CLAIMSNET COM INC, PRE 14A, 2000-08-22

CLAIMSNET COM INC
PRE 14A, 2000-08-22
COMPUTER PROCESSING & DATA PREPARATION

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Schedule 14A Information
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934

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 Pursuant to ss240.14a-12.

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CLAIMSNET.COM INC.
(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

1) Title of each class of securities to which transaction applies:

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2) Aggregate number of securities to which transaction applies:

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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):

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4) Proposed maximum aggregate value of transaction:

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5) Total fee paid:

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[ ] 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:

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2) Form, Schedule or Registration Statement No.:

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3) Filing Party:

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4) Date Filed:

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PRELIMINARY COPY

Claimsnet.com inc

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
September 29, 2000

To the Stockholders:

The Annual Meeting of Stockholders of Claimsnet.com inc, a
Delaware corporation (the "Company"), will be held at the offices of the
Company, 12801 North Central Expressway, First Floor Building Conference Room,
Dallas, Texas 75243, on September 29, 2000, at 8:00 A.M., Central Time, for the
following purposes:

(1) To approve an amendment to the certificate of incorporation of the
Company to amend its corporate name to be "HealthExchange Inc.";

(2) To approve the reservation by the Board of Directors of the Company of
1,427,076 shares of Common Stock issuable upon the potential
conversion of the outstanding shares of Series A Convertible
Redeemable Preferred Stock, par value $.001 per share, and Series B
Convertible Redeemable Preferred Stock, par value $.001 per share, of
the Company issued in connection with an acquisition in April 2000;

(3) To approve an amendment to the Company's 1997 Stock Option Plan to
increase the total number of shares of Common Stock issuable upon the
exercise of stock options granted thereunder by 750,000 shares;

(4) To elect three Directors of the Company, each of whom is to hold
office until the Annual Meeting of Stockholders in 2002 and until the
due election and qualification of his successor;

(5) To approve the designation of Ernst & Young LLP as independent
auditors for the current fiscal year; and

(6) To transact such other business as may properly come before the
meeting or any adjournment thereof.

Only stockholders of record at the close of business on July
31, 2000, will be entitled to notice of, and to vote at, the meeting or any
adjournments thereof.

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If you cannot personally attend the meeting, it is requested
that you promptly fill in, sign, and return the proxy submitted to you herewith.

By order of the Board of Directors,

C. KELLY CAMPBELL
Secretary
Dated: August ___, 2000

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PRELIMINARY COPY

CLAIMSNET.COM INC

PROXY STATEMENT

This proxy statement is being furnished in connection with the
solicitation of proxies by the Board of Directors of Claimsnet.com inc, a
Delaware corporation (the "Company"), to be voted at the Annual Meeting of
Stockholders (the "Meeting") scheduled to be held at the offices of the Company,
12801 North Central Expressway, First Floor Building Conference Room, Dallas,
Texas 75243 on September 29, 2000, at 8:00 a.m., Central Time, and at any
adjournments thereof.

Only stockholders of record as of the close of business on July 31,
2000, are entitled to notice of, and to vote at, the Meeting or any adjournment
thereof. On that date, the Company had outstanding 9,195,000 shares of common
stock, par value $.001 per share (the "Common Stock"). The presence in person or
by proxy of the holders of a majority of such shares shall constitute a quorum
for the transaction of business at the Meeting. Each share is entitled to one
vote.

Each form of proxy which is properly executed and returned to the
Company will be voted in accordance with the directions specified thereon, or,
if no directions are specified, will be voted (i) for the amendment of the
corporate name of the Company to "HealthExchange Inc.", as described under the
heading "Amendment Of Corporate Name," (ii) for the reservation by the Board of
Directors of the Company of 1,427,076 shares of Common Stock issuable upon the
potential conversion of the Company's Series A Convertible Redeemable Preferred
Stock, par value $.001 per share, and Series B Convertible Redeemable Preferred
Stock, par value $.001 per share, into shares of Common Stock, as described
under the heading "Reservation of Common Stock," (iii) for the amendment of the
Company's 1997 Stock Option Plan to increase the number of shares of Common
Stock issuable upon the exercise of options thereunder by 750,000, (iv) for the
election as Directors of the persons named herein under the caption "Election of
Directors," and (v) to approve the designation of Ernst & Young LLP as
independent auditors for the Company for its current fiscal year. Any
stockholder giving a proxy may revoke it at any time before it is exercised.
Such revocation may be effected by voting in person or by proxy at the Meeting,
by returning to the Company prior to the Meeting a proxy bearing a later date,
or by otherwise notifying the Secretary of the Company in writing prior to the
Meeting.

The address of the Company's executive offices is 12801 North Central
Expressway, Suite 1515, Dallas, Texas 75243 and its telephone number is (972)
458-1701. This proxy statement and the accompanying proxy are first being
distributed to the stockholders of the Company on or about August ___, 2000.

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AMENDMENT OF CORPORATE NAME

The Board of Directors has unanimously declared it advisable and
unanimously recommended to the stockholders of the Company that Article entitled
"FIRST" of the certificate of incorporation, which states the corporate name of
the Company be amended to be and read in its entirety as follows:

"FIRST. The name of the corporation is HealthExchange Inc.
(the "Corporation")."

Reasons for the Amendment

On April 18, 2000, Claimsnet.com inc., a Delaware corporation (the
"Company"), through its wholly-owned subsidiary, HealthExchange.com, Inc., a
Delaware corporation ("HECOM"), acquired from VHx Company, a Nevada corporation
("VHx"), substantially all of the properties and assets, the business and
goodwill related to the HealthExchange(TM), BenefitExchange(TM) and
CareExchange(TM) product suite (together, "HealthExchange") under development by
VHx, including the HealthExchange.com name and HealthExchange, BenefitExchange
and CareExchange trademarks, development and business contracts, and assumed
certain liabilities of VHx in the amount of $500,000.

This acquisition represented the first step in the Company's publicly
announced plan to broaden its operations and potential market beyond the
processing of healthcare transactions. Accordingly, in order to convey to the
public and the investment community the intent of the Company and its management
to diversify and expand its operations, the Board of Directors determined that
an amendment to the corporate name was advisable. The Board of Directors
believes that the name "HealthExchange Inc." properly conveys its vision to the
public and the investment community.

Required Vote

The proposal to amend the certificate of incorporation of the Company
requires the approval of the holders of a majority of the outstanding capital
stock of the Company.

THE BOARD OF DIRECTORS RECOMMENDS THE STOCKHOLDERS VOTE FOR THE
PROPOSAL.

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RESERVATION OF COMMON STOCK

Background

On April 18, 2000, Claimsnet.com inc., a Delaware corporation (the
"Company"), through its wholly-owned subsidiary, HECOM, acquired from VHx
substantially all of the properties and assets, the business and goodwill
related to the HealthExchange(TM), BenefitExchange(TM) and CareExchange(TM)
product suite (together, "HealthExchange") under development by VHx, including
the HealthExchange.com name and HealthExchange, BenefitExchange and CareExchange
trademarks, development and business contracts, and assumed certain liabilities
of VHx in the amount of $500,000. The purchase price consisted of the following:

o $300,000 in cash paid at closing,
o 1,200,000 shares of Common Stock,
o 13,767 shares of Series A 8% Convertible Redeemable Preferred
Stock (the "Series A Preferred Stock") and 13,767 shares of
Series B 8% Convertible Redeemable Preferred Stock (the
"Series B Preferred Stock," and, together with the Series A
Preferred Stock, the "Preferred Stock"),
o the cancellation of $2,013,742 owed by VHx to the Company, and
o options to purchase 175,000 shares of common stock at a
price of $8.00 per share.

The Common Stock and the Preferred Stock issued by the Company in connection
with such transaction are subject to an escrow agreement and the Common Stock is
subject to certain potential adjustments related to the dissolution of VHx.

The Preferred Stock is convertible into shares of Common Stock at a
conversion price based upon the market value of the Common Stock at a specified
time provided that the conversion price cannot be less than $14.00 or greater
than $15.00, and provided further that (i) the convertibility of the Preferred
Stock has been approved by the stockholders of the Company by March 31, 2001 and
(ii) the performance milestone for the relevant series of Preferred Stock has
been satisfied by March 31, 2001. The performance milestone for the Series A
Preferred Stock is the recognition of revenue from 6,000,000 member months
attributable to assets acquired. The performance milestone for the Series B
Preferred Stock is the existence of 1,000,000 lives covered by the business
operation attributable to the assets acquired. In the event that the performance
milestone of any series of Preferred Stock is not satisfied, that series of
Preferred Stock will be cancelled. The maximum aggregate number of shares of
Common Stock into which the Preferred Stock may be converted if both performance
milestones are met is 1,427,076. In the event that the performance milestone for
any series of Preferred Stock is satisfied by such date, but the required
approval by the stockholders of the Company is not obtained by such date, the
relevant series of preferred stock will begin on April 1, 2001 to accrued
cumulative dividends at the rate of 8% per annum and will be redeemed in equal
quarterly installments thereafter for three years out of the Company's capital
legally available therefor.

The Common Stock is quoted on the Nasdaq SmallCap(R) Market maintained
by the National Association of Securities Dealers, Inc. (the "NASD"). Pursuant

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to the listing agreement between the Company and the NASD, as well as the
provisions of the rules of the NASD applicable to the Company as a result of
this agreement, stockholders approval is required in order for the Company to
enter into any transaction as a result of which a number of shares of Common
Stock in excess of 20% of the outstanding Common Stock may potentially be
issued. At the date that the Company entered into the agreement to acquire the
assets, and assume the liabilities, described above, the number of shares of
Common Stock outstanding was 6,625,000. As a result of this acquisition, the
Company may be required to issue up to an aggregate of 2,627,076 shares of
Common Stock, including the 1,427,076 shares of Common Stock potentially
issuable upon the conversion of the Preferred Stock, then representing 39.7% of
the outstanding Common Stock.

The failure to issue such shares may result in the Company being
required to make substantial cash payments at least equal to the fair market
values of the Common Stock on the date or dates the respective obligations to
issue such securities arise.

There are authorized 40,000,000 shares of Common Stock under the
Company's Certificate of Incorporation, of which 9,195,000 shares are presently
outstanding and an aggregate of 2,480,819 shares are currently reserved for
issuance upon exercise as follows: (i) 250,000 shares upon exercise of the
Representatives' Warrants issued in connection with the Company's initial public
offering; (ii) 669,231 shares upon exercise of options granted or to be granted
under the Company's effective stock option plans; (iii) 1,561,588 shares upon
exercise of warrants outstanding at August 2, 2000. The additional 1,427,076
shares to be reserved if the proposal is approved will increase the total number
of shares reserved to 3,907,895, which represents 42.5% of the outstanding
shares of Common Stock, an increase from 27.0%.

Required Vote

The approval of the holders of a majority of the shares of Common Stock
present in person or by proxy at the Meeting for this purpose is required. The
shares of holders who abstain will be counted in the determination and therefore
will have the same effect as a vote against. Shares held in nominee names as to
which the broker does not vote on the proposal will not be counted in
determining the shares present in person or by proxy as to this proposal.

THE BOARD OF DIRECTORS RECOMMENDS THE STOCKHOLDERS VOTE FOR THE
PROPOSAL.

