorporation, which provides that Tenet may make
distributions to shareholders. All rights and
restrictions in Article VII are provided to Tenet
in the Act, making this Article unnecessary;
5. Approval of amendments to our Articles of Incorporation, which amendments
will include the following:
a.Elimination of Article II, which provides that Tenet shall exist
indefinitely. Under the "Act", every corporation has perpetual
duration, making this article unnecessary;
b.Modification to Article III which defines Tenet's purpose. The
modification eliminates references to computers systems related to the
medical and health fields and allows Tenet to engage in any acts,
activities and pursuits for which a corporation may be organized under
the Act;
c.Deletion of references to the Utah Business Corporation Act,
substituting references to the Utah Revised Business Corporation Act
(this modification allows the Articles of Incorporation to be
consistent with the State of Utah's adoption of a revised act, the
renumbering of articles to be consistent with the deletion of
articles), and the restatement of the Articles of Incorporation (the
"Amended and Restated Articles") 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.
6. 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
1) Asset Purchase Agreement and the Transaction, 2) the Written Consent
Resolutions and related amendment to our Articles of Incorporation, 3) the
Reverse Stock Split Resolution and related amendment to our Articles of
Incorporation, 4) amendments allowing for Tenet's acquisition of its on shares
and distributions to shareholders, 5) various amendments to our Articles of
Incorporation and the Amended and Restated Articles and, 6) 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
, 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 , 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
, 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, L.L.C.
("ClinicalVentures") and dated August 1, (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".
1. Approval of a resolution authorizing our shareholders to take action by the
written consent of fewer than all of the shareholder entitled to vote with
respect to the action, to the fullest extent permitted by Utah corporate law
(the "Written Consent Resolution") and approval of an amendment to the
Articles of Incorporation allowing such action;
2. Approval of a resolution authorizing 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 and approval of an amendment to
the Articles of incorporation allowing such action;
3. Approval of amendments to our Articles of Incorporation, which amendments
will include the following:
a. Elimination of Articles VI of our Articles of Incorporation,
which provides that Tenet may acquire its own shares. All rights
and restrictions in Article VI are provided to Tenet in the Utah
Revised Business Corporations Act, (the "Act") making this
Article unnecessary, and
b. Elimination of Article VII of our Articles of Incorporation,
which provides that Tenet may make distributions to shareholders.
All rights and restrictions in Article VII are provided to Tenet
in the Act, making this Article unnecessary;
4. Approval of amendments to our Articles of Incorporation, which amendments
will include the following:
a. Elimination of Article II, which provides that Tenet shall exist
indefinitely. Under the "Act", every corporation has perpetual duration,
making this article unnecessary;
b. Modification to Article III which defines Tenet's purpose. The
modification eliminates references to computers systems related to the
medical and health fields and allows Tenet to engage in any acts,
activities and pursuits for which a corporation may be organized under
the Act;
c. Deletion of references to the Utah Business Corporation Act, substituting
references to the Utah Revised Business Corporation Act (this
modification allows the Articles of Incorporation to be consistent with
the State of Utah's adoption of a revised act), the renumbering of
articles to be consistent with the deletion of articles, and the
restatement of the Articles of Incorporation (the "Amended and Restated
Articles") 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.
5. 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__, 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
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.
#
TABLE OF CONTENTS
Proxy Statement 1
Summary 3
Voting Securities and Principal Holders Thereof 8
Proposal #1 - Approval of the Asset Purchase 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 14
Pre-Closing Covenants 14
The Special Meeting 15
Cumulative Voting and Dissenters' Rights 16
The Closing 16
Conditions to Closing 16
Impact of Management Services Agreement on the Conditions to Closing 17
Covenant Against Competition 17
Termination 17
Our Management Following the Transaction 18
Our Business Following the Transaction 18
Securities Exchange Reporting and the Over-the-Counter Bulletin Board 19
Accounting Treatment 19
Unaudited Pro Forma Financial Statements 20
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 and Approval and Adoption of Related Amended Article 26
Proposal #3 - Approval of the Stock Split Resolution and Approval and Adoption of Related Amended Article 28
Reasons for Reverse Split 29
Effect of the Reverse Split 30
Summary of Federal Income Tax Consequences 30
Authorized Shares; Future Earnings 31
Accounting Matters 31
Potential Takeover Effect 32
Effect upon Outstanding Options and Warrants 32
Proposal #4 - Approval of Elimination of Articles Related to Acquisition by Tenet of Its Own Shares and Distributions to 33
Shareholders
Proposal #5 - Approval and Adoption of Amended Articles Related to Provisions No Longer Necessary and Consolidation of 34
Articles inot Restated and Amended Articles of Incorporation
ii
Proposal #6 - Election of Directors 35
Vote Required 35
Other Information 37
Shareholder Proposals 38
Proxy Card
Exhibits:
Exhibit A: Asset Purchase Agreement A-1
Exhibit B: Form of Amended and Restated Articles of Incorporation B-1
Exhibit C: Utah Code Ann. {section} 16-10a-1301, et. seq. Regarding Dissenters' Rights C-1
Exhibit D: Annual Report on Form 10-KSB for the year ended June 30, 2002 D-1
Exhibit E: Quarterly Report on Form 10-QSB for the quarter ended September 30, 2002 E-1
Exhibit F: Quarterly Report on Form 10-QSB for the quarter ended December 31, 2002 F-1
Exhibit G: Quarterly Report on Form 10-QSB for the quarter ended March 31, 2003 G-1
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
, 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 the approval of a one-
for-twenty reverse stock split; FOR the approval of elimination of Articles Vi
and VII regarding Tenet's acquisition of its own shares and shareholder
distributions, 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:
1
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
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 from Delta
HeathCare Consulting Group, Inc. resulting from the prior sale of Tenet's
consulting business, and miscellaneous personal property including office
furniture and equipment required to maintain minimal operations. Our Unaudited
Pro Forma Financial Statements are included in this proxy statement and
illustrate the estimated effect of the Transaction on our financial statements.
