Lyle B. Stewart, P.C.
3751 South Quebec Street
Denver, Colorado 80237
Telephone: 303-267-0920
Fax: 303-267-0922
April 16, 1998
United States Securities and Exchange Commission
Division of Corporation Finance
450 Fifth Street, N.W.
Judiciary Plaza
Washington, D.C. 20549-1004
Re: Medix Resources, Inc.
Commission File No. 0-24768
Preliminary Proxy Material
Dear Sir or Madam:
On behalf of my client, Medix Resources, Inc.(the "Corporation"), and
pursuant to Rule 101(a)(1)(iii) under Regulation S-T promulgated by the U.S.
Securities and Exchange Commission, we are filing herewith a preliminary copy
of the Proxy Statement and form of Proxy Card relating to the upcoming annual
meeting of the Corporation, scheduled for May 29, 1998. The form of Proxy
Card is attached at the end of the enclosed preliminary Proxy Statement. The
Corporation intends to release its definitive Proxy Statement to its
shareholders' on or about April 28, 1998. At that time, the Company will mail
its definitive Proxy Statement to its shareholders, accompanied by a copy of
its Form 10-KSB in lieu of the information required by Rule 14a-3(b).
If you have any questions with respect to this filing or if comments are to be
made regarding the enclosed material, please contact the undersigned at the
telephone number above.
Very truly yours,
/s/ Lyle B. Stewart
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF
1934
[AMENDMENT NO.__ ]
Filed by 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 240.14a- 11(c) or 240.14a-12
Medix Resources, Inc.
------------------------
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Medix Resources, Inc.
-----------------------
(NAME OF PERSON(S) FILING PROXY STATEMENT)
Payment of Filing Fee (Check the appropriate box):
[x ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules
14a-6(i)(4) and 0-11.
1) Title of each class of securities to which
transaction applies:
2) Aggregate number of securities to which
transaction applies:
3) Per unit price or other underlying value of
transaction computed pursuant to Exchange Act
Rule 0-11. Set forth amount on which filing fee
is calculated and state how it was determined:
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0- I 1 (a)(2) and
identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by
registration statement number, or the Form or Schedule and the
date of its filing.
1) Amount Previously Paid:
2) Form Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
MEDIX RESOURCES, INC.
360 SOUTH GARFIELD STREET, SUITE 400
DENVER, COLORADO 80209
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 29, 1998
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Medix
Resources, Inc., a Colorado corporation (the "Company"), will be held at the
Company's principal place of business at 360 South Garfield Street, Suite 400,
Denver, Colorado, on Friday, May 29, 1998 at 10:00 a.m., local time, for the
following purposes:
1. To elect a Board of Directors consisting of three (3) directors to
serve until the next Annual Meeting of Shareholders or until their
successors are duly elected and qualified;
2. To approve the proposal of the Board of Directors to
effect a reverse split of the Company's
outstanding shares of Common Stock;
3. To ratify the appointment of Ehrhardt Keefe Steiner &
Hottman PC, independent public
accountants, to audit the financial statements of
the Company for the fiscal year ending
December 27, 1998; and
4. To transact such other business as may properly come
before the Annual Meeting or any
adjournments(s) thereof.
The Board of Directors has fixed the close of business on April 24, 1998,
as the record date (the "Record Date") for determining the Shareholders
entitled to receive notice of, and to vote at, the Annual Meeting.
ALL SHAREHOLDERS ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING IN PERSON.
HOWEVER, TO ENSURE YOUR REPRESENTATION AT THE ANNUAL MEETING, YOU ARE URGED TO
MARK, SIGN, DATE AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN THE
POSTAGE-PREPAID ENVELOPE ENCLOSED FOR THAT PURPOSE. ANY SHAREHOLDER ATTENDING
THE ANNUAL MEETING MAY VOTE IN PERSON IF SUCH SHAREHOLDER HAS PREVIOUSLY
RETURNED A PROXY.
By Order of the Board of Directors
John P. Yeros, Chairman of the Board,
President and Chief Executive Officer
Denver, Colorado
April 27, 1998
MEDIX RESOURCES, INC.
360 SOUTH GARFIELD STREET, SUITE 400
DENVER, COLORADO 80209
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 29, 1998
INFORMATION CONCERNING SOLICITATION AND VOTING GENERAL
The enclosed Proxy is solicited on behalf of the Board of Directors of Medix
Resources, Inc., a Colorado corporation (the "Company"), for use at the Annual
Meeting of Shareholders to be held on Friday, May 29, 1998, at 10:00 a.m.,
local time, or at any adjournment(s) thereof, for the purposes set forth
herein and in an accompanying Notice of Annual Meeting of Shareholders. The
Annual Meeting will be held at the Company's principal place of business at
360 South Garfield Street, Suite 400, Denver, Colorado. The Company's
telephone number is (303) 393-1515. These proxy solicitation materials were
mailed on or about April 28, 1998 to all Shareholders listed in the
Shareholder records of the Company as of the Record Date (as that term is
defined below). The Company will bear the cost of this solicitation.
RECORD DATE AND SHARE OWNERSHIP
Shareholders of record at the close of business on April 24, 1998 (the
"Record Date") are entitled to vote at the Annual Meeting. At the Record
Date, [20,343,787] shares of the Company's common stock, $0.001 par value per
share (the "Common Stock"), were outstanding. Shareholders holding at least
one-third of all shares of Common Stock represented in person or by proxy,
shall constitute a quorum for the transaction of business at the Annual
Meeting.
REVOCABILITY OF PROXIES
Any Proxy given pursuant to this solicitation may be revoked by the
person or entity giving it at any time before its use by delivering to the
Company a written notice of revocation or a duly executed Proxy bearing a
later date or by attending the Annual Meeting and voting in person. An
appointment of proxy is revoked upon the death or incapacity of the
Shareholder appointing the proxy if the Secretary or other officer or agent of
the Company who is authorized to tabulate votes receives notice of such death
or incapacity before the proxy exercises his authority under the appointment.
VOTING AND SOLICITATION
Each outstanding share of Common Stock shall be entitled to one (1) vote
on each matter submitted to a vote at the Annual Meeting. Assuming a quorum
is present, those candidates receiving the most votes shall be elected as
directors of the Company. The proposed reverse split and the ratification of
accountants will be approved by the shareholders if the number of votes cast
for the proposal exceeds the number of votes cast against the proposal,
assuming a quorum is present. Abstentions and broker non-votes shall be
counted towards the presence of a quorum. However, they will not be counted
and will have no effect in the election of directors and in the voting on the
reverse split and the ratification of accountants. The principal executive
offices of the Company are located at 360 South Garfield Street, Suite 400,
Denver, Colorado 80209. In addition to the use of the mails, proxies may be
solicited personally, by telephone or by facsimile, and the Company may
reimburse brokerage firms and other persons holding shares of the Company's
Common Stock in their names or in the names of their nominees, for their
reasonable expenses in forwarding proxy solicitation materials to the
beneficial owners.
MATTERS TO BE BROUGHT BEFORE THE ANNUAL MEETING
The matters to be brought before the Annual Meeting include: (1) the
election of a Board of Directors consisting of three directors; (2) the
approval of the proposal of the Board of Directors to effect a reverse split
of the Company's outstanding shares of Common Stock; (3) the ratification of
the appointment of Ehrhardt, Keefe, Steiner & Hottman PC, independent public
accountants, to audit the financial statements of the Company for the fiscal
year ending December 27, 1998: and (4) the transaction of such other business
as may properly come before the Annual Meeting or any adjournment(s) thereof.
DEADLINE FOR RECEIPT OF SHAREHOLDER PROPOSALS FOR NEXT ANNUAL MEETING
Shareholders of the Company who intend to present proposals at the
Company's 1998 Annual Meeting of Shareholders must deliver such proposals to
the Company no later than December 31, 1998 in order to be included in the
Proxy Statement and form of Proxy relating to the 1999 Annual Meeting of
Shareholders. The Company currently anticipates that the 1999 Annual Meeting
of Shareholders will be held in the month of June of 1999.
ELECTION OF DIRECTORS
NOMINEES
The Company's Board of Directors currently consists of three directors. [It
is contemplated that a Board of three directors, all of whom are currently
serving in that capacity, will be elected at the Annual Meeting.] The Board of
Directors recommends that the Shareholders vote "FOR" the director nominees
listed below. Unless otherwise instructed, the proxy holder will vote the
proxies received by him for management's three nominees, as listed below. In
the event any management nominee is unable or declines to serve as a director
at the time of the Annual Meeting, the proxies will be voted for any nominee
who shall be designated by the current Board of Directors to fill the vacancy.