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AMENDMENT TO THE 1997 STOCK OPTION PLAN

General

Stockholders are being asked to approve an amendment to the Company's
1997 Stock Option Plan (the "Plan"), which relates to 557,692 shares of Common
Stock, to increase by 750,000 the number of shares subject to the Plan to
1,307,692 shares. The following description of the Plan is qualified in its
entirety by reference to the Plan, a copy of which is attached as Exhibit A.

As of July 31, 2000 no options have been exercised and options with
respect to 450,475 shares are outstanding.

The Plan provides for the grant of options to purchase Common Stock to
directors and officers of the Company, employees of the Company or its
subsidiaries and non-employee consultants and advisors who render bona fide
services to the Company or its subsidiaries. Options granted under the Plan may
be incentive stock options (as defined in the Internal Revenue Code of 1986, as
amended (the "Code") or non-qualified stock options.

The Board of Directors believes that the Company's future success
depends upon its ability to attract and retain the highest caliber personnel and
to use their capabilities to the fullest extent possible by encouraging their
dedication to the Company's interest and welfare through an opportunity to
acquire a proprietary interest in the Company. The Board of Directors believes
that one of the best ways to provide such opportunities is by means of stock
options granted under the Plan.

Administration and Summary of the Plan

The Plan will be administered by "disinterested members" of the Board
of Directors or the Compensation Committee, who determine, among other things,
the individuals who shall receive options, the time period during which the
options may be partially or fully exercised, the number of shares of common
stock issuable upon the exercise of each option, and the option exercise price.

Subject to some exceptions, the exercise price per share of Common
Stock subject to an incentive option may not be less than the fair market value
per share of common stock on the date the option is granted. The per share
exercise price of the Common Stock subject to a non-qualified option may be
established by the Board of Directors, but shall not, however, be less than 85%
of the fair market value per share of common stock on the date the option is
granted. The aggregate fair market value of Common Stock for which any person
may be granted incentive stock options which first become exercisable in any
calendar year may not exceed $100,000 on the date of grant.

No stock option may be transferred by an optionee other than by will or
the laws of descent and distribution, and, during the lifetime of an optionee,
the option will be exercisable only by the optionee. In the event of termination
of employment or engagement other than by death or disability, the optionee will
have no more than three months after such termination during which the optionee
shall be entitled to exercise the option, unless otherwise determined by the

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Board of Directors. Upon termination of employment or engagement of an optionee
by reason of death or permanent and total disability, the optionee's options
remain exercisable for one year to the extent the options were exercisable on
the date of such termination. No similar limitation applies to non-qualified
options.

The Company must grant options under the Plan within ten years from the
effective date of the Plan. The effective date of the Plan is April 5, 1997.
Subject to some exceptions, holders of incentive stock options granted under the
Plan cannot exercise these options more than ten years from the date of grant.
Options granted under the Plan generally provide for the payment of the exercise
price in cash and may provide for the payment of the exercise price by delivery
to the Company of shares of Common Stock already owned by the optionee having a
fair market value equal to the exercise price of the options being exercised, or
by a combination of these methods. Therefore, if that is provided in an
optionee's options, the optionee may be able to tender shares of common stock to
purchase additional shares of Common Stock and may theoretically exercise all of
his stock options with no additional investment other than the purchase of his
original shares.

Any unexercised options that expire or that terminate upon an
employee's ceasing to be employed by the Company become available again for
issuance under the Plan.

Federal Income Tax Treatment

Non-Qualified Stock Options

The following is a general summary of the federal income tax
consequences under current tax law of non-qualified stock options
("Non-Qualified Options"). This summary does not purport to cover all of the
special rules, including the state or local income or other tax consequences,
inherent in the ownership and exercise of Non-Qualified Options and the
ownership and disposition of the underlying shares.

An individual who receives a Non-Qualified Option will not recognize
any taxable income upon the grant of such Non-Qualified Option. In general, upon
exercise of a Non-Qualified Option, an individual will recognize ordinary income
in an amount equal to the excess (at the time of exercise) of the fair market
value of the shares of Common Stock received over the aggregate exercise price.
However, if the individual is an executive officer or Director of the Company or
the beneficial owner of more than ten percent of any class of equity securities
of the Company, the timing of recognition of income (and the determination of
the amount thereof) under certain circumstances possibly may be deferred for a
period following the exercise of a Non-Qualified Option (the "Deferral Period"),
unless the individual files a written election with the Internal Revenue
Service, within 30 days after the date of exercise, to include in income the
excess (on the date of exercise) of the fair market value of the shares of
Common Stock received over the aggregate exercise price.

An individual's tax basis in the shares of Common Stock received upon
the exercise of a Non-Qualified Option is cash paid on exercise, plus the amount
of ordinary income recognized by the optionee upon the exercise of such option.
The holding period for such shares would begin just after the receipt of such
shares or, in the case of an executive officer, Director or beneficial owner of
more than ten percent of any class of equity securities of the Company, just
after the expiration of the Deferral Period, if any (unless

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the individual elected to be taxed as of the date of exercise). A deduction for
federal income tax purposes will be allowed to the Company in an amount equal to
the ordinary income included by the optionee, provided that such deduction
constitutes an ordinary and necessary business expense to the Company and is
reasonable in amount and the limitations of Section 162(m) of the Code do not
apply.

If an individual exercises a Non-Qualified Option by delivering other
shares of Common Stock, the individual will not recognize gain or loss with
respect to the exchanged shares, even if their then fair market value is
different from the individual's tax basis in such shares. The individual,
however, will be taxed as described above with respect to the exercise of the
Non-Qualified Option as if the individual had paid the exercise price in cash,
and the Company generally will be entitled to an equivalent tax deduction.
Provided the individual receives a separate identifiable stock certificate
therefor, the individual's tax basis in that number of shares received on such
exercise which is equal to the number of shares surrendered on such exercise
will be equal to the individual's tax basis in the shares surrendered and the
individual's holding period for such number of shares received will include the
individual's holding period for the shares surrendered. The individual's tax
basis and holding period for the additional shares received on exercise of a
Non-Qualified Option paid for, in whole or in part, with shares of Common Stock
will be the same as if the individual had exercised the Non-Qualified Option
solely for cash.

Incentive Stock Options

The following is a general summary of the federal income tax
consequences under current tax law of incentive stock options. It does not
purport to cover all of the special rules, including special rules relating to
optionees subject to Section 16(b) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and the exercise of an option with previously
acquired shares or the state or local income or other tax consequences inherent
in the ownership and exercise of incentive stock options and the ownership and
disposition of the underlying shares.

An optionee will not recognize taxable income for federal income tax
purposes upon the grant of an incentive stock option. In the case of an
incentive stock option, no taxable income is recognized upon exercise of the
option. If the optionee disposes of the shares of Common Stock acquired pursuant
to the exercise of an incentive stock option more than two years after the date
of grant and more than one year after the transfer of the shares of Common Stock
to the optionee, the optionee will recognize long-term capital gain or loss and
the Company will not be entitled to a compensation deduction. However, if the
optionee fails to hold such shares of Common Stock for the required period, the
optionee would realize ordinary income on the excess of the fair market value of
the Common Stock at the time the option was exercised over the exercise price
(with the balance, if any, being long-term capital gain, provided that the
holding period for the shares exceeded one year and the optionee held such
shares as a capital asset at such time), and the Company will generally be
entitled to deduct such amount, provided that such amount constitutes an
ordinary and necessary business expense to the Company and is reasonable in
amount and the limitations of Section 162(m) of the Code do not apply. In
addition to the federal income tax consequences described above, an optionee may
be subject to the alternative minimum tax, which is payable to the extent it
exceeds the optionee's regular tax. For this purpose, upon the exercise of an
incentive stock option, the excess of the fair market value of the shares over

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the exercise price thereof is a tax preference item. If an optionee is required
to pay an alternative minimum tax, the amount of such tax which is attributable
to the incentive stock option preference (and other deferral preferences) is
allowed as a credit against the optionee's regular tax liability in subsequent
years. To the extent it is not used, it is carried forward.

Section 162(m)

Section 162(m) of the Code precludes a public corporation from taking a
tax deduction for certain compensation in excess of $1 million paid to its chief
executive officer or any of its four other highest-paid executive officers. This
limitation, however, does not apply to certain performance-based compensation.
Under Section 162(m) of the Code and the regulations adopted by the Internal
Revenue Service to implement such section, the Company believes that any
compensation expense derived from the exercise of stock options granted under
and pursuant to the Plan will be deductible by the Company for federal income
tax purposes to an exemption for performance-based plans.

Long term capital gains on shares held for more than 12 months will be
subject to a maximum rate of 20%.

THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR APPROVAL
OF THE AMENDMENT TO THE COMPANY'S 1997 STOCK OPTION PLAN.

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PRINCIPAL STOCKHOLDERS

The following table sets forth as information with respect to the
beneficial ownership as of July 31, 2000 of shares of Common Stock of each
stockholder of the Company known to the Company to own beneficially more than 5%
of the outstanding shares of Common Stock, and by all executive officers and
directors of the Company as a group:

Shares
Beneficially Percentage
Name and Address Owned as of of
of Beneficial Owner July 31, 2000+ Outstanding
------------------- -------------- -----------

Bo W. Lycke (1) 1,732,993 18.8%

VHx Company 1,200,000 13.1

Nan P. Smith (4) 1,200,000 13.1

Jeffrey W. Mascarella (4) 1,200,000 13.1

Eric T. Hillerbrand (4) 1,200,000 13.1

Sinclair Restructuring Fund, Ltd. 1,000,000 10.9

Ward L. Bensen (2) 701,904 7.6

Robert H. Brown, Jr. (3) 802,354 8.7

American Medical Finance, Inc. 481,603 5.2

All directors and executive officers as a group 2,474,030 26.6

--------------------------------

+ As used herein, the term beneficial ownership with respect to a
security is defined by Rule 13d-3 under the Securities Exchange Act of
1934, as amended, as consisting of sole or shared voting power
(including the power to vote or direct the vote) and/or sole or shared
investment power (including the power to dispose or direct the
disposition)) with respect to the security through any contract,
arrangement, understanding, relationship, or otherwise, including a
right to acquire such power(s) during the next 60 days. Unless
otherwise noted, beneficial ownership consists of sole ownership,
voting, and investment power with respect to all shares of Common Stock
shown as beneficially owned by them.

(1) Consists of 1,246,390 shares of common stock owned of record by Mr.
Lycke, 74,325 shares of which are subject to an option agreement with
Terry A. Lee, 5,000 shares which Mr. Lycke has the right to acquire,
and 481,603 shares of Common Stock owned of record by American Medical
Finance, 16,333 shares of which are subject to an option agreement with
Terry A. Lee. Mr. Lycke serves as the Chairman of the Board of
Directors of American Medical Finance. Messrs. Lycke, Bensen, and Brown
own 71.1%, 11.2%, and 17.7%, respectively, of the outstanding capital
stock of American Medical Finance, respectively. Therefore, Messrs.
Lycke, Bensen, and Brown may be deemed to beneficially own the shares
of Common Stock owned by American Medical Finance.

(2) Consists of 195,301 shares of Common Stock owned of record by Mr.
Bensen, 25,000 shares which Mr. Bensen has the right to acquire, and
481,603 shares of Common Stock owned of record by American Medical
Finance.