The effect as of the pro forma date of the financial statements (March 31,
2003) is consistent with the anticipated balance sheet effects after the
transaction is completed. 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.
WHAT ARE THE BASIC TERMS OF THE TRANSACTION?
If the shareholders approve the Transaction, the following will occur:
4
* 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 Board analyzed the anticipated future earnings of Tenet operations to
determine the purchase price. The Board believes this to be a fair price for
the assets after consideration of anticipated product development and marketing
costs required to maintain Tenet software as viable products.
ClinicalVentures has secured appropriate financing to complete the
Transaction. In addition to cash on hand of $50,000, ClinicalVentures has
executed an irrevocable loan agreement to borrow $289,000 at closing, to be
repaid over five years at 9% interest, with payments due each month starting
one month after the loan is closed
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. The Management Services Agreement appoints
ClinicalVentures as its exclusive agent to manage its business, including
direction of work of Tenet employees to continue to generate income, collection
all receivables related to work that is the subject of the Transaction, and
approval of disbursements for company expenses. Further, ClinicalVentures is
obligated to segregate Excluded Assets and receipts from Excluded Assets for
the benefit of Tenet. Such Excluded Assets may be used as required to retire
Retained Liabilities that become due during the transition period. Exhibit I
contains the Management Services Agreement. 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. Jerald
L. Nelson , Tenet's President , will retain his position as President and
remain available to Tenet to assist the Board in evaluating and pursuing new
business opportunities. The Board anticipates that it will be re-elected
pursuant to Proposal #6 of this proxy statement and will continue to serve as
Directors.
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.
6
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.
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 as of
September 27, 2002 Common(1) Percent of Shares
Outstanding (2)
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.
* 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.
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
9
in North America. Our principal offices are located at 53 West 9000 South,
Sandy, Utah 84070; and our telephone number is (801) 568-0899. Tenet has no
prior relationship or affiliation with ClinicalVentures, other than engaging
periodically in discussions regarding various potential business combinations
with ClinicalVentures' management.
ClinicalVentures, L.L.C.
ClinicalVentures, L.L.C. ("ClinicalVentures") is an Arizona company which
provides integrated clinical information management systems for clinicians and
the healthcare community. The administrative offices of ClinicalVentures are
located at 4515 South Lakeshore Drive, Suite 102 , Tempe, Arizona
85282, and the telephone number is (480) 239-0488 .
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 transactions, and our Board has considered at least
one previous offer to purchase substantially all of our operating assets. In
one case, Tenet explored combining operations with another provider of hospital
systems. However, the Board concluded that the partner's operations were
substantially weaker than Tenet's operations and that the combination would
weakened Tenet's market position. In a second opportunity, a potential
acquiring company offered to purchase the Assets of Tenet for a combined
consideration that was less than the value of the assets and less than the
value provided by ClinicalVentures. 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
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.,
10
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. Management
of both companies mutually agreed to defer any combination of the two companies
previously because ClinicalVentures was not large enough to benefit from the
inclusion Tenet's assets. ClinicalVentures' management and Tenet have
maintained causal contact over the years. Upon sale of the consulting division
of Tenet, ClinialVentures and Tenet initiated conversations to determine the
feasibility of a business combination.
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' customer base and
ClinicalVentures' 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:
o Our inability to increase shareholder value based upon our current
business and product lines.
o The fact that the anticipated synergy between our consulting and
patient information and tracking systems segments did not materialize.
o Our history of relatively flat sales.