In the event that additional persons are nominated for election as directors,
the proxy holder intends to vote all proxies received by him in such a manner
as will insure the election of as many of the nominees listed below as
possible. It is not expected that any nominee will be unable or will decline
to serve as a director. The term of office of each person elected as a
director will continue until the next Annual Meeting of Shareholders, or until
such person's successor has been elected and qualified. The nominees are as
follows:
John P. Yeros
Thomas J. Oberle
Charles Powell
Certain information regarding each nominee is set forth below.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE 'FOR' EACH OF THE ABOVE NOMINEES TO
THE COMPANY'S BOARD OF DIRECTORS. A PLURALITY OF THE VOTES CAST BY THE SHARES
ENTITLED TO VOTE AT THE ANNUAL MEETING WILL BE REQUIRED TO ELECT EACH
DIRECTOR.
BOARD MEETINGS
The Board of Directors of the Company held a total of two meetings during
the fiscal year ended December 28, 1997. All of the then current members of
the Board of Directors attended 100% of all meetings of the Board held during
the fiscal year ended December 28, 1997.
DIRECTORS AND EXECUTIVE OFFICERS
The directors and executive officers of the Company as of the
date hereof are set forth below:
<TABLE>
<CAPTION>
NAME AGE POSITION
<S> <C> <C>
John P. Yeros 47 Chairman of the Board, President
and Chief Executive Officer
Barry J. McDonald 39 Chief Operating Officer and Secretary
David Kinsella 36 Controller
Thomas J. Oberle(1)(2) 52 Director
Charles Powell(l)(2) 42 Director
</TABLE>
____________________
(1) Member of the Audit Committee
(2) Member of the Compensation Committee
Each director will serve a term of office that will continue until the
next Annual Meeting of Shareholders and
until the election and qualification of his or her respective successor. All
of the Company's executive officers
devote full-time to the Company's business and affairs.
John P. Yeros. Mr. Yeros, the founder of the Company, has served as a
director, Chairman of the Board of Directors and Chief Executive Officer of
the Company from the Company's incorporation in April 1988 until the present.
Mr. Yeros served as President of the Company from its incorporation to
September of 1993 and resumed the title in July 1995.
Barry J. McDonald. Mr McDonald joined the Company on February 1, 1997 as
Chief Operating Officer. Before that he was Senior Vice President of
TherAmerica, a physical therapy staffing company, which was acquired by the
Company in January 1997. He joined TherAmerica in November, 1994. From May,
1990 to November, 1994, he held various positions, including General manager,
with Colorado Therapists On Call. He graduated from the University of Toledo
with a degree in Healthcare Administration.
David Kinsella. Mr. Kinsella joined the company on August 25, 1997as
Controller of the Company. Before joining the Company, he was employed by
SBR, Inc., a private company in the retail sector, since May 1991. He held
various postions with SBR, Inc., including Accounting Supervisor, divisional
Controller and divisional Direcor of Accounting. He graduated from the
University of Colorado with a degree in Business Administration - Accounting.
Thomas J. Oberle. Mr. Oberle has been a director of the Company since its
incorporation. Since January 1993, Mr. Oberle has been the director of the
Colorado Dental Association. From January 1991 to January 1993, he served as
an independent insurance agent in Denver, Colorado. From October 1989 to
December 1991, Mr. Oberle was a Vice President of Equicor, a health
maintenance organization in Denver, Colorado. From May 1987 to October 1989,
he served as President of RMS, Inc., a corporation involved in organizing
various companies associated with the Children's Hospital in Denver, Colorado.
Mr. Oberle devotes only such time as is necessary to the business of the
Company.
Charles Powell. Mr. Powell has served as a director of the Company since
September 1994. Mr. Powell cofounded KAPRE Software, Inc., Boulder, Colorado,
in March 1992. Since March 1996 Mr. Powell has served as a director and the
Vice President of Operations for Antalys Corporation, a privately-held
software Company. Mr. Powell has served as Vice President of Finance and Vice
President of International Operations of KAPRE Software from March 1992 to
February 1996. From February 1992 through March 1993, Mr. Powell also served
as Chief Executive Officer of Generation 5 Technology, Inc., Denver, Colorado,
a publicly-held software development company. Mr. Powell devoted
approximately half of his time to each of KAPRE Software, Inc. and General 5
Technology, Inc. from March 1992 through March 1993. From November 1988 to
February 1992, Mr. Powell served as the Vice President of International
Operations for J.D. Edwards, Inc., Englewood, Colorado, a software
applications developer for the mainframe computer market. From April 1988 to
June 1989, Mr. Powell was President of Sheridan Securities, Inc., Denver,
Colorado. Mr. Powell currently serves on the Board of Directors of Milestone
Capital, Inc. and Siscom, Inc., both publicly-held companies located in
Denver, Colorado, and the Rockies Fund, Inc., headquartered in Colorado
Springs, Colorado: Mr. Powell devotes only such time as is necessary to the
Company's business.
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
EXECUTIVE OFFICER COMPENSATION
Summary Compensation Table. The following table sets forth the annual
and long-term compensation for services in all capacities to the Company for
the three years ended December 28, 1997 for John P. Yeros, the Chief Executive
Officer of the Company and Barry J. McDonald, Chief Operating Officer of the
Company (the "Named Officers"). No officer or employee of the Company other
than Mr. Yeros and Mr. McDonald earned an annual salary and bonus exceeding
$100,000 in 1997.
<TABLE>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
-------------------- ------------
Securities Underlying
Name and Principal Options/Warrants
Position Fiscal Year Salary Bonus Other(1) (Shares)
- ------------------ ------------ -------- ----- -------- ------------------
<S> <C> <C> <C> <C> <C>
John P. Yeros, 1997 $142,272 $15,000 - 523,455(2)
Chief Executive 1996 $154,000 -0- - 116,187(3)
Officer and 1995 $130,000 $10,000 - 300,000(4)
Chairman of the
Board
Barry J. McDonald 1997 $100,000 $10,000 $11,920 350,000(2)
Chief Operating
Officer
____________
</TABLE>
(1) Other annual compensation is made up of automobile allowances, and
disability and health insurance premiums. Such amounts for Mr. Yeros
are below 10% of his annual salary plus bonus and therefore are not
required to be reported.
(2) In August 1997, all outstanding options and warrants held by then current
employees of the Company, including options and warrants covering
1,009,768 shares held by Mr. Yeros, and options covering 100,000
shares held by Mr. McDonald, were re-priced to an exercise price of
$0.25 per share, the then fair market value of a share of the Company's
Common Stock. In addition, both Mr. Yeros and Mr. McDonald were granted
new options covering 250,000 shares at an exercise price of $0.25
per share.
(3) The options to purchase 116,187 shares of common stock granted to Mr.
Yeros at $1.88 per share which represent the fair market value of
the common stock at the date of grant were replacing previously granted
options to purchase 36,363 and 79,824 share of Common Stock granted at
$2.75 and $ 2.50 per share, respectively.
(4) The options to purchase a total of 300,000 shares of Common Stock granted
to Mr. Yeros was granted with an exercise price of $0.63 per
share, which represented the fair market value of the Common Stock
at the time of issuance.
Options Grants Table. The following table sets forth information on grants of
stock options pursuant to the
Company's 1996 Stock Incentive Plan (the " 1996 Plan") to the Named Officers
during 1997:
<TABLE>
<CAPTION>
Percent of Total
Options/Warrants
Granted to
Options/Warrants Employees in Exercise or Base Expiration
Name Granted (Shares) 1997(1) Price ($/Share) Date
- ---- ---------------- --------------- ---------------- ----------
<S> <C> <C> <C> <C>
John P.
Yeros 523,455(2) 41% $0.25 August 2007
Barry J.
McDonald 350,000(2) 27% $0.25 August 2007
</TABLE>
______________
(1) The Company granted options to acquire a total of 1,288,594 shares of
its Common Stock to employees during 1997.
(2) These options were granted pursuant to the 1996 Plan and are
exercisable immediately.
Fiscal Year-End Options and Warrants Table. The following table sets forth
information on year-end values of
stock options and warrants granted to, the Named Officers as of December 28,
1997:
<TABLE>
<CAPTION>
Number of Securities Underlying
Unexercised Options/Warrants at Value of Unexercised In-the-Money
Fiscal Year-End Options at Fiscal Year-End(1)
-------------------------------- -------------------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
John P.
Yeros 1,259,768 0 $0 -
Barry J.
McDonald 350,000 0 $0 -
</TABLE>
_____________
(1) The fair market value of the Common Stock at December 28, 1997 was
below the exercise price of all of the respective options and
warrants.
The Company has no retirement, pension or profit-sharing program for the
benefit of its directors, executive officers or other employees, but the Board
of Directors may recommend one or more such programs for adoption in the
future.