(3) Consists of 310,751 shares of Common Stock owned of record by Mr.
Brown, 18,531 shares of which are subject to an option agreement with
Terry A. Lee, 10,000 shares which Mr. Brown has the right to acquire,
and 481,603 shares of Common Stock owned of record by American Medical
Finance.

(4) Consists of 1,200,000 shares of Common Stock owned of record by VHx
Company, which the referenced individuals may be deemed to be
beneficial owners.

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ELECTION OF DIRECTORS

The Company's Board of Directors is divided into two classes with each
class consisting of, as nearly as possible, one-half of the total number of
directors constituting the entire Board of Directors. The Board of Directors
currently consists of three members in Class I and three members in Class II.
The terms of the Class I directors expire at this meeting of stockholders and
the terms of the Class II directors expire at the 2001 meeting of stockholders.
After the initial term, each class is elected for a term of two years. At each
annual meeting of stockholders, directors are elected to succeed those in the
class the term of which expires at that annual meeting, such newly elected
directors to hold office until the second succeeding annual meeting and the
election and qualification of their respective successors.

The Board of Directors recommends the election of the three nominees
for Class I Directors listed below, all of whom are currently Directors of the
Company. If for any reason any of said nominees shall become unavailable for
election, proxies will be voted for a substitute nominee designated by the
Board, but the Board has no reason to believe that this will occur. Directors of
the Company are elected by a plurality of the votes cast at a meeting of
stockholders.

Information Concerning Nominees for Class I Directors

The name and age of each nominee and the year he became a Director of
the Company, according to information furnished by each, is as follows:

First
Became a
Name Age Director
--------------------- ----- -----------
Bo W. Lycke 54 April 1996
Ward L. Bensen 59 April 1996
Robert H. Brown, Jr. 48 April 1996

Bo W. Lycke, age 54, has served as the Chairman of the Board of
Directors, President, and Chief Executive Officer of the Company since its
inception in 1996. In 1990, Mr. Lycke founded American Medical Finance for the
purpose of financing and processing medical accounts receivable and, since such
time has served as its Chairman of the Board of Directors thereof. During the
period from 1983 to 1990, Mr. Lycke was involved in a variety of entrepreneurial
undertakings in the fields of satellite antenna manufacturing, precious metal
scrap recovery, and independent radio programming production. He also has
extensive experience as a director of several private companies. In 1972, Mr.
Lycke founded, and from 1973 to 1983, was President and Director, of Scanoil,
Inc., a company engaged in domestic and international oil futures trading, as
well as chartering and operating ocean-going oil tankers. From 1971 to 1983 Mr.
Lycke served as a President and Director of various domestic operating
subsidiaries of the Volvo Automotive/Beijer Group, the indirect owner of
Scanoil, Inc.

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Ward L. Bensen, age 59, has been a director of the Company since April
1996 and has served as Treasurer of the Company since inception. Since January
1995, Mr. Bensen has served as a Director and Treasurer at American Tuition,
Inc. and currently is the Managing Director for New Business Development. Since
1990, he has served as a Director of American Medical Finance, of which he was
from June 1994 Senior Vice President, where he was primarily responsible for its
marketing efforts in the western United States and receivables acquisitions
nationwide. From March 1993 until September 1993, Mr. Bensen was Vice President
of Investment, and marketed investment programs for both Prudential Securities
and Shearson Lehman Brothers, and, from 1991 to 1993, provided specialized
investment banking services as a partner of John Casey and Associates, a
contract wholesale securities marketing firm. From 1984 to 1991, he served as
Division Vice President for Jones International Securities and prior thereto,
held various positions with Shearson American Express, The Safeco Insurance Co.,
and Procter & Gamble.

Robert H. Brown, Jr., age 48, has served as a Director of the Company
since April 1996 and has been a director of American Medical Finance since 1990.
Since January 1999, Mr. Brown has served as President and Chief Executive
Officer of Frost Securities, Inc. He had been, from July 1998 to December 1998,
President and Chief Executive Officer of RHB Capital, LLC, a Dallas-based
private investment firm, and from 1990 to 1998, Executive Vice President of Dain
Rauscher, Inc., a regional investment banking and brokerage firm. Mr. Brown was
Senior Vice President of TM Capital Corporation during 1989 and was, from 1985
to 1989, a Vice President of Thompson McKinnon Securities, where he was
responsible for all corporate finance activities in the southwestern United
States. Mr. Brown also serves as a Director of Emerson Radio Inc.

Information Concerning the Class II Directors

Sture Hedlund has served since January 1987 as Chairman of the Board of
Directors of Scandinavian Merchant Group AB, a Swedish corporation engaged in
venture capital investing. Since 1993, Mr. Hedlund has been a director of
Ortivus AB, a public company engaged in the business of medical technology, and
has been a director of Ortivus Medical AB, a company engaged in the manufacture
of heart monitoring devices and a subsidiary of Ortivus AB.

John C. Willems, III served as legal counsel to the Company from April
1996 to April 1999. Since August 1999, Mr. Willems has been in private practice
as an attorney in Dallas, Texas. From September 1993 through August 1999, Mr.
Willems was an attorney with the law firm of McKinley, Ringer & Zeiger, PC, in
Dallas, Texas, practicing in the area of business law. From January 1992 to
August 1993, Mr. Willems was an attorney in the law firm of Settle & Pou, PC,
also located in Dallas, Texas.

Westcott W. Price, III, 59, an independent consultant since February
1997, was formerly President, Chief Executive Officer and Vice Chairman of the
Board of Directors of FHP International Corporation, a publicly-held managed
health care company ("FHP"). From 1981 to 1997, during his tenure at FHP, its
annual revenues grew from under $50 million to over $4 billion. In February
1997, FHP was acquired for $2.1 billion. From 1973 to 1981, Mr. Price was
President and Chief Executive Officer of Wm. Flaggs, Inc., a restaurant chain,
and from 1970 to 1973, he was the Chief Operating Officer of California Medical

11
<PAGE>

Centers, a publicly-held long-term care and retail pharmacy-operating company in
Los Angeles. Mr. Price has in the past served on various boards of directors,
including Health Maintenance Life Insurance Company and Talbert Medical
Management Company, a physician practice management company with revenues of
$460 million. He currently serves as a director of Scripps Health, a non-profit
hospital operating company, Speed Vu.com, and U.S. Education Corporation, as
well as other private companies.

Meetings and Committees

During the fiscal year ended December 31, 1999 ("Fiscal 1999"), the
Board of Directors held two meetings, including those in which matters were
adopted by unanimous written consent. The Board has an Audit Committee and a
Compensation Committee.

The Audit Committee of the Board of Directors consists of Messrs. Brown
and Hedlund. It held four meetings during Fiscal 1999. The audit committee is
responsible for reviewing the plans and results of the audit engagement with the
independent auditors; reviewing the adequacy, scope, and results of the internal
accounting controls and procedures; reviewing the degree of independence of the
auditors; reviewing the auditors' fees; and recommending the engagement of
auditors to the full board of directors.

Messrs. Brown and Hedlund are members of the Compensation Committee.
The Compensation Committee has (1) full power and authority to interpret the
provisions of, and supervise the administration of, the Company's 1997 Stock
Option Plan and (2) the authority to review all compensation matters relating to
the Company. The Compensation Committee held two meetings during Fiscal 1999, as
well as two unanimous written consents in lieu of meetings.

EXECUTIVE COMPENSATION

Compliance with Section 16(a) of
The Securities Exchange Act of 1934

Section 16(a) of the Exchange Act and the rules of the Securities and
Exchange Commission (the "Commission") thereunder require the Company's
Directors and officers, and any person who beneficially owns more than ten
percent of the Common Stock (collectively, "Reporting Persons"), to file reports
of their ownership and changes in ownership of Common Stock with the Commission.
Reporting Persons are also required to furnish the Company with copies of all
Section 16(a) reports they file.

Based solely upon a review of copies of such reports furnished to the
Company, and written representations that certain reports were not required, the
Company believes that all of its Reporting Persons filed on a timely basis all
reports required by Section 16(a) of the Exchange Act during or with respect to
the year ended December 31, 1999, except that reports on Form 3 were filed
subsequent to such date.

12
<PAGE>

Executive Compensation

The following table sets forth the compensation paid or accrued by the
Company for services rendered in all capacities during the years ended December
31, 1999, 1998, and 1997 by the Chief Executive Officer and each of the four
other most highly compensated executive officers of the Company.

SUMMARY COMPENSATION TABLE
Annual Compensation

Annual Compensation
-------------------------------
Name and Principal Position Year Salary Bonus
--------------------------- ---- ------ -----

Bo W. Lycke........................... 1999 $258,390 $ --
Chairman of the Board of Directors, 1998 108,333 --
President, and Chief Executive Officer 1997 50,415

Terry A. Lee(1)....................... 1999 140,865 15,000
Former Executive Vice President of 1998 125,000 --
Marketing and Technology 1997 122,806 153,500(2)

Randall S. Lindner(3)................. 1999 97,308 5,451
Former Vice President of Technology 1998 100,000 --
1997 74,498 --

Paul W. Miller....................... 1999 106,345 31,487
Vice President and Chief 1998 100,000 20,000
Financial Officer 1997 11,538 --

Abbas R. Kafi......................... 1999 125,000 15,512
Vice President and Chief 1998 55,288 --
Technology Officer

----------

(1) The employment of Mr. Lee terminated effective June 16, 2000.
(2) A portion of the annual bonus to Terry S. Lee consisted of shares of
Common Stock valued at $78,500.
(3) The employment of Mr. Lindner terminated effective January 7, 2000.

Director Compensation

During the year ended December 31, 1999, the directors received no
compensation for their services other than reimbursement of expenses relating to
attending meetings of the board of directors.

13
<PAGE>

Directors' Stock Option Plan

In April 1998, the Company adopted the Directors' Stock Option Plan
(the "Directors' Plan") to tie the compensation of outside non-employee
directors to future potential growth in the Company's earnings, if any, to
encourage them to remain on its Board of Directors, to provide outside directors
with an increased incentive to make significant and extraordinary contributions
to the long-term performance and growth of the Company's and to join the
interests of the outside directors through the opportunity for increased stock
ownership with the interests of the Company's stockholders. Only outside
directors shall be eligible to receive options under the Directors' Plan.

An aggregate of 111,538 shares of Common Stock are reserved for
issuance to participants under the Directors' Plan. Options exercisable for an
aggregate of 80,000 shares of Common Stock at a price of $8.00 per share were
granted under the Directors' Plan in April 1999 to Mr. Bensen (25,000 shares),
Mr. Brown (10,000 shares), Mr. Hedlund (10,000 shares), Mr. Willems (5,000
shares), and Mr. Price (30,000 shares). Stock options granted under the
Directors' Plan will give the option holder the right to purchase Common Stock
at an exercise price fixed in the stock option agreement executed by the option
holder and the Company at the time of grant which is not to be less than the
fair market value of a share on the date the option is granted.

The options granted are fully vested and have a term of ten years.
Payment of the purchase price for the share shall be in cash, except under some
circumstances, by surrender of shares of Common Stock, valued at their then fair
market value on the date of exercise, or by a combination of cash and shares.

Immediately following the Annual Stockholders' Meeting, each board
member will be granted an option to purchase 5,000 shares of Common Stock at a
price equal to 100% of the fair market value per share on the date of grant and
shall become exercisable fifty percent on the first anniversary of the date of
grant and fully exercisable on the second anniversary of the date of the grant.
The option granted shall have a term of ten years.