11
o Our lack of significant market share within the industry.
o The research and development expenses necessary to maintain a lead
among our industry competitors and the lengthy sales cycle for our
product line.
o The proposed terms and conditions of the Asset Purchase Agreement.
o The fact that the Asset Purchase Agreement requires that the
Transaction be approved by a majority of the outstanding shares of our
common stock.
o 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.
o The fact that other potential purchasers offered terms less favorable
than those offered by ClinicalVentures .
o 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. The risks associated with
the Transaction are minimal because ClinicalVentures is paying cash for the
Assets and has the cash available for the purchase, ClinicalVentures
participates in and understands the risks of the hospital information systems
market, and ClinicalVentures has the expertise to evaluate the Assets. If
Tenet were to continue operations, the risks to the Company are significant.
With the sale of the consulting division, Tenet lost two of its senior managers
and cannot support the management structure, sales effort, and development
effort required to either maintain its current customer base or increase its
customer base. Of its installed base of 25 hospitals, three hospitals have
terminated use of Tenet systems. Tenet is at risk of losing its development
personnel and customer support personnel, which would prevent Tenet from
meeting its obligations under existing maintenance agreements. The Board
of Directors believes that the risks to Tenet of maintaining profitable
continuing operations are greater if the Transactions is not successfully
closed than if it is properly concluded.
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.
12
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 Maintenance Agreements obligate ClinicalVentures to provide on-
going technical support for the balance of the term of the Maintenance
Agreement. Maintenance Agreements are usually written for a term of one year
and have various starting and ending dates. Customers usually renew these
agreements annually. The supporting company must provide technical support by
telephone 24 hours a day, seven days a week. Tenet anticipates that all other
liabilities associated with the Assets will be paid by Tenet before the closing
date of the Transaction. 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.
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 , the balance of
$289,000 will be paid at closing, funded by an irrevocable loan
agreement wherein ClinicalVentures will borrow $289,000 at closing, to
be repaid over five years at 9% interest, with payments due each month
starting one month after the loan is closed ); 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.
13
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;
* 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;
14
* 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' ability to conclude the Transaction;
* Tenet will promptly advise ClinicalVentures of any of the
following:
* 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;
15
* 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
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%;
16
* 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:
* 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, Tenet will not
17
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. Anderson 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
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
18
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.
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
19
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.
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 AND APPROVAL AND ADOPTION OF
RELATED AMENDED ARTICLE
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.
In addition, the Board of Directors recommends that the shareholders
approve and adopt an amendment to our Articles of Incorporation (see Exhibit B,
Amended and Restated Articles, Article VI) 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 implementing the Written Consent
Resolutions and affording our management and shareholders more durable and
accessible evidence of our shareholders' intent to be governed by Section 704
of the Act.
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.
27
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.
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 and the related
amended article 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 AND APPROVAL AND ADOPTION OF
THE AMENDED ARTICLE RELATED TO THE WRITTEN CONSENT RESOLUTIONS.
PROPOSAL #3
APPROVAL OF STOCK SPLIT RESOLUTION AND APPROVAL AND ADOPTION OF RELATED AMENDED
ARTICLE
Our Board of Directors has unanimously approved , and recommends that our
shareholders approve 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 and approve and adopt an amendment to our
Articles of Incorporation to effect a reverse split of our issued and
outstanding common stock (see Exhibit B, Amended and Restated Articles, Article
III). 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. The Board of Directors
recommends that the shareholders approve and adopt the following resolution:
RESOLVED: That the shareholders of the corporation resolve to
approve 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
We will not issue scrip or fractional shares, or certificates for
fractional shares, in connection with the reverse stock split. We estimate
that four of our 314 shareholders of record own an aggregate of less than
twenty shares each and will be paid cash for their shares, leaving Tenet with
310 shareholders of record. Any fractional shares that may result for other
shareholders 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 less than
$100.00to holders of fractional shares of common stock after the reverse split.
The reverse stock split is not intended to be a step in a plan to initiate a
"going private transaction". Management has no plans to initiate a "going
private transaction".
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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.
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.
29
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.
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. The Board currently has no plans,
proposals, or other arrangements that would involve issuance of these shares.
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.
30
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.
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 79,833,795 shares to approximately 98,991,744
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.
Summary of effect of reverse split:
Pre-split Post-split
Issued & Outstanding 19,336,205 966,756
Authorized 100,000,000 100,000,000
Reserved for issuance 830,000 41,500
Unreserved for issuance 79,833,795 98,991,744
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.
31
EFFECT UPON OUTSTANDING OPTIONS AND WARRANTS.
TENET HAS OUTSTANDING OPTIONS TO PURCHASE FOR 830,000 SHARES OF COMMON STOCK.
POST-SPLIT, THESE OPTIONS WILL COVERT TO 41,500 SHARES. THE PRE-SPLIT OPTION
PRICE IS $0.10 PER SHARE AND IS ANTI-DILUTIVE.