Employment Agreements. Mr. Yeros entered into an Employment Agreement
with the Company effective October 15, 1993, which has been amended and
extended effective January 1, 1997. Mr. Yeros' extended Employment Agreement
provides for a five-year term, through December 31, 2001, with the right on
the part of the Company to extend the Employment Agreement on written notice
to the employee given not less than 90 days prior to the expiration of the
initial term. Mr. McDonald entered into a similar Employment Agreement with
the Company that provides for a two-year term to February 1, 1999. Such
Employment Agreements provide for termination by the employee with or without
cause or by the Company with cause. Each Employment Agreement is subject to
termination by the Company without cause after the initial one-year term,
subject to the right of the employee to receive 12 months' compensation. His
extended Employment Agreement provides for Mr. Yeros to receive a minimum
annual salary of $165,000 for the first year, and adjusted upwards at a
minimum of 10% annually after 1997. Mr. Yeros agreed to reduce his salary for
fiscal 1997 to $142,000. Mr. McDonald's Employment Agreement provides that he
will receive a minimum annual salary of $110,000 for 1997. The Employment
Agreements contain bonus and stock option provisions that empower the Board of
Directors to grant bonuses and stock options based upon the employee's
performance. The Employment Agreements contain provisions providing that,
upon the occurrence of a "Triggering Event" (defined to include a
non-negotiated change in ownership of between 50% and 80% of the outstanding
shares of the Company's Common Stock or a non-negotiated merger of the Company
with and into another corporation) during the period that Mr. Yeros or Mr.
McDonald is acting as an officer or director of the Company, he will receive a
lump sum payment equal to one(1) times the previous year's base pay in the
event of termination other than for cause. The Employment Agreements also
contain a non-compete provision that extends for a period of one year after
termination or resignation of the employee, as well as certain confidentiality
provisions.
DIRECTOR COMPENSATION
Mr. Yeros is the only employee who is a director of the Company
and he does not receive any additional compensation for his services as a
director. Non-employee directors receive no salary for their services as
such, although they do receive a fee of $500 per Board or committee meeting.
The Board of Directors has also
authorized payment of reasonable travel or other out-of-pocket expenses
incurred by non-employee directors for attending Board or committee meetings.
During 1997, Mr. Oberle and Mr.Powell were each paid $1,000 for their services
to the Company.
STOCK OPTION PLANS AND WARRANTS
The Company adopted an Incentive Stock Option Plan in 1988 (the
"Incentive Plan"). The Incentive Plan covers an aggregate of 100,000 shares
of common stock. The Incentive Plan is administered by the Compensation
Committee of the Board of Directors, of which Messrs. Oberle and Powell are
members. The Incentive Plan provides that no options may be granted at an
exercise price less than the fair market value of the common stock of the
Company on the date of grant. Unless otherwise specified, the options expire
ten years from the date of grant and may not be exercised during the initial
one-year period from the date of grant. Thereafter, the options may be
exercised in whole or in part, depending on terms of the particular option.
As of April 15, 1998, options for 67,500 shares were outstanding pursuant to
the Incentive Plan at exercise prices ranging from $.25 to $1.34.
The 1994 Omnibus Stock Plan (the "Omnibus Plan") was adopted by the
Company's Board of Directors effective January 1, 1994. The purpose of the
Omnibus Plan is to provide a vehicle under which a variety of equity based
awards may be granted to employees, nonaffiliated individuals (as defined in
the Omnibus Plan), and non-employee directors of the Company in order to
promote the Company's development and success. The Omnibus Plan permits the
award of non-qualified stock options, restricted shares, performance units,
performance shares, share appreciation rights, and other forms of awards,
including deferrals of earned awards, as approved by the Compensation
Committee of the Board of Directors. A maximum of 500,000 shares of common
stock are reserved and available for grants of any kind under the Omnibus
Plan. As of April 15, 1998, options for 216,188 shares were outstanding under
the Omnibus Plan at exercise prices ranging from $.25 to $2.50.
The 1996 Stock Incentive Plan (the 1996 Plan") was adopted by
the Company's Board of Directors effective November 22, 1995. The purpose of
the 1996 Plan is to provide a vehicle under which a variety of equity
based awards may be granted to employees, nonaffiliated individuals (as
defined in the 1996 Plan), and non-employee directors of the Company in order
to promote the Company's development and success. The 1996 Plan permits the
award of non-qualified stock options, stock awards and purchases, as approved
by the Compensation Committee of the Board of Directors. A maximum of
4,000,000 shares of common stock are authorized for grants of any kind under
the 1996 Plan. As of April 15, 1998, options for 2,891,877 shares were
outstanding under the 1996 Plan at exercise prices of between $.25 and $1.88.
In November 1994, the Board of Directors issued warrants to Mr.
Yeros entitling him to acquire 287,626 shares of Common Stock. The warrants
originally had an exercise price of $1.75, the fair market value at the date
of grant, but in 1997 the exercise price was adjusted to $0.25, the then fair
market value. The warrants vested immediately and are exercisable when the
Company's consolidated revenues, on a pro forma basis, equal or exceed
$20,000,000, or at the end of seven years, whichever comes first. The
consolidated revenues of the Company exceeded $20,000,000 for the year ended
December 28, 1997. These warrants expire at the end of seven years, November
23, 2001, if not exercised. The Compensation Committee of the Board of
Directors approved the granting of these warrants.
SECURITY OWNERSHIP OF CERTAIN BENEFICLAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership of Common Stock as of April 15, 1998 by (i) each person known by the
Company to own beneficially more than 5 % of the outstanding shares of Common
Stock. (ii) each director , nominee and each executive officers and (iii) all
executive officers and directors and nominees as a Group. Shares not
outstanding but deemed beneficial1y owned by virtue of the right of any
individual to acquire shares within 60 days are treated as outstanding only
when determining the amount and percentage of Common Stock owned by such
individual. Each person has sole voting and investment power with respect to
the shares shown, except as noted.
<TABLE>
<CAPTION>
Number of Shares Percentage of Class
------------------ ---------------------
<S> <C> <C>
Barbara Asbell(1) 1,965,817(2) 9.5%
John P. Yeros(1) 1,889,768(2) 8.5%
Robert Jagunich(1) 1,129,978 5.5%
Barry J. McDonald(1)(3) 450,000 2.2%
David Kinsella(1)(3) 150,000 -
Thomas J. Oberle(1)(3) 313,250 1.5%
Charles Powell(1)(3) 310,000 1.5%
All directors and
executive officers
as a group(5 persons) 3,113,018 13.2%
</TABLE>
________________
(1) The address for each named officer and director is 360 South Garfield
Street, Suite 400, Denver, Colorado 80209. The address of Ms. Asbell is One
Boardwalk, Suite 200, Thousand Oaks, CA 91360. Ms. Asbell is an employee of
Cymedix Lynx Corporation, a wholly-owned subsidiary of the Company. Mr.
Jagunich's address is 470 San Antonio, Suite G, Palo Alto, California 94306
(2) For Ms. Asbell this number includes 400,000 shares subject to currently
exercisable options, and for Mr. Yeros this number includes 1,759,768 shares
subject to currently exercisable warrants and options or options exercisable
within 60 days.
(3) Represents shares subject to currently exercisable options or options
exercisable within 60 days.
CERTAIN BUSINESS RELATIONSHIPS
In connection with the Company's purchase of a travel nurse business in
1992, the Company issued a promissory note that was personally guaranteed by
Mr. Yeros. The Company also issued a warrant to the seller to purchase 37,500
shares of the Company's Common Stock at an exercise price of $6.00 per share.
Ultimately, the Company defaulted on the promissory note. To secure a waiver
of the default, the Company agreed to increase the number of shares of Common
Stock purchasable upon exercise of the warrant from 37,500 shares to 50,000
shares, and to reduce the exercise price from $6.00 per share to S4.00 per
share. The promissory note was paid off in 1996. Mr. Yeros received an
indirect personal benefit as a result of the partial release of his personal
guarantee.
CONFLICTS OF INTEREST
The Company has adopted a policy that any transactions with directors or
officers or any entities in which they are also officers or directors or in
which they have a financial interest, will only be on terms that would be
reached in an arms-length transaction, consistent with industry standards and
approved by a majority of the disinterested directors of the Company's Board
of Directors. This policy, which is set forth in the minutes of the Board of
Directors, provides that no such transaction by the Company shall be either
void or voidable solely because of such relationship or interest of such
directors or officers or solely because such directors are present at the
meeting of the Board of Directors of the Company or a committee thereof that
approves such transaction or solely because their votes are counted for such
purpose. In addition, interested directors may be counted in determining the
presence of a quorum at a meeting of the Board of Directors of the Company or
a committee thereof that approves such a transaction. The Company has also
adopted a policy that any loans to officers, directors and 5% or more
shareholders are subject to approval by a majority of the disinterested
directors.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's directors and executive officers, and persons who own
more than 10% of a registered class of the Company's equity securities, to
file with the Securities and Exchange Commission initial reports of ownership
and reports of changes in ownership of the Company's Common Stock and other
equity securities. Officers, directors and greater than 10% shareholders are
requested by Securities and Exchange Commission regulations to furnish the
Company with copies of all Section 16(a) reports they file.