In the event of any changes in the Common Stock by reason of stock
dividends, split-ups, recapitalization, mergers, consolidations, combinations,
or other exchanges of shares and the like, appropriate adjustments will be made
by the Board of Directors to the number of shares of Common Stock available for
issuance under the Directors' Plan, the number of shares subject to outstanding
options, and the exercise price per share of outstanding options, as necessary
substantially to preserve option holders' economics interests in their options.

Shares subject to an option which remain unpurchased at the expiration,
termination, or cancellation of an option will again be available for use under
the Directors' Plan, but shares surrendered as payment for an option, as
described above will not again be available for use under the Directors' Plan.

Unless earlier terminated, the Directors' Plan will terminate on
December 31, 2007.

14
<PAGE>

Employment Agreements

In April 1997, the Company entered into an employment agreement with
Mr. Lycke providing that, commencing on December 11, 1998, the first effective
date of its initial public offering, and expiring on December 31, 2002, Mr.
Lycke will serve as Chairman of the Board of Directors, President, and Chief
Executive Officer of the Company at a base salary equal to $250,000, increasing
by 5% per annum subject to increase by the Board of Directors, and any bonuses
as may be determined by the Board of Directors. In addition, Mr. Lycke is to
receive use of a Company-owned automobile or an automobile allowance. In the
event of a change in control of the Company as defined in the employment
agreement, all options previously granted to Mr. Lycke which remain unvested
will automatically vest immediately. Upon a termination of Mr. Lycke's
employment following a change in control, unless Mr. Lycke voluntarily
terminates his employment for other than listed reasons described in the
employment agreement, the Company is required to pay Mr. Lycke a lump sum
severance payment equal to one-half his then current annual salary. In addition,
if Mr. Lycke's employment is terminated (1) upon his death, (2) by the Company
due to disability, (3) by the Company without cause, or (4) by Mr. Lycke
voluntarily upon the Company's default or an unremedied adverse change in
duties, as defined in the agreement, then the Company is required to pay Mr.
Lycke a lump sum severance payment equal to his then current annual salary. Mr.
Lycke may terminate his employment at any time upon at least 30 days written
notice to the Company. Upon such termination by the agreement, Mr. Lycke is
subject to a non-compete, non-disturbance, and non-interference provisions for
one year. In January 1998, Mr. Lee was granted options to purchase an aggregate
of 109,189 previously issued shares of Common Stock at a price of $3.89 per
share from Mr. Lycke and two other stockholders of the Company. See "Security
Ownership of Directors and Executive Officers."

1997 Stock Option Plan

In April 1997, the Board of Directors and stockholders of the Company
adopted the 1997 Stock Option Plan (the "1997 Plan"). The 1997 Plan provides for
the grant of options to purchase up to an aggregate of 557,692 shares of Common
Stock to employees, officers, directors, and consultants of the Company, of
which there was outstanding as of July 31, 2000 options to purchase 450,475
shares. Options may be either "incentive stock options" or non-qualified options
under the Federal tax laws. Incentive stock options may be granted only to
employees of the Company, while non-qualified options may be issued to
non-employee directors, consultants, and others, as well as to employees of the
Company.

The 1997 Plan is to be administered by "disinterested members" of the
Board of Directors or the Compensation Committee, who determine, among other
things, the individuals who shall receive options, the time period during which
the options may be partially or fully exercised, the number of shares of Common
Stock issuable upon the exercise of each option, and the option exercise price.

Subject to a number of exceptions, the exercise price per share of
Common Stock subject to an incentive option may not be less than the fair market
value per share of Common Stock on the date the option is granted. The per share
exercise price of the Common Stock subject to a non-qualified option may be
established by the Board of Directors, but shall not, however, be less than 85%
of the fair market value per share of Common Stock on the date the option is

15
<PAGE>

granted. The aggregate fair market value of Common Stock for which any person
may be granted incentive stock options which first become exercisable in any
calendar year may not exceed $100,000 on the date of grant.

In the event of termination of employment or engagement other than by
death or disability, the optionee will have no more than three months after such
termination during which the optionee shall be entitled to exercise the option,
unless otherwise determined by the Board of Directors. Upon termination of
employment or engagement of an optionee by reason of death or permanent and
total disability, the optionee's options remain exercisable for one year to the
extent the options were exercisable on the date of such termination. No similar
limitation applies to non-qualified options.

No options may be granted under the 1997 Plan after April 4, 2007.
Subject to a number of exceptions, the options may not be longer than ten years.

Any unexercised options that expire or that terminate upon an
employee's ceasing to be employed by the Company become available again for
grant under the 1997 Plan.

Stock Options

No options were exercised during the year ended December 31, 1999. The
following tables set forth the details as to the options granted by the Company
during and held at the end of the year ended December 31, 1999 by those persons
set forth under the Summary Compensation Table:

Potential Realizable Value at
Assumed Annual Rates of Stock
Individual Grants Price Appreciation for
----------------- Option Term(1)
-------------------------------------------------------------------------------- -----------------------------------
(a) (b) (c) (d) (e) (f) (g) (h)
Percent of
Total
Options
Granted to Exercise
Options Employees in Price Expiration
Name Granted Fiscal Year ($/sh) Date 0% 5% 10%
---- ------- ----------- ------- ----------- --- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Bo W. Lycke 20,000 4.4% $8.80 4/6/09 $ 0 $28,200 81,600
Terry A. Lee(2) 20,000 4.4% $8.00 4/6/09(2) $ 0 25,156(2) 63,750(2)
Randall S. Lindner(3) 118,900 26.4% $8.00 1/7/00(3) $ 0 0(3) 0(3)
Paul W. Miller 50,000 11.1% $8.00 4/6/09 $ 0 251,588 637,497
Abbas R. Kafi 12,000 2.7% $8.00 4/6/09 $ 0 60,374 152,999
</TABLE>
----------
(1) Based on the exercise price per share.
(2) Seventy five percent of Mr. Lee's options expired upon the cessation of
his employment on June 16, 2000.
(3) Mr. Lindner's options expired upon the cessation of his employment on
January 7, 2000.

16
<PAGE>
<TABLE>
<CAPTION>
Number of Shares Underlying Value of Unexercised
Unexercised Options at In-the-Money Options
December 31, 1999 December 31, 1999 (1)
------------------------------ ------------------------------

Name Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Bo W. Lycke -- 20,000 -- $ 24,000
Terry A. Lee -- 20,000 -- 40,000
Randall S. Lindner -- 118,900 -- 237,800
Paul W. Miller -- 50,000 -- 100,000
Abbas R. Kafi -- 12,000 -- 24,000
</TABLE>

(1) The last sale price of a share of the Company's Common Stock on
December 31, 1999, as reported by the Nasdaq SmallCap Market,
was $10.00.

Report of the Compensation Committee
on Executive Compensation

The Compensation Committee (the "Committee") is authorized to review
and make recommendations to the Board of Directors as to the compensation in
cash or other forms for its executive officers. The compensation policy of the
Compensation Committee is to provide for a base salary which in most instances
is not greater than base salaries paid by other companies of comparable size and
capitalization in or out of the industry in which the Company is engaged to
officers with the same positions and responsibilities and provide for cash
bonuses or stock options based on the attainment of favorable operating results
by the Company.

The Committee believes that the Company's stock option program should
be used as a means to conserve cash in rewarding executive and key employees for
good or exceptional performance, the performance of increased responsibilities,
improved performance independent of operating results, loyalty, and seniority.

The Compensation Committee

Sture Hedlund
Robert H. Brown, Jr.

Performance Graph

The following graph provides a comparison of cumulative shareholder
returns ("Total Return") for the Company as compared with the Nasdaq Composite
Index and the Dow-Jones Internet Commerce Index. The graph covers the period
April 6, 1999, when the Common Stock began trading on the Nasdaq Small Cap
Market System, through December 31, 1999.

----------------- ---------------- ----------------- -----------------
Nasdaq Dow-Jones
Date CLAI Composite Internet
----------------- ---------------- ----------------- -----------------
4/6/99 0.0% 0.0% 0.0%
4/30/99 18.8% -0.7% -0.7%
5/28/99 11.7% -3.5% -21.4%
6/30/99 4.7% 4.9% -14.6%
7/30/99 -13.3% 3.1% -34.8%
8/31/99 -25.0% 7.0% -37.5%
9/30/99 -45.3% 7.3% -30.3%
10/29/99 -40.6% 15.9% -34.0%
11/30/99 7.0% 30.3% -23.5%
12/31/99 25.0% 59.0% -20.9%

17
<PAGE>

Certain Relationships and Related Transactions

On July 31, 1996, the Company acquired all of the Internet software,
licenses, intellectual property rights, and technology developed by American
Medical Finance in exchange for a promissory note in the amount of $3,740,000
bearing interest at the rate of 9.5% per annum collateralized by all of the
Internet software, intellectual property rights, Internet technology, and
technology rights of the Company, including software development costs. On
September 19, 1997, American Medical Finance reduced the principal amount of
this note to $2,000,000 and contributed the remaining $1,740,000 in principal
amount of this note to the capital of the Company. The note was repaid in April
1999 from net proceeds of the initial public offering of the Common Stock of the
Company.

Upon the consummation of the acquisition transaction with American
Medical Finance, American Medical Finance agreed to provide the Company with a
credit line of up to $2,000,000 to facilitate additional development of the
Company's services and technology. During June 1998, American Medical Finance
purchased an aggregate of 107,704 shares of Common Stock in the Company's then
private placement. As consideration, American Medical Finance cancelled $450,000
of the principal balance then outstanding under the credit line. At December 31,
1998, advances under this line of credit were approximately $1,462,000. The line
of credit accrued interest at the rate of 9.5% per annum and was secured by all
of the assets of the Company, other than the collateral securing the note to
American Medical Finance described above. The line of credit loan was repaid in
April 1999 from the net proceeds of the Company's initial public offering of the
Common Stock of the Company.

All future transactions between the Company and its officers,
directors, and 5% stockholders will be on terms no less favorable to the Company
than can be obtained from unaffiliated third parties and will be approved by a
majority of the independent and disinterested directors of the Company.

On May 24, 2000, American Medical Finance acquired 100,000 shares of
Common Stock from the Company at the purchase price of $3.00 per share.

American Medical Finance is the record owner of 481,603 shares of
Common Stock, representing 5.2% of the outstanding Common Stock as of July 31,
2000. Bo W. Lycke, the Chairman of the Board, President, and Chief Executive
Officer, Ward L. Bensen, a Director, and Robert H. Brown, Jr., a Director of the
Company are the Chairman of the Board, a Director and Senior Vice President, and
a Director, respectively, of American Medical Finance. Messrs. Lycke, Bensen,
and Brown own 71.1%, 11.2%, and 17.7% of the outstanding capital stock of
American Medical Finance, respectively.

SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS

The following table sets forth information with respect to the
beneficial ownership of shares of Common Stock as of August ___, 2000 of each
executive officer and director, and of each stockholder of the Company known to
own beneficially more than 5% of the outstanding shares of Common Stock and all
officers and directors as a group. The number of shares beneficially owned is

18
<PAGE>

determined under the rules of the Securities and Exchange Commission and the
information is not necessarily indicative of beneficial ownership for any other
person. Under such rules, "beneficial ownership" includes shares as to which the
undersigned has sole or shared voting power or investment power and shares which
the undersigned has the right to acquire within 60 days of August __, 2000
through the exercise of any stock option or other right. Unless otherwise
indicated, the named person has sole investment and voting power with respect to
the shares set forth in the table.