VOTE REQUIRED
Approval and adoption of the Reverse Split Resolution and related
amended article require 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 on your signed, dated proxy, your shares will be
voted in favor of approval and adoption of the Reverse Split Resolution and
related amended article.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE APPROVAL
OF THE STOCK SPLIT RESOLUTION AND APPROVAL AND ADOPTION OF RELATED AMENDED
ARTICLE
PROPOSAL #4
APPROVAL OF ELIMINATION OF ARTICLES RELATED TO ACQUISITION BY TENET
OF ITS OWN SHARES AND DISTRIBUTIONS TO SHAREHOLDERS
GENERAL
Our Board of Directors has unanimously approved, and recommends that the
shareholders approve and adopt, deletions from our Articles of Incorporation
which would eliminate provisions for Tenet to acquire its own shares and make
distributions to shareholders. The rights and restrictions given by these two
articles are specified by Utah Corporate law, making these two articles
unnecessary.
A. 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. Deletion of Article VI will have no material effect on shareholders.
There is no change in Tenet's ability to acquire its own shares in either
quantitative or qualitative terms. Tenet currently has no plans to acquire any
of its shares.
B. 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. Deletion of Article VII
will have no material effect on shareholders. There is no change in Tenet's
ability to provide distributions to shareholders. Tenet currently has no plans
to provide any distributions to shareholders.
VOTE REQUIRED
Approval of elimination of articles related to acquisition by Tenet of
its own shares and distribution to shareholders 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 on your signed,
dated proxy, your shares will be voted in favor of approval and adoption of the
Reverse Split Resolution and related amended article.
32
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE
APPROVAL OF ELIMINATION OF ARTICLES RELATED TO ACQUISITION BY TENET
OF ITS OWN SHARES AND DISTRIBUTIONS TO SHAREHOLDERS
PROPOSAL #5
APPROVAL AND ADOPTION OF AMENDED ARTICLES RELATED TO
PROVISIONS NO LONGER NECESSARY AND CONSOLIDATION OF ARTICLES INTO
RESTATED AND AMENDED ARTICLES OF INCORPORATION
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.
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. ADDITIONAL MODIFICATIONS
The Board of Directors recommends the restatement of our Articles of
Incorporation which would incorporate all amendments and consolidate all
changes into a single document, our Amended and Restated Articles (see Exhibit
B, Amended and Restated Articles). 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.
33
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.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL TO APPROVE AND ADOPT
THE AMENDED AND RESTATED ARTICLES.
PROPOSAL #6
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.
34
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.
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.
35
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' 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.
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:
36
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.
37
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
38
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, 4, 5, AND
6, BELOW.
1. To consider and vote upon a proposal to approve the sale to
ClinicalVentures, L.L.C. ("ClinicalVentures") 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 ClinicalVentures.
FOR AGAINST ABSTAIN
/ / / / / /
2. To consider and approve resolutions and related amendment to the Articles
of Incorporation of Tenet 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 a resolution and related amendment to the
Articles of Incorporation of Tenet authorizing a one-for-twenty reverse
split of the outstanding shares of 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.
FOR AGAINST ABSTAIN
/ / / / / /
4. To consider and approve amendments to the Articles of Incorporation of
Tenet, which amendments will include the following:
a. Elimination of Articles VI of our Articles of Incorporation, which
provides that Tenet may acquire its own shares. All rights and
restrictions in Article VI are provided to Tenet in the Utah Revised
Business Corporations Act (the "Act") making this Article unnecessary,
and
b. Elimination of Article VII of our Articles of Incorporation, which
provides that Tenet may make distributions to shareholders. All rights
and restrictions in Article VII are provided to Tenet in the Act, making
this Article unnecessary;
FOR AGAINST ABSTAIN
/ / / / / /
5. To consider and approve amendments to and a restatement of the Articles
of Incorporation of Tenet, which amendments will include the following:
a. Elimination of Article II, which provides that Tenet shall exist
indefinitely. Under the "Act", every corporation has perpetual
duration, making this article unnecessary;
b. Modification to Article III which defines Tenet's purpose. The
modification eliminates references to computers systems related to
the medical and health fields and allows Tenet to engage in any
acts, activities and pursuits for which a corporation may be
organized under the Act;
c. Deletion of references to the Utah Business Corporation Act,
substituting references to the Utah Revised Business Corporation Act
(this modification allows the Articles of Incorporation to be
consistent with the State of Utah's adoption of a revised act, the
renumbering of articles to be consistent with the deletion of
articles), and the restatement of the Articles of Incorporation
(the "Amended and Restated Articles") 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.
FOR AGAINST ABSTAIN
/ / / / / /
6. 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.
{square}FOR all Nominees
{square}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
{square}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.
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, 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