During fiscal 1997, Mr. McDonald and Mr. Kinsella inadvertently failed to
file a Form 3 in a timely manner.
REVERSE SPLIT OF THE OUTSTANDING SHARES OF THE COMPANY'S COMMON
STOCK
GENERAL
The Board of Directors of the Company has authorized a vote by the
shareholders on a proposal to effect a reverse split of the issued and
outstanding shares of Common Stock (the Reverse Stock Split") if on May 28,
1998, the reported last sale price of the Company's Common Stock on the Nasdaq
SmallCap Market has not been over $2.00 for each of the previous five days on
which the Common Stock traded in such market (the "Trading Period"). The
ratio of the Reverse Stock Split (the "Reverse Split Ratio") would be
determined based on the formula set forth below, and could vary from 1 for 2
to 1 for 10. A copy of the Plan of Effecting a Reverse Stock Split (the
"Plan"), which has been approved by the Board of Directors and is recommended
to the shareholders for their approval at the Annual Meeting is attached as
Exhibit A. If adopted, each share of Common Stock issued and outstanding
immediately prior to the time and date the Board of Directors determines to be
the effective time of the Reverse Stock Split (the "Effective Date") will be
reclassified as, and changed into, a fraction of one share of Common Stock,
depending on the Reverse Split Ratio that results from the application of the
formula set forth below and in the Plan.
By approving this proposal, the Shareholders will authorize a Reverse
Split Ratio determined as follows, based upon the average last sale price per
share of the Common Stock as reported on the Nasdaq SmallCap Market during the
Trading Period:
<TABLE>
<CAPTION>
Average Last
Sale Price Reverse
During Trading Period Split Ratio
----------------------- ---------------
<S> <C>
Under $0.15 1 for 10
$0.16 to $0.25 1 for 8
$0.26 to $0.40 1 for 5
$0.41 to $0.50 1 for 4
$0.51 to $0.65 1 for 3
$0.66 to $2.00 1 for 2
</TABLE>
If the average last sale price during the Trading Period is over $2.00 per
share, the Reverse Stock Split will not occur.
However, by approving this proposal, the Shareholders will also give the
Board of Directors authority to determine, in its sole discretion, that it is
in the best interest of the Company to abandon the the Reverse Stock Split at
any time prior to the Effective Date, without further action by the
Shareholders.
The Reverse Stock Split, if it occurs, will not materially affect any
Shareholder's proportionate equity interest in the Company or the relative
rights, preferences, privileges or priorities of any Shareholder. In
addition, pursuant to the terms of the Company's stock option plans, warrants
and convertible debt, the number of shares issuable upon exercise of
outstanding options, warrants and convertible debt, and the exercise price per
share, will be proportionately adjusted.
PURPOSE AND EFFECT OF THE REVERSE STOCK SPLIT
For approximately the last twelve months, the Company's Common Stock has
traded below $1.00 per share, which is the minimum bid price for continued
listing on the Nasdaq SmallCap Market. The Company has maintained its listing
on the Nasdaq SmallCap Market by meeting an alternative test, which is no
longer available. On August 25, 1997, The Nasdaq Stock Market, Inc ("Nasdaq")
announced revised initial and continuing listing standards for the Nasdaq
SmallCap Market. Among these revised standards, Nasdaq has announced that it
has eliminated the alternative test to the $1.00 minimum bid. Nasdaq has
notified the Company that it is not in compliance with this requirement and
has given the Company until May 28, 1998 to regain compliance. In order to
avoid being delisted from the Nasdaq SmallCap Market, the Company's Board of
Directors has determined to propose to the Company's Shareholders for their
approval, the Reverse Stock Split, which would only take place if the
Company's Common Stock continued to trade below $2.00 per share during the
Trading Period. The Board of Directors has determined to propose the Reverse
Stock Split at 1 for 2 even if the Company's Common Stock trades above $1.00
per share during the Trading Period. If the Reverse Stock Split proposal is
approved by the Stockholders, the Board of Directors believes that even if the
trading price was above $1.00 per share, it could be in the Company's and
shareholders' best interest to consummate a 1 for 2 Reverse Stock Split in
order to enhance the marketability of the Common Stock.
The principal effect of the Reverse Stock Split will be to decrease the number
of outstanding shares of Common Stock from ________ shares, as of the Record
Date, to an amount that would depend on the Reverse Split Ratio used, which
could vary from approximately _________ shares, if the Split Ratio were 1 for
2, to approximately ____________ shares, if the Reverse Split Ratio were 1 for
10 (all as if the Reverse Stock Split occurred on the Record Date). The
Common Stock issued pursuant to the Reverse Stock Split will be fully paid and
nonassessable. The respective voting rights and other rights that accompany
the Common Stock will not be altered by the Reverse Stock Split (other than as
a result of payment of cash in lieu of fractional shares as discussed below),
and the par value of the Common Stock will remain at $.001 per share.
Consummation of the Reverse Stock Split will not alter the number of
authorized shares of the Company's Common Stock, which will remain at
25,000,000. The currently authorized and outstanding shares of the Company's
Preferred Stock, 2,500,000 and ___, respectively, will not be affected by this
vote, other than a pro-rata reduction in the number of shares of Common Stock
into which the Preferred Stock is convertible and a pro-rata increase in
conversion price. After giving effect to the Reverse Stock Split, the number
of outstanding shares of Common Stock (as of April 24, 1998) would be as set
forth above, with the result that authorized but unissued shares would be an
amount from _______ to ___________, depending on the Reverse Split Ratio, with
approximately ____________ to ___________ of such shares of Common Stock being
reserved for issuance pursuant to the Company's warrants, stock option plans
and convertible preferred stock. At this time, the Company has no plans to
issue additional shares of its Common Stock other than pursuant to outstanding
options, warrants and convertible preferred stock.
The Board of Directors believes that a decrease in the number of shares
of Common Stock outstanding without any material alteration of the
proportionate economic interest in the Company represented by individual share
holdings may increase the trading price of the Common Stock, although no
assurance can be given that the market price of the Common Stock will rise in
proportion to the reduction in the number of shares outstanding resulting from
the Reverse Stock Split. Such a result could contribute to the Company's
ability to retain its listing on the Nasdaq SmallCap Market, although
retaining such listing can not be assured
There can be no assurance that the Reverse Stock Split will not
adversely impact the market price of the Common Stock, that the marketability
of the Common Stock will improve as a result of the Reverse Stock Split or
that the Reverse Stock Split will otherwise have any of the effects described
herein. If the Company's Common Stock is removed from listing on the Nasdaq
SmallCap Market, price information will be available on the NASD OTC Bulletin
Board. However, such information is not as widely available as Nasdaq
SmallCap Market information in newspapers and other publications.
CERTIFICATES AND FRACTIONAL SHARES
The Reverse Stock Split will occur on the Effective Date without any
action on the part of Shareholders of the Company and without regard to the
date or dates certificates presently representing shares of the Common Stock
(the "Old Certificates") are physically surrendered for certificates
representing the number of shares of the Common Stock such Shareholders are
entitled to receive as a consequence of the Reverse Stock Split (the "New
Certificates"). The Old Certificates will be deemed to represent the number
of shares of Common Stock resulting from the application of the appropriate
Reverse Split Ratio after the Effective Date of the Reverse Stock Split. New
Certificates will be issued in due course as Old Certificates are tendered to
the Exchange Agent for exchange or transfer. No fractional shares of Common
Stock will be issued and, in lieu thereof, Shareholders holding a number of
shares of Common Stock not evenly divisible by the Reverse Split Ratio, upon
surrender of their Old Certificates, will receive cash in lieu of fractional
shares of Common Stock. Such cash payment will not be made until a
Shareholder presents his Old Certificates to the Exchange Agent. The price
payable by the Company for the fractional shares of Common Stock will be equal
to the product of (a) the number of old shares that appears in the numerator
of the fraction of a new share, times (b) the average of the last sale price
-----
of one old share, as reported on the Nasdaq SmallCap Market for the five
trading days immediately preceding the Effective Date.
Only the fractional shares will be purchased by the Company, as a result,
whole shares will remain outstanding. For example, if stockholder Z owns 125
old shares of the Company's Common Stock, and the Reverse Split Ratio is 1 for
2, then dividing 125 shares by 2 would cause stockholder Z to hold, after the
reverse split, 62.5 new shares. Stockholder Z would be issued a New
Certificate for 62 new shares and would receive a cash payment (calculated as
described above) for his .5 new share fractional interest.