Except as otherwise noted below, the address of each of the persons in
the table is c/o Claimsnet.com inc, 12801 N. Central Expressway, Suite 1515,
Dallas, Texas 75243.

Shares Beneficially Owned
-------------------------------
Name and Address
of Beneficial Owner Number of Shares Percent
------------------------------------------ ---------------- ------------

Bo W. Lycke (1) .......................... 1,732,993 18.8%
VHx Company............................... 1,200,000 13.1
Nan P. Smith (4).......................... 1,200,000 13.1
Jeffrey W. Mascarella (4)................. 1,200,000 13.1
Eric T. Hillerbrand (4)................... 1,200,000 13.1
Sinclair Restructuring Fund, Ltd.......... 1,000,000 10.9
Ward L. Bensen (1) (2).................... 701,904 7.6
Robert H. Brown, Jr. (1) (3).............. 802,354 8.7
Paul W. Miller (6)........................ 14,100 *
Sture Hedlund (7)......................... 117,008 1.3
John C. Willems, III (8).................. 14,277 *
Wescott W. Price, III (5) ................ 55,000 *
American Medical Finance.................. 481,603 5.2
12801 N. Central Expressway
Dallas, Texas 75243
All directors and executive officers of 2,474,030 26.6
Claimsnet.com as a group
(seven persons)(1)-(4)

------------------
* Less than one percent.

(1) Consists of 1,246,390 shares of common stock owned of record by Mr.
Lycke, 74,325 shares of which are subject to an option agreement with
Terry A. Lee, 5,000 shares which Mr. Lycke has the right to acquire,
and 481,603 shares of Common Stock owned of record by American Medical
Finance, 16,333 shares of which are subject to an option agreement with
Terry A. Lee, former Executive Vice President and Chief Operating
Officer of the Company. Mr. Lycke serves as the Chairman of the Board
of Directors of American Medical Finance. Messrs. Lycke, Bensen, and
Brown own 71.1%, 11.2%, and 17.7%, respectively, of the outstanding
capital stock of American Medical Finance, respectively. Therefore,
Messrs. Lycke, Bensen, and Brown may be deemed to beneficially own the
shares of Common Stock owned by American Medical Finance.

(4) Consists of 1,200,000 shares of Common Stock owned of record by VHx
Company of which the referenced individuals may be deemed to be
beneficial owners.

19
<PAGE>

(5) Consists of 25,000 shares of Common Stock owned of record by Mr. Price
and 30,000 shares which Mr. Price has the right to acquire.

(6) Consists of 1,600 shares of Common Stock owned of record by Mr. Miller
and 12,500 shares which Mr. Miller has the right to acquire.

(7) Consists of 107,008 shares of Common Stock owned of record by Mr.
Hedlund and 10,000 shares which Mr. Hedlund has the right to acquire.

(8) Consists of 9,277 shares of Common Stock owned of record by Mr. Willems
and 5,000 shares which Mr. Willems has the right to acquire.

20
<PAGE>

RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS

The Board of Directors has selected Ernst & Young LLP independent
auditors, to audit the financial statements of the Company for the fiscal year
ending December 31, 2000. King Griffin & Adamson P.C. audited the Company's
financial statements for the years ended December 31, 1997 and 1998 and were
replaced as auditors for the Company on August 10, 1999 by Ernst & Young LLP.
Representatives of King Griffin & Adamson P.C. and Ernst Young LLP are expected
to be present at the Meeting and will have an opportunity to make a statement if
they desire to do so, and are expected to respond to appropriate questions.

Required Vote

The affirmative vote of the holders of a majority of the shares of
Common Stock voting in person or by proxy on this proposal at the Meeting is
required to ratify the appointment of the independent auditors.

THE BOARD RECOMMENDS A VOTE "FOR" THE RATIFICATION OF THE
APPOINTMENT OF ERNST & YOUNG LLP AS INDEPENDENT AUDITORS

ANNUAL REPORT

The Annual Report of the Company to the stockholders for the year ended
December 31, 1999, including financial statements, is being mailed to
stockholders with this proxy material.

PROXY SOLICITATION

The cost of soliciting proxies will be borne by the Company. In
addition to the use of the mail, proxies may be solicited, personally, or by
telephone or telegraph, by officers, Directors, and regular employees of the
Company, who will not be specially compensated for this purpose. The Company
will also request record holders of Common Stock who are securities brokers,
custodians, nominees, and fiduciaries to forward soliciting material to the
beneficial owners of such stock, and will reimburse such brokers, custodians,
nominees, and fiduciaries for their reasonable out-of-pocket expenses in
forwarding soliciting material.

OTHER MATTERS

The Company is unaware of any matters, other than those mentioned
above, which will be brought before the Meeting for action. However, if any
other matters properly come before the Meeting, it is the intention of the
persons named in the accompanying form of proxy to vote such proxy in accordance
with their judgment on such matters.

Any proposals intended to be presented by stockholders at the Annual
Meeting of Stockholders to be held in 2001 must be received by the Company for
inclusion in the Company's proxy material by a reasonable period prior to the

21
<PAGE>

solicitation of proxies with respect to the Annual Meeting of Stockholders to be
held in 2001 in solicitation and anticipated to commence in June 2000.

It is important that your proxy be returned promptly no matter how
small or large your holding may be. Stockholders who do not expect to attend in
person are urged to execute and return the enclosed form of proxy.

August ___, 2000

-------------------------------
Bo W. Lycke, President

22
<PAGE>

Exhibit A

Claimsnet.com inc.

1997 STOCK OPTION PLAN, AS AMENDED

Adopted April 5, 1997

I. Purpose.
-------

The purpose of the claimsnet.com, inc. 1997 Stock Option Plan (the
"Plan") is to provide a means whereby selected employees, officers, directors,
and consultants of claimsnet.com, inc., a Delaware corporation (the "Company"),
or of any parent or subsidiary (as defined in subsection 5.7 hereof and referred
to hereinafter as "Affiliates") thereof, may be granted incentive stock options
and/or nonqualified stock options to purchase shares of common stock, $.001 par
value (the "Common Stock") in order to attract and retain the services or advice
of such employees, officers, directors, and consultants and to provide
additional incentive for such persons to exert maximum efforts for the success
of the Company and its Affiliates by encouraging stock ownership in the Company.

II. Administration.
--------------

Subject to Section 2.3 hereof, the Plan shall be administered by the
Board of Directors of the Company (the "Board") or, in the event the Board shall
appoint and/or authorize a committee of two or more members of the Board to
administer the Plan, by such committee. The administrator of the Plan shall
hereinafter be referred to as the "Plan Administrator."

The foregoing notwithstanding, in the event the Company shall register
any of its equity securities pursuant to Section 12(b) or 12(g) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and any
directors are eligible to receive options under the Plan, then with respect to
grants to be made to directors: (a) the Plan Administrator shall be constituted
so as to meet the requirements of Section 16(b) of the Exchange Act and Rule
16b-3 thereunder, each as amended from time to time, or (b) if the Plan
Administrator cannot be so constituted, no options shall be granted under the
Plan to any directors.

Section 2.1 Procedures. The Board shall designate one of the members of
the Plan Administrator as chairman. The Plan Administrator may hold meetings at
such times and places as it shall determine. The acts of a majority of the
members of the Plan Administrator present at meetings at which a quorum exists,
or acts approved in writing by all Plan Administrator members, shall be valid
acts of the Plan Administrator.

Section 2.2 Responsibilities. Except for the terms and conditions
explicitly set forth herein, the Plan Administrator shall have the authority, in
its discretion, to determine all matters relating to the options to be granted
under the Plan, including, without limitation, selection of whether an option
will be an incentive stock option or a nonqualified stock option, selection of
the individuals to be granted options, the number of shares to be subject to

A-1
<PAGE>

each option, the exercise price per share, the timing of grants and all other
terms and conditions of the options. Grants under the Plan need not be identical
in any respect, even when made simultaneously. The Plan Administrator may also
establish, amend, and revoke rules and regulations for the administration of the
Plan. The interpretation and construction by the Plan Administrator of any terms
or provisions of the Plan or any option issued hereunder, or of any rule or
regulation promulgated in connection herewith, shall be conclusive and binding
on all interested parties, so long as such interpretation and construction with
respect to incentive stock options corresponds to the requirements of Internal
Revenue Code of 1986, as amended (the "Code") Section 422, the regulations
thereunder, and any amendments thereto. The Plan Administrator shall not be
personally liable for any action made in good faith with respect to the Plan or
any option granted thereunder.

Section 2.3 Rule 16b-3 and Section 16(b) Compliance; Bifurcation of
Plan. It is the intention of the Company that the Plan comply in all respects
with Rule 16b-3 under the Exchange Act to the extent applicable, and in all
events the Plan shall be construed in favor of its meeting the requirements of
Rule 16b-3. If any Plan provision is later found not to be in compliance with
such Rule, such provision shall be deemed null and void. The Board of Directors
may act under the Plan only if all members thereof are "disinterested persons"
as defined in Rule 16b-3 and further described in Section 4 hereof; and from and
after the date that the Company first registers a class of equity securities
under Section 12 of the Exchange Act, no director or officer or other Company
"insider" subject to Section 16 of the Exchange Act may sell shares received
upon the exercise of an option during the six month period immediately following
the grant of the option. Notwithstanding anything in the Plan to the contrary,
the Board, in its absolute discretion, may bifurcate the Plan so as to restrict,
limit, or condition the use of any provision of the Plan to participants who are
officers and directors or other persons subject to Section 16(b) of the Exchange
Act without so restricting, limiting, or conditioning the Plan with respect to
other participants.

III. Stock Subject to The Plan.
-------------------------

The stock subject to this Plan shall be the Common Stock, presently
authorized but unissued or subsequently acquired by the Company. Subject to
adjustment as provided in Section 7 hereof, the aggregate amount of Common Stock
to be delivered upon the exercise of all options granted under the Plan shall
not exceed in the aggregate 1,307,692 shares as such Common Stock was
constituted on the effective date of the Plan. If any option granted under the
Plan shall expire, be surrendered, exchanged for another option, canceled, or
terminated for any reason without having been exercised in full, the unpurchased
shares subject thereto shall thereupon again be available for purposes of the
Plan, including for replacement options which may be granted in exchange for
such surrendered, canceled, or terminated options.

IV. Eligibility.
-----------

An incentive stock option may be granted only to any individual who, at
the time the option is granted, is an employee of the Company or any Affiliate
thereof. A nonqualified stock option may be granted to any employee, officer,
director, or consultant of the Company or any Affiliate thereof, whether an
individual or an entity. Any party to whom an option is granted under the Plan
shall be referred to hereinafter as an "Optionee."

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A director shall in no event be eligible for the benefits of the Plan
unless at the time discretion is exercised in the selection of a director as a
person to whom options may be granted, or in the determination of the number of
shares which may be covered by options granted to the director: (a) the Board of
Directors has delegated its discretionary authority over the Plan to a committee
consisting solely of "disinterested persons" (as defined below) or (b) the Plan
otherwise complies with the requirements of Rule 16b-3 under the Exchange Act.
For purposes of this paragraph, a "disinterested person" shall mean a director
(i) who was not during the one year prior to service as Plan Administrator
granted or awarded equity securities pursuant to the Plan or any other plan of
the Company or its Affiliates entitling the participants therein to acquire
equity securities of the Company or its Affiliates except as permitted by Rule
16b-3(c)(2)(i), or (ii) who is otherwise considered to be a "disinterested
person" in accordance with such Rule 16b-3(c)(2)(i) or any other applicable
rules, regulations, or interpretations of the Securities and Exchange
Commission.

V. Terms and Conditions of Options.
-------------------------------

Options granted under the Plan shall be evidenced by written agreements
which shall contain such terms, conditions, limitations, and restrictions as the
Plan Administrator shall deem advisable and which are not inconsistent with the
Plan. Notwithstanding the foregoing, options shall include or incorporate by
reference the following terms and conditions:

5.1 Number of Shares and Price. The maximum number of shares that
may be purchased pursuant to the exercise of each option, and the price per
share at which such option is exercisable (the "exercise price"), shall be as
established by the Plan Administrator; provided, that the Plan Administrator
shall act in good faith to establish the exercise price which shall be not less
than 100% of the fair market value per share of the Common Stock at the time of
grant of the option with respect to incentive stock options; and provided,
further, that, with respect to incentive stock options granted to greater than
ten percent stockholders, the exercise price shall be as required by Section 6
hereof.

5.2 Term and Maturity. Subject to the restrictions contained in
Section 6 hereof with respect to granting stock options to greater than ten
percent stockholders, the term of each stock option shall be as established by
the Plan Administrator and, if not so established, shall be ten years from the
date of its grant, but in no event shall the term of any incentive stock option
exceed a ten year period. To ensure that the Company or Affiliate will achieve
the purpose and receive the benefits contemplated in the Plan, any option
granted to any Optionee hereunder shall, unless the condition of this sentence
is waived or modified in the agreement evidencing the option or by resolution

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adopted by the Plan Administrator, be exercisable according to the following
schedule:

Period of Optionee's
Continuous Relationship
With the Company or
Affiliate From the Date Portion of Total Option
the Option is Granted Which is Exercisable
--------------------- --------------------
1 year 25%
2 years 50%
3 years 75%
4 years 100%

5.3 Exercise. Subject to the vesting schedule described in
subsection 5.2 hereof, each option may be exercised in whole or in part;
provided, that only whole shares may be issued pursuant to the exercise of any
option. Subject to any other terms and conditions herein, the Plan Administrator
may provide that an option may not be exercised in whole or in part for a stated
period or periods of time during which such option is outstanding; provided,
that the Plan Administrator may rescind, modify, or waive any such limitation at
any time and from time to time after the grant date thereof. During an
Optionee's lifetime, any incentive stock options granted under the Plan are
personal to such Optionee and are exercisable solely by such Optionee. Options
shall be exercised by delivery to the Company of notice of the number of shares
with respect to which the option is exercised, together with payment of the
exercise price in accordance with Section 5.4 hereof.

5.4 Payment of Exercise Price. Payment of the option exercise
price shall be made in full at the time the notice of exercise of the option is
delivered to the Company and shall be in cash, bank certified or cashier's
check, or personal check (unless at the time of exercise the Plan Administrator
in a particular case determines not to accept a personal check) for shares of
Common Stock being purchased.

The Plan Administrator can determine at the time the option is
granted in the case of incentive stock options, or at any time before exercise
in the case of nonqualified stock options, that additional forms of payment will
be permitted. To the extent permitted by the Plan Administrator and applicable
laws and regulations (including, without limitation, federal tax and securities
laws and regulations and state corporate law), an option may be exercised by:

(a) delivery of shares of Common Stock of the Company held by
an Optionee having a fair market value equal to the exercise price,
such fair market value to be determined in good faith by the Plan
Administrator;

(b) delivery of a properly executed Notice of Exercise,
together with irrevocable instructions to a broker, all in accordance
with the regulations of the Federal Reserve Board, to promptly deliver
to the Company the amount of sale or loan proceeds to pay the exercise
price and any federal, state, or local withholding tax obligations that
may arise in connection with the exercise;

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(c) delivery of a properly executed Notice of Exercise,
together with instructions to the Company to withhold from the shares
of Common Stock that would otherwise be issued upon exercise that
number of shares of Common Stock having a fair market value equal to
the option exercise price.

5.5 Withholding Tax Requirement. The Company or any Affiliate
thereof shall have the right to retain and withhold from any payment of cash or
Common Stock under the Plan the amount of taxes required by any government to be
withheld or otherwise deducted and paid with respect to such payment. No option
may be exercised unless and until arrangements satisfactory to the Company, in
its sole discretion, to pay such withholding taxes are made. At its discretion,
the Company may require an Optionee to reimburse the Company for any such taxes
required to be withheld by the Company and withhold any distribution in whole or
in part until the Company is so reimbursed. In lieu thereof, the Company shall
have the right to withhold from any other cash amounts due or to become due from
the Company to the Optionee an amount equal to such taxes or retain and withhold
a number of shares having a market value not less than the amount of such taxes
required to be withheld by the Company to reimburse the Company for any such
taxes and cancel (in whole or in part) any such shares of Common Stock so
withheld. If required by Section 16(b) of the Exchange Act, the election to pay
withholding taxes by delivery of shares of Common Stock held by any person who
at the time of exercise is subject to Section 16(b) of the Exchange Act shall be
made either six months prior to the date the option exercise becomes taxable or
at such other times as the Company may determine as necessary to comply with
Section 16(b) of the Exchange Act. Although the Company may, in its discretion,
accept Common Stock as payment of withholding taxes, the Company shall not be
obligated to do so.

5.6 Nontransferability.
------------------

5.6.1 Option. Options granted under the Plan and the rights and
privileges conferred hereby may not be transferred, assigned, pledged, or
hypothecated in any manner (whether by operation of law or otherwise) other than
by will or by the applicable laws of descent and distribution or pursuant to a
qualified domestic relations order as defined in Section 414(p) of the Code, or
Title I of the Employee Retirement Income Security Act of 1974, as amended, or
the rules thereunder, and shall not be subject to execution, attachment, or
similar process. Any attempt to transfer, assign, pledge, hypothecate, or
otherwise dispose of any option under the Plan or of any right or privilege
conferred hereby, contrary to the Code or to the provisions of the Plan, or the
sale or levy or any attachment or similar process upon the rights and privileges
conferred hereby shall be null and void ab initio. The designation by an
Optionee of a beneficiary does not, in and of itself, constitute an
impermissible transfer under this subsection 5.6.1.

5.6.2 Stock. The Plan Administrator may provide in the
agreement granting the option that (a) the Optionee may not transfer or
otherwise dispose of shares acquired upon exercise of an option without first
offering such shares to the Company for purchase on the same terms and
conditions as those offered to the proposed transferee or (b) upon termination
of employment of an Optionee the Company shall have a six month right of
repurchase as to the shares acquired upon exercise, which right of repurchase
shall allow for a maximum purchase price equal to the fair market value of the
shares on the termination date. The foregoing rights of the Company shall be
assignable by the Company upon reasonable written notice to the Optionee.

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5.7 Termination of Relationship. If the Optionee's relationship
with the Company or any Affiliate thereof ceases for any reason other than
termination for cause, death, or total disability, and unless by its terms the
option sooner terminates or expires, then the Optionee may exercise, for a three
month period, that portion of the Optionee's option which is exercisable at the
time of such cessation, but the Optionee's option shall terminate at the end of
the three month period following such cessation as to all shares for which it
has not theretofore been exercised, unless, in the case of a nonqualified stock
option, such provision is waived in the agreement evidencing the option or by
resolution adopted by the Plan Administrator within 90 days of such cessation.
If, in the case of an incentive stock option, an Optionee's relationship with
the Company or Affiliate thereof changes from employee to nonemployee (i.e.,
from employee to a position such as a consultant), such change shall constitute
a termination of an Optionee's employment with the Company or Affiliate and the
Optionee's incentive stock option shall terminate in accordance with this
subsection 5.7.

If an Optionee is terminated for cause, any option granted
hereunder shall automatically terminate as of the first discovery by the Company
of any reason for termination for cause, and such Optionee shall thereupon have
no right to purchase any shares pursuant to such option. "Termination for cause"
shall mean dismissal for dishonesty, conviction or confession of a crime
punishable by law (except minor violations), fraud, misconduct, or disclosure of
confidential information. If an Optionee's relationship with the Company or any
Affiliate thereof is suspended pending an investigation of whether or not the
Optionee shall be terminated for cause, all Optionee's rights under any option
granted hereunder likewise shall be suspended during the period of
investigation.

If an Optionee's relationship with the Company or any Affiliate
thereof ceases because of a total disability, the Optionee's option shall not
terminate or, in the case of an incentive stock option, cease to be treated as
an incentive stock option until the end of the 12 month period following such
cessation (unless by its terms it sooner terminates and expires). As used in the
Plan, the term "total disability" refers to a mental or physical impairment of
the Optionee which is expected to result in death or which has lasted or is, in
the opinion of the Company and two independent physicians, expected to last for
a continuous period of 12 months or more and which causes or is, in such
opinion, expected to cause the Optionee to be unable to perform his or her
duties for the Company and to be engaged in any substantial gainful activity.
Total disability shall be deemed to have occurred on the first day after the
Company and the two independent physicians have furnished their opinion of total
disability to the Plan Administrator.

For purposes of this subsection 5.7, a transfer of relationship
between or among the Company and/or any Affiliate thereof shall not be deemed to
constitute a cessation of relationship with the Company or any of its
Affiliates. For purposes of this subsection 5.7, with respect to incentive stock
options, employment shall be deemed to continue while the Optionee is on
military leave, sick leave, or other bona fide leave of absence (as determined
by the Plan Administrator). The foregoing notwithstanding, employment shall not
be deemed to continue beyond the first 90 days of such leave, unless the
Optionee's reemployment rights are guaranteed by statute or by contract.

As used herein, the term "Affiliate" shall be defined as follows:
(a) when referring to a subsidiary corporation, "Affiliate" shall mean any

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<PAGE>

corporation (other than the Company) in, at the time of the granting of the
option, an unbroken chain of corporations ending with the Company, if stock
possessing 50% or more of the total combined voting power of all classes of
stock of each of the corporations other than the Company is owned by one of the
other corporations in such chain; and (b) when referring to a parent
corporation, "Affiliate" shall mean any corporation in an unbroken chain of
corporations ending with the Company if, at the time of the granting of the
option, each of the corporations other than the Company owns stock possessing
50% or more of the total combined voting power of all classes of stock in one of
the other corporations in such chain.

5.8 Death of Optionee. If an Optionee dies while he or she has a
relationship with the Company or any Affiliate thereof or within the three month
period (or 12 month period in the case of totally disabled Optionees) following
cessation of such relationship, any option held by such Optionee, to the extent
that the Optionee would have been entitled to exercise such option, may be
exercised within one year after his or her death by the personal representative
of his or her estate or by the person or persons to whom the Optionee's rights
under the option shall pass by will or by the applicable laws of descent and
distribution.

5.9 Status of Stockholder. Neither the Optionee nor any party to
which the Optionee's rights and privileges under the option may pass shall be,
or have any of the rights or privileges of, a stockholder of the Company with
respect to any of the shares issuable upon the exercise of any option granted
under the Plan unless and until such option has been exercised.