SOURCE OF FUNDS; NUMBER OF HOLDERS
The funds required to purchase the fractional shares are available and will be
paid from the current cash reserves of the Company. The Company's Shareholder
list indicates that a portion of the outstanding Common Stock is registered in
the names of clearing agencies and broker nominees. It is, therefore, not
possible to predict with certainty the number of fractional shares and the
total amount that the Company will be required to pay for fractional share
interests. However, it is not anticipated that the funds necessary to effect
the cancellation of fractional shares will be material.
As of April 24, 1997, the Company had approximately 400 shareholders of
record, and approximately 2,200 beneficial owners, of Common Stock. The
Company does not anticipate that the Reverse Stock Split and the payment of
cash in lieu of fractional shares will result in a significant reduction in
the number of shareholders of record or beneficial owners of Common Stock.
The Company does not presently intend to seek, either before or after the
Reverse Stock Split, any change in the Company's status as a reporting company
for federal securities law purposes.
EXCHANGE OF STOCK CERTIFICATES
As soon as practicable after the Effective Date, the Company will send a
letter of transmittal to each shareholder of record on the Effective Date for
use in transmitting Old Certificates to the Exchange Agent. The letter of
transmittal will contain instructions for the surrender of Old Certificates to
the Exchange Agent in exchange for New Certificates. No New Certificates will
be issued to a shareholder until such shareholder has surrendered all Old
Certificates together with a properly completed and executed letter of
transmittal to the Exchange Agent.
Upon proper completion and execution of the letter of transmittal and
return thereof to the Exchange Agent, together with all Old Certificates,
shareholders will receive a New Certificate or New Certificates representing
the number of whole shares of new Common Stock into which their shares of
Common Stock represented by the Old Certificates have been converted as a
result of the Reverse Stock Split. Until surrendered, outstanding Old
Certificates held by Shareholders will be deemed f or all purposes to
represent the number of whole shares of new Common Stock to which such
shareholders are entitled as a result of the Reverse Stock Split.
Shareholders should not send their Old Certificates to the Exchange Agent
until they have received the letter of transmittal. Shares not presented for
surrender as soon as practicable after the letter of transmittal is sent will
be exchanged at the first time they are presented for transfer.
No service charges will be payable by holders of shares of Common Stock
in connection with the exchange of certificates, all expenses of which will be
borne by the Company. However, if a transfer of ownership is requested, a fee
may be charged.
FEDERAL INCOME TAX CONSECTUENCES
Except as described below with respect to cash received in lieu of
fractional share interests, the receipt of Common Stock in the Reverse Stock
Split should not result in any taxable gain or loss to Shareholders for
federal income tax purposes. The tax basis of Common Stock received as a
result of the Reverse Stock Split (including any fractional share interests to
which a Shareholder is entitled) will be equal, in the aggregate, to the basis
of the shares exchanged for the Common Stock. For tax purposes, the holding
period of the shares immediately prior to the Effective Date will be included
in the holding period of the Common Stock received as a result of the Reverse
Stock Split, including any fractional share interests to which a Shareholder
is entitled. A Shareholder who receives cash in lieu of fractional shares of
Common Stock will be treated as first receiving such fractional shares and
then receiving cash as payment in exchange for such fractional shares of
Common Stock, and will recognize capital gain or loss in an amount equal to
the difference between the amount of cash received and the adjusted basis of
the fractional shares treated as surrendered for cash.
THE FEDERAL INCOME TAX DISCUSSION WITH RESPECT TO THE REVERSE STOCK SPLIT
SET FORTH ABOVE IS INCLUDED HEREIN FOR GENERAL INFORMATION ONLY. ALL
SHAREHOLDERS ARE ADVISED TO CONSULT THEIR OWN TAX ADVISORS AS TO ANY FEDERAL,
STATE, LOCAL OR FOREIGN TAX CONSEQUENCES APPLICABLE TO THEM WHICH COULD RESULT
FROM THE REVERSE SPLIT.
RIGHT OF DISSENT
Article 113 of the Colorado Business Corporation Act
provides that a shareholder, whether or not entitled to vote, is entitled to
dissent and obtain payment of the fair value of such shareholder's shares in
the event of a reverse split that reduces the number of shares owned by the
shareholder to only a fraction of a share or to scrip if the fractional share
or scrip so created is to be acquired for cash. While the Company is not
aware that any of its shareholders own so few shares that they would be
"cashed out" of their total equity interest in the Company by the Reverse
Stock Split, if such shareholders exist they have a statutory right to dissent
(a "Qualifying Shareholder"). The Company's Qualifying Shareholders will be
entitled to that right if the Reverse Stock Split is approved by the
shareholders of the Company and the Reverse Stock Split becomes effective.
Attached to the Proxy Statement as Exhibit C is a copy of Article 113 for your
review, as required by Colorado law. If a Qualifying Shareholder desires to
exercise its dissenters' rights, it must (a) cause the Company to receive
written notice, before the vote is taken, of the Qualifying Shareholder's
intention to demand payment for the Qualifying Shareholder's fractional share
resulting from the Reverse Stock Split, and (b) not vote its shares in favor
of the proposed Reverse Stock Split. If a Qualifying Shareholder does not
satisfy these requirements, it is not entitled to demand payment as described
above. If the Reverse Stock Split is approved at the Annual Meeting, the
Company shall give all Qualifying Shareholders who complied with clauses (a)
and (b) above written notice of the approval of the Reverse Stock Split within
ten (10) days after the effective date. Such notice shall inform those
Qualifying Shareholders how they may receive payment as a dissenting
shareholder. Such Qualifying Shareholders will be given at least thirty (30)
days to deliver its payment demand and stock certificate to the Company or its
agent. If the Reverse Stock Split has not become effective within sixty (60)
days after the date set by the Company by which payment demands and stock
certificates must be received, the stock certificates received by the Company
or its agent shall be returned to each dissenting shareholder. If the Reverse
Stock Split becomes effective after such sixty days, the Company shall send a
new dissenter's notice and the provisions of Article 113 shall again be
applicable.
A dissenting Qualifying Shareholder may reject the
Company's payment offer, or may give notice to the Company in writing of the
shareholder's estimate of the fair value and amount of interest owed to the
shareholder by the Company, if (a) the dissenting shareholder believes the
amount paid by the Company is less than fair value or the interest calculation
is incorrect, (b) the Company fails to make payment within sixty (60) days of
the date the shareholder's payment demand was due, or (c) the Company does not
return the deposited stock certificates as required if the Reverse Stock Split
does not become effective. If the dissenting Qualifying Shareholder provides
such notice, the Company must pay the shareholder's demand or commence a court
proceeding within sixty (60) days of receiving such rejection or additional
payment demand, as set forth in Part 3 of Article 113, attached hereto as
Exhibit B. A dissenting Qualifying Shareholder waives its right to require
the Company to pay its demand or seek judicial review if the Company does not
receive this notice within thirty (30) days after the Company made or offered
payment to the dissenting Qualifying Shareholder.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE 'FOR' THE REVERSE STOCK SPLIT PLAN.
SUCH PROPOSAL SHALL BE RATIFIED IF A PLURALITY OF THE SHARES REPRESENTED AT
THE ANNUAL MEETING VOTE IN FAVOR OF THE APPOINTMENT.
RATIFICATION OF APPOINTMENT OF EHRHARDT KEEFE STEINER & HOTTMAN PC
The Board of Directors has appointed Ehrhardt Keefe Steiner & Hottman PC,
independent public accountants, to audit the Company's financial statements
for the fiscal year ending December 27, 1998 and recommends that the Company's
Shareholders ratify such appointment. Representatives of Ehrhardt Keefe
Steiner & Hottman PC are expected to be present at the Annual Meeting, and
will have the opportunity to make a statement if thev desire, and are expected
to be available to respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE 'FOR' THE RATIFICATION OF EHRHARDT
KEEFE STEINER & HOTTMAN PC TO AUDIT THE COMPANY'S FINANCIAL STATEMENTS FOR THE
FISCAL YEAR ENDING DECEMBER 27, 1998. SUCH APPOINTMENT SHALL BE RATIFIED IF A
PLURALITY OF THE SHARES REPRESENTED AT THE ANNUAL MEETING VOTE IN FAVOR OF THE
APPOINTMENT.
OTHER MATTERS
Management knows of no other matters to be submitted to the Annual
Meeting. If any other matters properly come before the Annual Meeting, it is
intended that the person named in the enclosed form of Proxy will vote such
Proxy in accordance with his judgment.
ANNUAL REPORT TO SECURITIES AND EXCHANGE COMMISSION
A copy of the Company's Annual Report on Form 10-KSB for the fiscal year
ended December 31, 1996, as filed with the Securities and Exchange Commission,
is enclosed herewith as the Company's Annual Report to Shareholders and
additional copies thereof may be obtained by Shareholders, without charge, by
written request to John P. Yeros, President, Medix Resources, Inc., 360 South
Garfield Street, Suite 400, Denver, Colorado 80209.