5.10 Continuation of Employment. Nothing in the Plan or in any
option granted pursuant to the Plan shall confer upon any Optionee any right to
continue in the employ of the Company or of an Affiliate thereof, or to continue
to be engaged as a consultant to the Company or such Affiliate, or to interfere
in any way with the right of the Company or of any such Affiliate to terminate
his or her employment or other relationship with the Company at any time.

5.11 Modification and Amendment of Option. Subject to the
requirements of Section 422 of the Code with respect to incentive stock options
and to the terms and conditions and within the limitations of the Plan,
including, without limitation, Section 9.1 hereof, the Plan Administrator may
modify or amend outstanding options granted under the Plan. The modification or
amendment of an outstanding option shall not, without the consent of the
Optionee, impair or diminish any of his or her rights or any of the obligations
of the Company under such option. Except as otherwise provided herein, no
outstanding option shall be terminated without the consent of the Optionee.
Unless the Optionee agrees otherwise, any changes or adjustments made to
outstanding incentive stock options granted under the Plan shall be made in such
a manner so as not to constitute a "modification" as defined in Section 424(h)
of the Code and so as not to cause any incentive stock option issued hereunder
to fail to continue to qualify as an incentive stock option as defined in
Section 422(b) of the Code.

5.12 Limitation on Value for Incentive Stock Options. As to all
incentive stock options granted under the terms of the Plan, to the extent that
the aggregate fair market value (determined at the time of the grant of the
incentive stock option) of the shares of Common Stock with respect to which
incentive stock options are exercisable for the first time by the Optionee

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<PAGE>

during any calendar year (under the Plan and all other incentive stock option
plans of the Company, an Affiliate thereof or a predecessor corporation) exceeds
$100,000, such options shall be treated as nonqualified stock options. The
foregoing sentence shall not apply, and the limitation shall be that provided by
the Code or the Internal Revenue Service, as the case may be, if such annual
limit is changed or eliminated by (a) amendment of the Code or (b) issuance by
the Internal Revenue Service of (i) a Revenue ruling, (ii) a Private Letter
ruling to any of the Company, any Optionee, or any legatee, personal
representative, or distributee of any Optionee, or (iii) regulations.

5.13. Valuation of Common Stock Received Upon Exercise.
------------------------------------------------

5.13.1 Exercise of Options Under Sections 5.4(a) and (c). The
value of Common Stock received by the Optionee from an exercise under Sections
5.4(a) and 5.4(c) hereof shall be the fair market value as determined by the
Plan Administrator, provided, that if the Common Stock is traded in a public
market, such valuation shall be the average of the high and low trading prices
or bid and asked prices, as applicable, of the Common Stock for the date of
receipt by the Company of the Optionee's delivery of shares under Section 5.4(a)
hereof or delivery of the Notice of Exercise under Section 5.4(c) hereof,
determined as of the trading day immediately preceding such date (or, if no sale
of shares is reported for such trading day, on the next preceding day on which
any sale shall have been reported).

5.13.2 Exercise of Option Under Section 5.4(b). The value of
Common Stock received by the Optionee from an exercise under Section 5.4(b)
hereof shall equal the sales price received for such shares.

VI. Greater Than Ten Percent Stockholders.
-------------------------------------

6.1 Exercise Price and Term of Incentive Stock Options. If
incentive stock options are granted under the Plan to employees who, at the time
of such grant, own greater than ten percent of the total combined voting power
of all classes of stock of the Company or any Affiliate thereof, the term of
such incentive stock options shall not exceed five years and the exercise price
shall be not less than 110% of the fair market value of the Common Stock at the
time of grant of the incentive stock option. This provision shall control
notwithstanding any contrary terms contained in an option agreement or any other
document. The term and exercise price limitations of this provision shall be
amended to conform to any change required by a change in the Code or by ruling
or pronouncement of the Internal Revenue Service.

6.2 Attribution Rule. For purposes of subsection 6.1, in
determining stock ownership, an employee shall be deemed to own the stock owned,
directly or indirectly, by or for his or her brothers, sisters, spouse,
ancestors, and lineal descendants. Stock owned, directly or indirectly, by or
for a corporation, partnership estate, or trust shall be deemed to be owned
proportionately by or for its stockholders, partners, or beneficiaries. If an
employee or a person related to the employee owns an unexercised option or
warrant to purchase stock of the Company, the stock subject to that portion of
the option or warrant which is unexercised shall not be counted in determining
stock ownership. For purposes of this Section 6, stock owned by an employee
shall include all stock owned by him or her which is actually issued and
outstanding immediately before the grant of the incentive stock option to the
employee.

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<PAGE>

VII. Adjustments Upon Changes in Capitalization.
------------------------------------------

The aggregate number and class of shares for which options may be
granted under the Plan, the number and class of shares covered by each
outstanding option, and the exercise price per share thereof (but not the total
price), and each such option, shall all be proportionately adjusted for any
increase or decrease in the number of issued shares of Common Stock of the
Company resulting from a split or consolidation of shares or any like capital
adjustment, or the payment of any stock dividend.

7.1. Effect of Liquidation, Reorganization, or Change in Control.
-----------------------------------------------------------

7.1.1 Cash, Stock, or Other Property for Stock. Except as
provided in subsection 7.1.2 hereof, upon a merger (other than a merger of the
Company in which the holders of Common Stock immediately prior to the merger
have the same proportionate ownership of common stock in the surviving
corporation immediately after the merger), consolidation, acquisition of
property or stock, separation, reorganization (other than mere reincorporation
or creation of a holding company), or liquidation of the Company (each, an
"event"), as a result of which the stockholders of the Company receive cash,
stock, or other property in exchange for, or in connection with, their shares of
Common Stock, any option granted hereunder shall terminate, but the time during
which such options may be exercised shall be accelerated as follows: the
Optionee shall have the right immediately prior to any such event to exercise
such Optionee's option in whole or in part whether or not the vesting
requirements set forth in the option agreement have been satisfied.

7.1.2 Conversion of Options on Stock for Exchange Stock. If the
stockholders of the Company receive capital stock of another corporation
("Exchange Stock") in exchange for their shares of Common Stock in any
transaction involving a merger (other than a merger of the Company in which the
holders of Common Stock immediately prior to the merger have the same
proportionate ownership of common stock in the surviving corporation immediately
after the merger), consolidation, acquisition of property or stock, separation,
or reorganization (other than mere reincorporation or creation of a holding
company), all options granted hereunder shall be converted into options to
purchase shares of Exchange Stock unless the Company and corporation issuing the
Exchange Stock, in their sole discretion, determine that any or all such options
granted hereunder shall not be converted into options to purchase shares of
Exchange Stock but instead shall terminate in accordance with the provisions of
subsection 7.1.1 hereof. The amount and price of converted options shall be
determined by adjusting the amount and price of the options granted hereunder in
the same proportion as used for determining the number of shares of Exchange
Stock the holders of the Common Stock receive in such merger, consolidation,
acquisition, separation, or reorganization. Unless the Board determines
otherwise, the converted options shall be fully vested whether or not the
vesting requirements set forth in the option agreement have been satisfied.

7.2 Fractional Shares. In the event of any adjustment in the
number of shares covered by an option, any fractional shares resulting from such
adjustment shall be disregarded and each such option shall cover only the number
of full shares resulting from such adjustment.

7.3 Determination of Board to Be Final. Except as otherwise
required for the Plan to qualify for the exemption afforded by Rule 16b-3 under

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the Exchange Act, all adjustments under this Section 7 shall be made by the
Board, and its determination as to what adjustments shall be made, and the
extent thereof, shall be final, binding, and conclusive. Unless an Optionee
agrees otherwise, any change or adjustment to an incentive stock option shall be
made in such a manner so as not to constitute a "modification" as defined in
Section 425(h) of the Code and so as not to cause the incentive stock option
issued hereunder to fail to continue to qualify as an incentive stock option as
defined in Section 422(b) of the Code.

VIII. Securities Law Compliance.
-------------------------

Shares shall not be issued with respect to an option granted under the
Plan unless the exercise of such option and the issuance and delivery of such
shares pursuant thereto shall comply with all relevant provisions of law,
including, without limitation, any applicable state securities laws, the
Securities Act of 1933, as amended (the "Act"), the Exchange Act, the rules and
regulations promulgated thereunder, and the requirements of any stock exchange
upon which the shares may then be listed, and shall be further subject to the
approval of counsel for the Company with respect to such compliance, including,
without limitation, the availability of an exemption from registration for the
issuance and sale of any shares hereunder. Inability of the Company to obtain
from any regulatory body having jurisdiction, the authority deemed by the
Company's counsel to be necessary for the lawful issuance and sale of any shares
hereunder or the unavailability of an exemption from registration for the
issuance and sale of any shares hereunder shall relieve the Company of any
liability in respect of the nonissuance or sale of such shares as to which such
requisite authority shall not have been obtained.

As a condition to the exercise of an option, if, in the opinion of
counsel for the Company, assurances are required by any relevant provision of
the aforementioned laws, the Company may require the Optionee to give written
assurances satisfactory to the Company at the time of any such exercise (a) as
to the Optionee's knowledge and experience in financial and business matters
(and/or to employ a purchaser representative reasonably satisfactory to the
Company who is knowledgeable and experienced in financial and business matters)
and that such Optionee is capable of evaluating, either alone or with the
purchaser representative, the merits and risks of exercising the option or (b)
that the shares are being purchased only for investment and without any present
intention to sell or distribute such shares. The foregoing requirements shall be
inoperative if the issuance of the shares upon the exercise of the option has
been registered under a then currently effective registration statement under
the Act.

At the option of the Company, a stop-transfer order against any shares
may be placed on the official stock books and records of the Company, and a
legend indicating that the stock may not be pledged, sold, or otherwise
transferred unless an opinion of counsel is provided (concurred in by counsel
for the Company) stating that such transfer is not in violation of any
applicable law or regulation, may be stamped on stock certificates in order to
assure exemption from registration. The Plan Administrator may also require such
other action or agreement by the Optionees as may from time to time be necessary
to comply with the federal and state securities laws. NONE OF THE ABOVE SHALL BE
CONSTRUED TO IMPLY AN OBLIGATION ON THE PART OF THE COMPANY TO UNDERTAKE
REGISTRATION OF THE OPTIONS OR STOCK HEREUNDER.

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<PAGE>

Should any of the Company's capital stock of the same class as the
stock subject to options granted hereunder be listed on a national securities
exchange or on the NASDAQ National Market, all stock issued hereunder if not
previously listed on such exchange or market shall, if required by the rules of
such exchange or market, be authorized by that exchange or market for listing
thereon prior to the issuance thereof.

IX. Use of Proceeds.
---------------

The proceeds received by the Company from the sale of shares pursuant
to the exercise of options granted hereunder shall constitute general funds of
the Company.

X. Amendment and Termination.
-------------------------

10.1 Board Action. The Board may at any time suspend, amend, or
terminate the Plan, provided, that no amendment shall be made without
stockholder approval within 12 months before or after adoption of the Plan if
such approval is necessary to comply with any applicable tax or regulatory
requirement, including any such approval as may be necessary to satisfy the
requirements for exemptive relief under Rule 16b-3 of the Exchange Act or any
successor provision. Rights and obligations under any option granted before
amendment of the Plan shall not be altered or impaired by any amendment of the
Plan unless the Company requests the consent of the person to whom the option
was granted and such person consents in writing thereto.