By Order of the Board of Directors
DATED: April 27, 1998
EXHIBIT A
PLAN OF EFFECTING A REVERSE STOCK SPLIT
The Board of Directors of Medix Resources, Inc. (the "Company"), acting by
Unanimous Written Consent, effective April 15, 1998, has adopted the following
Plan of Effecting a Reverse Stock Split (the "Plan") and authorizes the
officers of the Company to present this Plan to the Company's shareholders for
approval pursuant to Section 105 of Article 106 of the Colorado Business
Corporation Act, and further unanimously recommends such approval to the
shareholders of the Company.
Section 1. If this Plan has been approved by the Company's shareholders and
not abandoned as provided in Section 5 or Section 6 below, upon such date and
time as is set by the Board of Directors (the "Effective Date"), each share of
Common Stock of the Company issued and outstanding immediately prior to the
Effective Date (the "Old Common Stock") shall automatically and without any
action on the part of the holder thereof be reclassified as, and changed into,
a fraction of a share of Common Stock (the "New Common Stock") based upon the
Reverse Split Ratio determined according to the formula set forth in Section 5
below , subject to the treatment of fractional share interests as described
below. Such reclassification and change of Old Common Stock into New Common
Stock shall not change the par value per share of the shares reclassified and
changed, which par value shall remain $.001 per share. Each holder of a
certificate or certificates, which immediately prior to the Effective Date
represented outstanding shares of Old Common Stock (the "Old Certificates",
whether one or more), shall be entitled to receive, upon surrender of such Old
Certificates to the Company's agent (the "Exchange Agent") for cancellation, a
certificate or certificates representing the number of whole shares of New
Common Stock into which and for which the shares of the Old Common Stock,
formerly represented by such Old Certificates so surrendered, are reclassified
under the terms hereof (the "New Certificates", whether one or more). From
and after the Effective Date, Old Certificates shall represent only the right
to receive New Certificates (and, where applicable, cash in lieu of fractional
shares, as provided below) pursuant to the provisions hereof.
Section 2. No certificates or scrip representing fractional share interests
in New Common Stock will be issued, and no such fractional share interest will
entitle the holder thereof to vote, or to any rights of a stockholder of the
Company. A holder of Old Certificates shall receive, in lieu of any fraction
of a share of New Common Stock to which the holder would otherwise be
entitled, a cash payment therefor in an amount equal to the product of (a) the
number of shares of Old Common Stock that appears in the numerator of such
fraction times (b) the average of the last sale price of one share of Old
Common Stock, as reported on the Nasdaq SmallCap Market for the five business
days immediately preceding the Effective Date for which transactions in Old
Common Stock are reported. If more than one Old Certificate shall be
surrendered at one time for the account of the same stockholder, the number of
full shares of New Common Stock for which New Certificates shall be issued
shall be computed on the basis of the aggregate number of shares represented
by the Old Certificates so surrendered. In the event that the Exchange Agent
becomes aware that a holder of Old Certificates has not tendered all the
holder's certificates for exchange, the Exchange Agent shall carry forward any
fractional share until all certificates of that holder have been presented for
exchange such that payment for fractional shares to any one holder shall not
exceed the value of one share of Old Common Stock.
Section 3. If any New Certificate is to be issued in a name other than that in
which the Old Certificates surrendered for exchange are issued, the Old
Certificates so surrendered shall be properly endorsed and otherwise in proper
form for transfer, and the person or persons requesting such exchange shall
affix any requisite stock transfer tax stamps to the Old Certificates
surrendered, or provide funds for their purchase, or establish to the
satisfaction of the Exchange Agent that such taxes are not payable.
Section 4. From and after the Effective Date, the amount of capital
represented by the shares of the New Common Stock into which and for which the
shares of the Old Common Stock are reclassified under the terms hereof shall
be the same as the amount of capital represented by the shares of Old Common
Stock so reclassified, until thereafter reduced or increased in accordance
with applicable law."
Section 5. (a) The Reverse Split Ratio to be used in Section 1 above shall be
determined as follows, based upon the average last sale price per share of the
Common Stock as reported on the Nasdaq SmallCap Market during the Trading
Period (as defined below):
<TABLE>
<CAPTION>
Average Last
Sale Price Reverse
During Trading Period Split Ratio
----------------------- ------------
<S> <C>
Under $0.15 1 for 10
$0.16 to $0.25 1 for 8
$0.26 to $0.40 1 for 5
$0.41 to $0.50 1 for 4
$0.51 to $0.65 1 for 3
$0.66 to $2.00 1 for 2
</TABLE>
If the average last sale price during the Trading Period is over $2.00 per
share, no reverse stock split shall occur and this Plan shall be abandoned
without further action by any party
(b) For the purpose of this Section 5, "Trading Period" shall mean the period
of five trading days on which the Common Stock trades in the Nasdaq SmallCap
Market prior to May 28, 1998.
Section 6. Before and after the vote by the shareholders to approve this
Plan, the Board of Directors shall have authority to determine, in its sole
discretion, that it is in the best interest of the Company to abandon the
reverse stock split and this Plan at any time prior to the Effective Date,
without further action by the shareholders of the Company.
EXHIBIT B
ARTICLE 113
DISSENTERS' RIGHTS
PART 1
RIGHT OF DISSENT-
PAYMENT FOR SHARES
7-113-101. DEFINITIONS. For purposes of this article:
(1) "Beneficial shareholder" means the beneficial owner of shares
held in a voting trust or by a nominee as the record shareholder.
(2) "Corporation" means the issuer of the shares held by a dissenter
before the corporate action, or the surviving or acquiring domestic or foreign
Corporation, by merger or share exchange of that issuer.
(3) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under section 7-113-102 and who exercises that right at the
time and in the manner required by part 2 of this article.
(4) "Fair value," with respect to a dissenter's shares, means the
value of the shares immediately before the effective date of the corporate
action to which the dissenter objects, excluding any appreciation or
depreciation in anticipation of the corporate action except to the extent that
exclusion would be inequitable.
(5) "Interest" means interest from the effective date of the
corporate action until the date of payment, at the average rate currently paid
by the Corporation on its principal bank loans or, if none, at the legal rate
as specified in section 5-12-101, C.R.S.
(6) "Record shareholder" means the person in whose name shares are
registered in the records of a Corporation or the beneficial owner of shares
that are registered in the name of a nominee to the extent such owner is
recognized by the Corporation as the shareholder as provided in section
7-107-204.
(7) "Shareholder means either a record shareholder or a beneficial
shareholder.
7-113-102. RIGHT TO DISSENT.
(1) A shareholder, whether or not entitled to vote, is entitled to
dissent and obtain payment of the fair value of the shareholder's shares in
the event of any of the following corporate actions:
(a) Consummation of a plan of merger to which the Corporation is a
party if:
(I) Approval by the shareholders of that Corporation is required for
the merger by section 7-111-103 or 7-111-104 or by the articles of
inCorporation; or
(II) The Corporation is a subsidiary that is merged with its parent
Corporation under section 7-111-104;
(b) Consummation of a plan of share exchange to which the Corporation
is a party as the Corporation whose shares will be acquired;
(c) Consummation of a sale, lease, exchange, or other disposition of
all, or substantially all, of the property of the Corporation for which a
shareholder vote is required under section 7-112-102(1); and
(d) Consummation of a sale, lease, exchange, or other disposition of
all, or substantially all, of the property of an entity controlled by the
Corporation if the shareholders of the Corporation were entitled to vote upon
the consent of the Corporation to the disposition pursuant to section
7-112-102(2).
(1.3) A shareholder is not entitled to dissent and obtain payment,
under subsection (1) of this section, of the fair value of the shares of any
class or series of shares which either were listed on a national securities
exchange registered under the federal "Securities Exchange Act of 1934," as
amended, or on the national market system of the national association of
securities dealers automated quotation system, or were held of record by more
than two thousand shareholders, at the time of:
(a) The record date fixed under section 7-107-107 to determine the
shareholders entitled to receive notice of the shareholders' meeting at which
the corporate action is submitted to a vote;
(b) The record date fixed under section 7-107-104 to determine
shareholders entitled to sign writings consenting to the corporate action; or
(c) The effective date of the corporate action if the corporate
action is authorized other than by a vote of shareholders.
(1.8) The limitation set forth in subsection (1.3) of this section
shall not apply if the shareholder will receive for the shareholder's shares,
pursuant to the corporate action, anything except:
(a) Shares of the Corporation surviving the consummation of the plan
merger of share exchange;
29
(b) Shares of any other Corporation which at the effective date of
the plan of merger or share exchange either will be listed on a national
securities exchange registered under the federal "Securities Exchange Act of
1934," as amended, or on the national market system of the national
association of securities dealers automated quotation system, or will be held
of record by more than two thousand shareholders;
(c) Cash in lieu of fractional shares; or
(d) Any combination of the foregoing described shares or cash in lieu
of fractional shares.
(2) (Delated by amendment, L. 96, p. 1321, ' 30, effective June 1,
1996.)
(2.5) A shareholder, whether or not entitled to vote, is entitled to
dissent and obtain payment of the fair value of the shareholder's shares in
the event of a reverse split that reduces the number of shares owned by the
shareholder to a fraction of a share or to scrip if the fractional share or
scrip so created is to be acquired for cash or the scrip is to be voided under
section 7-106-104.
(3) A shareholder is entitled to dissent and obtain payment of the
fair value of the shareholder's shares in the event of any corporate action to
the extent provided by the bylaws or a resolution of the board of directors.
(4) A shareholder entitled to dissent and obtain payment for the
shareholder's shares under this article may not challenge the corporate action
creating such entitlement unless the action is unlawful or fraudulent with
respect to the shareholder or the Corporation.
7-113-103. DISSENT BY NOMINEES AND BENEFICIAL OWNERS.
(1) A record shareholder may assert dissenters' rights as to fewer
than all the shares registered in the record shareholder's name only if the
record shareholder dissents with respect to all shares beneficially owned by
any one person and causes the Corporation to receive written notice which
states such dissent and the name, address, and federal taxpayer identification
number, if any, of each person on whose behalf the record shareholder asserts
dissenters' rights. The rights of a record shareholder under this subsection
(1) are determined as if the shares as to which the record shareholder
dissents and the other shares of the record shareholder were registered in the
names of a different shareholders.
(2) A beneficial shareholder may assert dissenters' rights as to the
shares held on the beneficial shareholder's behalf only if:
(a) The beneficial shareholder causes the Corporation to receive the
record shareholder's written consent to the dissent not later than the time
the beneficial shareholder asserts dissenters' rights; and
(b) The beneficial shareholder dissents with respect to all shares
beneficially owned by the beneficial shareholder.
(3) The Corporation may require that, when a record shareholder
dissents with respect to the shares held by any one or more beneficial
shareholders, each such beneficial shareholder must certify to the Corporation
that the beneficial shareholder and the record shareholder or record
shareholders of all shares owned beneficially by the beneficial shareholder
have asserted, or will timely assert, dissenters' rights as to all such shares
as to which there is no limitation on the ability to exercise dissenters'
rights. Any such requirement shall be stated in the dissenters' notice given
pursuant to section 7-113-203.
PART 2
PROCEDURE FOR EXERCISE
OF DISSENTERS' RIGHTS
7-113-201. NOTICE OF DISSENTERS' RIGHTS.
(1) If a proposed corporate action creating dissenters' rights under
section 7-113-102 is submitted to a vote at a shareholders' meeting, the
notice of the meeting shall be given to all shareholders, whether or not
entitled to vote. The notice shall state that shareholders are or may be
entitled to assert dissenters' rights under this article and shall be
accompanied by a copy of this article and the materials, if any, that, under
articles 101 to 117 of this title, are required to be given to shareholders
entitled to vote on the proposed action at the meeting. Failure to give
notice as provided by this subsection (1) shall not affect any action taken at
the shareholders' meeting for which the notice was to have been given, but any
shareholder who was entitled to dissent but who was not given such notice
shall not be precluded from demanding payment for the shareholder's shares
under this article by reason of the shareholder's failure to comply with the
provisions of section 7-113-202(1).
(2) If a proposed corporate action creating dissenters' rights under
section 7-113-102 is authorized without a meeting of shareholders pursuant to
section 7-107-104, any written or oral solicitation of a shareholder to
execute a writing consenting to such action contemplated in section 7-107-104
shall be accompanied or preceded by a written notice stating that shareholders
are or may be entitled to assert dissenters' rights under this article, by a
copy of this article, and by the materials, if any, that, under articles 101
to 117 of this title, would have been required to be given to shareholders
entitled to vote on the proposed action if the proposed action were submitted
to a vote at a shareholders' meeting. Failure to give notice as provided by
this subsection (2) shall not affect any action taken pursuant to section
7-107-104 for which the notice was to have been given, but any shareholder who
was entitled to dissent but who was not given such notice shall not be
precluded from demanding payment for the shareholder's shares under this
article by reason of the shareholder's failure to comply with the provisions
of section 7-113-202(2).
7-113-202. NOTICE OF INTENT TO DEMAND PAYMENT.
(1) If a proposed corporate action creating dissenters' rights under
section 7-113-102 is submitted to a vote at a shareholders' meeting and if
notice of dissenters' rights has been given to such shareholder in connection
with the action pursuant to section 7-113-201 (1), a shareholder who wishes to
assert dissenters' rights shall:
(a) Cause the Corporation to receive, before the vote is taken,
written notice of the shareholder's intention to demand payment for the
shareholder's shares if the proposed corporate action is effectuated; and
(b) Not vote the shares in favor of the proposed corporate action.
(2) If a proposed corporate action creating dissenters' rights under
section 7-113-102 is authorized without a meeting of shareholders pursuant to
section 7-107-104 and if notice of dissenters' rights has been given to such
shareholder in connection with the action pursuant to section 7-113-201(2), a
shareholder who wishes to assert dissenters' rights shall not execute a
writing consenting to the proposed corporate action.
(3) A shareholder who does not satisfy the requirements of subsection
(1) or (2) of this section is not entitled to demand payment for the
shareholder's shares under this article.
7-113-203. DISSENTERS' NOTICE.
(1) If a proposed corporate action creating dissenters' rights under
section 7-113-102 is authorized, the Corporation shall give a written
dissenters' notice to all shareholders who are entitled to demand payment for
their shares under this article.
(2) The dissenters' notice required by subsection (1) of this section
shall be given no later than ten days after the effective date of the
corporate action creating dissenters' rights under section 7-113-102 and
shall:
(a) State that the corporate action was authorized and state the
effective date or proposed effective date of the corporate action;
(b) State an address at which the Corporation will receive payment
demands and the address of a place where certificates for certificated shares
must be deposited;
(c) Inform holders of uncertificated shares to what extent transfer
of the shares will be restricted after the payment demand is received;
(d) Supply a form for demanding payment, which form shall request a
dissenter to state an address to which payment is to be made;
(e) Set the date by which the Corporation must receive the payment
demand and certificates for certificated shares, which date shall not be less
than thirty days after the date the notice required by subsection (1) of this
section is given;
(f) State the requirement contemplated in section 7-113-103(3), if
such requirement is imposed; and
(g) Be accompanied by a copy of this article.
7-113-204. PROCEDURE TO DEMAND PAYMENT.
(1) A shareholder who is given a dissenters' notice pursuant to
section 7-113-203 and who wishes to assert dissenters' rights shall, in
accordance with the terms of the dissenters' notice:
(a) Cause the Corporation to receive a payment demand, which may be
the payment demand form contemplated in section 7-113-203(2)(d), duly
completed, or may be stated in another writing; and
(b) Deposit the shareholder's certificates for certificated shares.
(2) A shareholder who demands payment in accordance with subsection
(1) of this section retains all rights of a shareholder, except the right to
transfer the shares, until the effective date of the proposed corporate action
giving rise to the shareholder's exercise of dissenters' rights and has only
the right to receive payment for the shares after the effective date of such
corporate action.
(3) Except as provided in section 7-113-207 or 7-113-209(1)(b), the
demand for payment and deposit of certificates are irrevocable.
(4) A shareholder who does not demand payment and deposit the
shareholder's share certificates as required by the date or dates set in the
dissenters' notice is not entitled to payment for the shares under this
article.
7-113-205. UNCERTIFICATED SHARES.
(1) Upon receipt of a demand for payment under section 7-113-204 from
a shareholder holding uncertificated shares, and in lieu of the deposit of
certificates representing the shares, the Corporation may restrict the
transfer thereof.
(2) In all other respects, the provisions of section 7-113-204 shall
be applicable to shareholders who own uncertificated shares.
7-113-206. PAYMENT.
(1) Except as provided in section 7-113-208, upon the effective date
of the corporate action creating dissenters' rights under section 7-113-102 or
upon receipt of a payment demand pursuant to section 7-113-204, whichever is
later, the Corporation shall pay each dissenter who complied with section
7-113-204, at the address stated in the payment demand, or if no such address
is stated in the payment demand, at the address shown on the Corporation's
current record of shareholders for the record shareholder holding the
dissenter's shares, the amount the Corporation estimates to be the fair value
of the dissenter's shares, plus accrued interest.