10.2 Automatic Termination. Unless sooner terminated by the Board,
the Plan shall terminate ten years from the earlier of (a) the date on which the
Plan is adopted by the Board or (b) the date on which the Plan is approved by
the stockholders of the Company. No option may be granted after such termination
or during any suspension of the Plan. The amendment or termination of the Plan
shall not, without the consent of the option holder, alter or impair any rights
or obligations under any option theretofore granted under the Plan.

XII. Effectiveness of the Plan.
-------------------------

The Plan shall become effective upon adoption by the Board so long as
it is approved by the holders of a majority of the Company's outstanding shares
of voting capital stock at any time within 12 months before or after the
adoption of the Plan by the Board.

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<PAGE>

claimsnet.com, inc.

[INCENTIVE][NONQUALIFIED] STOCK OPTION LETTER AGREEMENT

TO: ______________________

We are pleased to inform you that you have been selected by the Plan
Administrator of the claimsnet.com, inc. (the "Company") 1997 Stock Option Plan
(the "Plan") to receive a(n) [incentive] [nonqualified] option for the purchase
of ________ shares of the Company's common stock, $.10 par value, at an exercise
price of $____ per share (the "exercise price"). A copy of the Plan is attached
and the provisions thereof, including, without limitation, those relating to
withholding taxes, are incorporated into this Agreement by reference.

The terms of the option are as set forth in the Plan and in this
Agreement. The most important of the terms set forth in the Plan are summarized
as follows:

Term. The term of the option is ten years from date of grant, unless
sooner terminated.

Exercise. During your lifetime only you can exercise the option. The Plan
also provides for exercise of the option by the personal representative of your
estate or the beneficiary thereof following your death. You may use the Notice
of Exercise in the form attached to this Agreement when you exercise the option.

Payment for Shares. The option may be exercised by the delivery of:

(a) Cash, personal check (unless at the time of exercise the Plan
Administrator determines otherwise), or bank certified or cashier's checks;

(b) Unless the Plan Administrator in its sole discretion determines
otherwise, shares of the capital stock of the Company held by you having a fair
market value at the time of exercise, as determined in good faith by the Plan
Administrator, equal to the exercise price;

(c) Unless the Plan Administrator in its sole discretion determines
otherwise, a properly executed Notice of Exercise, together with instructions to
the Company to withhold from the shares that would otherwise be issued upon
exercise that number of shares having a fair market value equal to the option
exercise price; or

(d) Unless the Plan Administrator in its sole discretion determines
otherwise, a properly executed Notice of Exercise, together with irrevocable
instructions to a broker to promptly deliver to the Company the amount of sale
or loan proceeds to pay the exercise price.

Termination. The option will terminate immediately upon termination for
cause, as defined in the Plan, or three months after cessation of your
relationship with the Company or an Affiliate thereof, unless cessation is due
to death or total disability, in which case the option shall terminate 12 months
after cessation of such relationship.

A-12
<PAGE>

Transfer of Option. The option is not transferable except by will or by
the applicable laws of descent and distribution or pursuant to a qualified
domestic relations order.

Vesting. The option is vested according to the following schedule:

Period of Optionee's
Continuous Relationship
With the Company or
Affiliate From the Date Portion of Total Option
the Option is Granted Which is Exercisable
--------------------- --------------------

1 year 25%
2 years 50%
3 years 75%
4 years 100%

Date of Grant. The date of grant of the option is _______________.

YOUR PARTICULAR ATTENTION IS DIRECTED TO SECTION 8 OF THE PLAN WHICH
DESCRIBES CERTAIN IMPORTANT CONDITIONS RELATING TO FEDERAL AND STATE SECURITIES
LAWS THAT MUST BE SATISFIED BEFORE THE OPTION CAN BE EXERCISED AND BEFORE THE
COMPANY CAN ISSUE ANY SHARES TO YOU. THE COMPANY HAS NO OBLIGATION TO REGISTER
THE SHARES THAT WOULD BE ISSUED UPON THE EXERCISE OF YOUR OPTION, AND IF IT
NEVER REGISTERS THE SHARES, YOU WILL NOT BE ABLE TO EXERCISE THE OPTION UNLESS
AN EXEMPTION FROM REGISTRATION IS AVAILABLE. AT THE PRESENT TIME, EXEMPTIONS
FROM REGISTRATION UNDER FEDERAL AND STATE SECURITIES LAWS ARE VERY LIMITED AND
MIGHT BE UNAVAILABLE TO YOU PRIOR TO THE EXPIRATION OF THE OPTION. CONSEQUENTLY,
YOU MIGHT HAVE NO OPPORTUNITY TO EXERCISE THE OPTION AND TO RECEIVE SHARES UPON
SUCH EXERCISE. IN ADDITION, YOU SHOULD CONSULT WITH YOUR TAX ADVISOR CONCERNING
THE RAMIFICATIONS TO YOU OF HOLDING OR EXERCISING YOUR OPTIONS OR HOLDING OR
SELLING THE SHARES UNDERLYING SUCH OPTIONS.

You understand that, during any period in which the shares which may be
acquired pursuant to your option are subject to the provisions of Section 16 of
the Securities Exchange Act of 1934, as amended (and you yourself are also so
subject), in order for your transactions under the Plan to qualify for the
exemption from Section 16(b) provided by Rule 16b-3, a total of six months must
elapse between the grant of the option and the sale of shares underlying the
option.

A-13
<PAGE>

Please execute the Acceptance and Acknowledgement set forth below on the
enclosed copy of this Agreement and return it to the undersigned.

Very truly yours,
claimsnet.com, inc.

By:______________________
Name:
Title:

ACCEPTANCE AND ACKNOWLEDGEMENT

I, a resident of the State of __________, accept the stock option
described above granted under the claimsnet.com, inc. 1997 Stock Option Plan,
and acknowledge receipt of a copy of this Agreement, including a copy of the
Plan. I have read and understand the Plan, including the provisions of Section 8
thereof.

Dated: _____________________

--------------------------------------- -----------------------------------
Taxpayer I.D. Number Signature

By his or her signature below, the spouse of the Optionee, if such
Optionee is legally married as of the date of such Optionee's execution of this
Agreement, acknowledges that he or she has read this Agreement and the Plan and
is familiar with the terms and provisions thereof, and agrees to be bound by all
the terms and conditions of this Agreement and the Plan.

Dated: _____________________

-------------------------
Spouse's Signature

-------------------------
Printed Name

A-14
<PAGE>

NOTICE OF EXERCISE

The undersigned, pursuant to a(n) [incentive] [nonqualified] Stock
Option Letter Agreement (the "Agreement") between the undersigned and
claimsnet.com,inc. (the "Company"), hereby irrevocably elects to exercise
purchase rights represented by the Agreement, and to purchase thereunder _______
shares (the "Shares") of the Company's common stock, $.10 par value ("Common
Stock"),covered by the Agreement and herewith makes payment in full therefor.

1. If the sale of the Shares and the resale thereof has not, prior to
the date hereof, been registered pursuant to a registration statement filed and
declared effective under the Securities Act of 1933, as amended (the "Act"), the
undersigned hereby agrees, represents, and warrants that: (a) the undersigned is
acquiring the Shares for his or her own account (and not for the account of
others), for investment and not with a view to the distribution or resale
thereof; (b) By virtue of his or her position, the undersigned has access to the
same kind of information which would be available in a registration statement
filed under the Act; (c) the undersigned is a sophisticated investor; (d) the
undersigned understands that he or she may not sell or otherwise dispose of the
Shares in the absence of either (i) a registration statement filed under the Act
or (ii) an exemption from the registration provisions thereof; and (e) The
certificates representing the Shares may contain a legend tothe effect of
subsection (d) of this Section 1.

2. If the sale of the Shares and the resale thereof has been registered
pursuant to a registration statement filed and declared effective under the Act,
the undersigned hereby represents - 1 -and warrants that he or she has received
the applicable prospectus and a copy of the most recent annual report, as well
as all other material sent to stockholders generally. 3. The undersigned
acknowledges that the number of shares of Common Stock subject to the Agreement
is hereafter reduced by the number of shares of Common Stock represented by the
Shares.

Very truly yours,

____________________________________
(type name under signature line)

Social Security No. ________________

Address: ___________________________

___________________________________

A-15

<PAGE>

CLAIMSNET.COM INC.
Proxy for 2000 Annual Meeting
This Proxy is Solicited by the Board of Directors

KNOW ALL MEN BY THESE PRESENTS that I (we), the undersigned
Stockholder(s) of CLAIMSNET.COM INC. (the "Company"), do hereby nominate,
constitute and appoint Bo W. Lycke and Paul W. Miller or either of them (with
full power to act alone), my (our) true and lawful attorney(s) with full power
of substitution, for me (us) and in my (our) name, place and stead to vote all
the Common Stock of said Company, standing in my (our) name on the books on the
record date, July 31, 2000, at the Annual Meeting of its Stockholders to be held
at the offices of the Company at 12801 North Central Expressway, First Floor
Building Conference Room, Dallas, Texas 75243, on September 29, 2000, at 8:00
a.m., local time, or at any postponement or adjournment thereof, with all the
powers the undersigned would possess if personally present.

This Proxy, when properly executed, will be voted as directed below. In
the absence of any direction, the shares represented hereby will be voted for
the (a) approval of the proposed amendment to the Company's Certificate of
Incorporation, (b) approval of the reservation of 1,427,076 shares of Common
Stock of the Company, (c) approval of the proposed amendment to the Company's
1997 Stock Option Plan, increasing the total number of issuable shares by
750,000, (d) election of the nominees listed and (e) ratification of the
appointment of the auditors.

|X| Please mark your votes in this example.

1. Approval of the proposal to amend the Certificate of Incorporation of
the Company to amend its corporate name to be "HealthExchange Inc."
The Board of Directors recommends a vote FOR approval.

|_| For |_| Against |_| Abstain

2. Approval of the reservation by the Board of Directors of 1,427,076
shares of Common Stock of the Company, issuable upon the potential
conversion of the Company's Series A Convertible Redeemable Preferred
Stock and Series B Convertible Redeemable Preferred Stock. The Board of
Directors recommends a vote FOR approval.

|_| For |_| Against |_| Abstain

3. Approval of the proposal to increase the number of shares issuable
pursuant to the 1997 Stock Option Plan by 750,000. The Board of
Directors recommends a vote FOR approval.

|_| For |_| Against |_| Abstain

4. Election of Directors; Election of the three nominees, Bo W. Lycke,
Ward A. Bensen, and Robert H. Brown, Jr.

|_| For All Nominees |_| Withhold From All Nominees

If you do not wish your shares voted FOR a particular nominee, draw a line
through that person's name above.

5. Approval of the appointment of Ernst & Young LLP, as independent auditors
of the Company for the fiscal year ending December 31, 2000. The Board of
Directors recommends a vote FOR approval.

|_| For |_| Against |_| Abstain

6. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before such meeting or adjustment or
postponement, thereof.

SIGNATURES(S)___________________________

________________________________________

Date____________________________________

NOTE: Please sign exactly as the name(s) appear hereon. Joint owners should
sign. When signing as attorney, executor, administrator, trustee, or
guardian, please give full title as such.