(2) The payment made pursuant to subsection (1) of this section shall
be accompanied by:
(a) The Corporation's balance sheet as of the end of its most recent
fiscal year or, if that is not available, the Corporation's balance sheet as
of the end of a fiscal year ending not more than sixteen months before the
date of payment, an income statement for that year, and, if the Corporation
customarily provides such statements to shareholders, a statement of changes
in shareholders' equity for that year and a statement of cash flow for that
year, which balance sheet and statements shall have been audited if the
Corporation customarily provides audited financial statements to shareholders,
as well as the latest available financial statements, if any, for the interim
or full-year period, which financial statements need not be audited;
(b) A statement of the Corporation's estimate of the fair value of
the shares;
(c) An explanation of how the interest was calculated;
(d) A statement of the dissenter's right to demand payment under
section 7-113-209; and
(e) A copy of this article.
7-113-207. FAILURE TO TAKE ACTION.
(1) If the effective date of the corporate action creating
dissenters' rights under section 7-113-102 does not occur within sixty days
after the date set by the Corporation by which the Corporation must receive
the payment demand as provided in section 7-113-203, the Corporation shall
return the deposited certificates and release the transfer restrictions
imposed on uncertificated shares.
(2) If the effective date of the corporate action creating
dissenters' rights under section 7-113-102 occurs more than sixty days after
the date set by the Corporation by which the Corporation must receive the
payment demand as provided in section 7-113-203, then the Corporation shall
send a new dissenters' notice, as provided in section 7-113-203, and the
provisions of sections 7-113-204 to 7-113-209 shall again be applicable.
7-113-208. SPECIAL PROVISIONS RELATING TO SHARES ACQUIRED AFTER
ANNOUNCEMENT OF PROPOSED CORPORATE ACTION.
(1) The Corporation may, in or with the dissenters' notice given
pursuant to section 7-113-203, state the date of the first announcement to
news media or to shareholders of the terms of the proposed corporate action
creating dissenters' rights under section 7-113-102 and state that the
dissenter shall certify in writing, in or with the dissenter's payment demand
under section 7-113-204, whether or not the dissenter (or the person on whose
behalf dissenters' rights are asserted) acquired beneficial ownership of the
shares before that date. With respect to any dissenter who does not so
certify in writing, in or with the payment demand, that the dissenter or the
person on whose behalf the dissenter asserts dissenters' rights acquired
beneficial ownership of the shares before such date, the Corporation may, in
lieu of making the payment provided in section 7-113-206, offer to make such
payment if the dissenter agrees to accept it in full satisfaction of the
demand.
(2) An offer to make payment under subsection (1) of this section
shall include or be accompanied by the information required by section
7-113-206(2).
7-113-209. PROCEDURE IF DISSENTER IS DISSATISFIED WITH PAYMENT OR OFFER.
(1) A dissenter may give notice to the Corporation in writing of the
dissenter's estimate of the fair value of the dissenter's shares and of the
amount of interest due and may demand payment of such estimate, less any
payment made under section 7-113-206, or reject the Corporation's offer under
section 7-113-208 and demand payment of the fair value of the shares and
interest due, if:
(a) The dissenter believes that the amount paid under section
7-113-206 or offered under section 7-113-208 is less than the fair value of
the shares or that the interest due was incorrectly calculated;
(b) The Corporation fails to make payment under section 7-113-206
within sixty days after the date set by the Corporation by which the
Corporation must receive the payment demand; or
(c) The Corporation does not return the deposited certificates or
release the transfer restrictions imposed on uncertificated shares as required
by section 7-113-207(1).
(2) A dissenter waives the right to demand payment under this section
unless the dissenter causes the Corporation to receive the notice required by
subsection (1) of this section within thirty days after the Corporation made
or offered payment for the dissenter's shares.
PART 3
JUDICIAL APPRAISAL OF SHARES
7-113-301. COURT ACTION.
(1) If a demand for payment under section 7-113-209 remains
unresolved, the Corporation may, within sixty days after receiving the payment
demand, commence a proceeding and petition the court to determine the fair
value of the shares and accrued interest. If the Corporation does not
commence the proceeding within the sixty-day period, it shall pay to each
dissenter whose demand remains unresolved the amount demanded.
(2) The Corporation shall commence the proceeding described in
subsection (1) of this section in the district court of the county in this
state where the Corporation's principal office is located or, if the
Corporation has no principal office in this state, in the district court of
the county in which its registered office is located. If the Corporation is a
foreign Corporation without a registered office, it shall commence the
proceeding in the county where the registered office of the domestic
Corporation merged into, or whose shares were acquired by, the foreign
Corporation was located.
(3) The Corporation shall make all dissenters, whether or not
residents of this state, whose demands remain unresolved parties to the
proceeding commenced under subsection (2) of this section as in an action
against their shares, and all parties shall be served with a copy of the
petition. Service on each dissenter shall be by registered or certified mail,
to the address stated in such dissenter's payment demand, or if no such
address is stated in the payment demand, at the address shown on the
Corporation's current record of shareholder for the record shareholder holding
the dissenter's shares, or as provided by law.
(4) The jurisdiction of the court in which the proceeding is
commenced under subsection (2) of this section is plenary and exclusive. The
court may appoint one or more persons as appraisers to receive evidence and
recommend a decision on the question of fair value. The appraisers have the
powers described in the order appointing them, or in any amendment to such
order. The parties to the proceeding are entitled to the same discovery
rights as parties in other civil proceedings.
(5) Each dissenter made a party to the proceeding commenced under
subsection (2) of this section is entitled to judgment for the amount, if any,
by which the court finds the fair value of the dissenter's shares, plus
interest, exceeds the amount paid by the Corporation, or for the fair value,
plus interest, of the dissenter's shares for which the Corporation elected to
withhold payment under section 7-113-208.
7-113-302. COURT COSTS AND COUNSEL FEES.
(1) The court in an appraisal proceeding commenced under section
7-113-301 shall determine all costs of the proceeding, including the
reasonable compensation and expenses of appraisers appointed by the court.
The court shall assess the costs against the Corporation; except that the
court may assess costs against all or some of the dissenters, in amounts the
court finds equitable, to the extent the court finds the dissenters acted
arbitrarily, vexatiously, or not in good faith in demanding payment under
section 7-113-209.
(2) The court may also assess the fees and expenses of counsel and
experts for the respective parties, in amounts the court finds equitable:
(a) Against the Corporation and in favor of any dissenters if the
court finds the Corporation did not substantially comply with the requirements
of part 2 of this article; or
(b) Against either the Corporation or one or more dissenters, in
favor of any other party, if the court finds that the party against whom the
fees and expenses are assessed acted arbitrarily, vexatiously, or not in good
faith with respect to the rights provided by this article.
(3) If the court finds that the services of counsel for any dissenter
were of substantial benefit to other dissenters similarly situated, and that
the fees for those services should not be assessed against the Corporation,
the court may award to said counsel reasonable fees to be paid out of the
amounts awarded to the dissenters who were benefitted.
[Form of Proxy Card]
MEDIX RESOURCES, INC.
360 South Garfield Street, Suite 400
Denver, Colorado 80209-3136
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
May 29, 1998
The undersigned hereby appoints each of John P. Yeros and Barry J. McDonald,
individually, as proxy and attorney-in-fact for the undersigned, with full
power of substitution, to vote on behalf of the undersigned at the Company's
1998 Annual Meeting of Shareholders to be held on May 29, 1998 and at any
adjournment(s) or postponement(s) thereof, all shares of the Common Stock,
$.001 par value, of the Company standing in the name of the undersigned or
which the undersigned may be entitled to vote as follows:
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED "FOR" ITEMS 1, 2 AND 3. In their discretion, the proxies are
authorized to vote upon such other business as may properly come before the
Annual Meeting or any adjournments or postponements thereof, hereby revoking
any proxy or proxies heretofore given by the undersigned.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
1. ELECTION OF DIRECTORS FOR ALL NOMINEES [ ] WITHHOLD AUTHORITY[ ]
(except as indicated below) to vote for all nominees
Nominees: John P. Yeros, Thomas J. Oberle, and Charles Powell.
To withhold authority to vote for any individual nominee, write that
individual's name in this space:
[Reverse Side]
2. To approve the proposal of the Board of Directors to effect a reverse
split of the Company's outstanding shares of Common Stock:
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. Ratify the selection by the Board of Directors of Ehrhardt Keefe
Steiner & Hottman as independent public accountants, to audit the financial
statements of the Company for the 1997 fiscal year:
FOR [ ] AGAINST [ ] ABSTAIN [ ]
Please sign exactly as name appears at left:
Dated:__________________________________________
Signature:_______________________________________
Signature (if held jointly):__________________________
When shares are held by joint tenants, both must sign. When signing as
attorney, executor, administrator, trustee or guardian, please give full title
as such . If a corporation, please sign in the corporate name by president or
other authorized officer. If a partnership, please sign in partnership name
by authorized person.
PLEASE MARK, SIGN, DATE AND MAIL THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
