Lyle B. Stewart, P.C.
3751 South Quebec Street
Denver, Colorado 80237
Telephone: 303-267-0920
Fax: 303-267-0922
April 26, 1999
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
Definitive 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 the definitive copy of the Proxy
Statement and form of Proxy Card relating to the upcoming annual meeting of the
Corporation, scheduled for June 11, 1999. The form of Proxy Card is attached at
the end of the enclosed definitive Proxy Statement. The Corporation intends to
release its definitive Proxy Statement to its shareholders' on or about April
30, 1999. 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
<PAGE>
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:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2)) [x] Definitive Proxy Statement [ ] Definitive Additional
Materials [ ] Soliciting Material Pursuant to ss. 240.14a- 11(c) or ss.
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 0-11 (a)(2) and identify the filing for which the
offsetting fee was paid previously. Identify the previous filing by
registration statement number, or the Form or Schedule and the date
of its filing.
1) Amount Previously Paid:
2) Form Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
MEDIX RESOURCES, INC.
7100 E. Belleview Ave., Suite 301
Englewood, Colorado 80111
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 11, 1999
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Medix
Resources, Inc., a Colorado corporation (the "Company"), will be held at the
Hilton-Denver Tech South Hotel, 7801 E. Orchard Road, Englewood, Colorado,
80111, on Friday, June 11, 1999 at 10:00 a.m., local time, for the following
purposes:
1. To elect a Board of Directors consisting of six (6) directors, who
will serve staggered terms of 3, 2 and 1 year(s), as provided in the
attached Proxy Statement and until their successors are duly elected
and qualified;
2. To approve an amendment of the Company's Articles of Incorporation to
increase the number of authorized shares of Common Stock from
25,000,000 to 50,000,000;
3. To ratify the appointment of Ehrhardt Keefe Steiner & Hottman PC,
independent public accountants, to audit the financial statements of
the Company for the 1999 fiscal year; 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 16, 1999, 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
Englewood, Colorado
April 26, 1999
<PAGE>
MEDIX RESOURCES, INC.
7100 E. Belleview Ave., Suite 301
Englewood, Colorado 80111
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 11, 1999
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, June 11, 1999, 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 Hilton-Denver Tech South Hotel, 7801 E. Orchard
Road, Englewood, Colorado, 80111. The Company's telephone number is (303)
741-2045. These proxy solicitation materials were mailed on or about April 30,
1999 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 16, 1999 (the "Record
Date") are entitled to vote at the Annual Meeting. At the Record Date,
21,786,438 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 amendment to the Company's Articles of Incorporation will
be approved by the shareholders if the number of votes cast for the proposed
amendment exceeds the number of votes cast against the proposed amendment,
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 or in the voting on the proposed
amendment and the ratification of accountants. The principal executive offices
of the Company are located at 7100 E. Belleview Ave., Suite 301, Englewood,
Colorado 80111. 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 six directors; (2) the approval of an
amendment to the Company's Articles of Incorporation to increase the number of
authorized shares of Common Stock from 25,000,000 to 50,000,000, which has been
proposed by the Board of Directors; (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 1999 fiscal year; 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
2000 Annual Meeting of Shareholders must deliver such proposals to the Company
no later than December 31, 1999 in order to be included in the Proxy Statement
and form of Proxy relating to the 2000 Annual Meeting of Shareholders. The
Company currently anticipates that the 2000 Annual Meeting of Shareholders will
be held on approximately the same date in 2000 as the date of the 1999 Annual
meeting.
ELECTION OF DIRECTORS
Nominees
The Company's Board of Directors currently consists of seven directors. Four of
such directors were elected to the Board on April 13, 1999 by the then three
current directors. During all of 1998, the Board of Directors had three members,
Messrs. Oberle, Powell and Yeros. It is proposed that a Board of six directors,
all of whom are currently serving in that capacity, will be elected at the
Annual Meeting. Mr. Powell has chosen not to stand for re-election to the Board.
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 six nominees, as listed below.
Pursuant to the Company's Articles of Incorporation, whenever the Company's
Board consists of six or more members, the Company's Board of Directors shall be
classified into three classes as nearly equal in number as possible. Because
this is the first Annual Meeting since the Board of Directors has been increased
from three directors, two of the six directors will be elected for terms of
three, two and one year(s), respectively. Therefore, Messrs. Newman and Yeros
will be elected for a three-year term, Messrs. Oberle and Prufeta will be
elected for a two-year term, and Messrs. Stahl and McLean will be elected for a
one-term term. At the next Annual Meeting, unless a vacancy on the Board is
filled during the year, only two directors will be elected for a three-year term
each.
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 end of his respective term and until such person's successor has been
elected and qualified. The nominees are as follows:
Brian McLean
Joel C. Newman
Thomas J. Oberle
John R. Prufeta
Douglas Stahl
John P. Yeros
Biographical 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 27, 1998, and signed five Unanimous Written Consents
in lieu of a meeting. 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 27, 1998.
Directors and Executive Officers
The directors and executive officers of the Company as of the date hereof are
set forth below:
Name Age Position
John P. Yeros(1)(2)(3) 48 Chairman of the Board, President,
Chief Executive Officer and Secretary
David Kinsella 37 Controller
Brian McLean(1)(4) 39 Director
Joel C. Newman(1)(2) 41 Director
Thomas J. Oberle(4) 53 Director
Charles Powell(2) 43 Director
John R. Prufeta(3)(4) 38 Director
Douglas Stahl(3) 49 Director
- --------------------
(1) Member of the Executive Committee
(2) Member of the Audit Committee
(3) Member of the Transaction Committee
(4) Member of the Compensation Committee
Each nominee for election as a director will serve the term of office stated
above, and until the election and qualification of his respective successor. All
of the Company's executive officers devote full-time to the Company's business
and affairs. Biographical information on each current executive officer and
director, and nominee for election as a director is set forth below.
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. Mr. Yeros graduated from Wichita State
University with a Bachelor of Science degree.
David Kinsella. Mr. Kinsella joined the company on August 25, 1997 as 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. He graduated from
St. Mary's College in Winona, Minnesota with a Bachelor of Science degree.
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.
Brian McLean, M.D. Dr. McLean has been a self-employed anesthesiologist in New
York City for over five years. He was elected to the Company's Board of
Directors on April 13, 1999. He invests in healthcare capital opportunities and
is a limited partner in Hudson Partners, an SBIC venture fund and serves on the
Board of Directors of Amarillo Biosciences, Inc., a Nasdaq Small-Cap listed
company as well as several private companies.
Joel C. Newman, M.D. Dr. Newman is the Managing Director of The Fountainhead
Group LLC, a merchant banking firm he founded in June 1998 to specialize in the
healthcare sector. Prior To launching his own firm, Dr. Newman was a Director of
Healthcare Mergers & Acquisitions at Merrill Lynch & Co for five years. He was
elected to the Company's Board of Directors on April 13, 1999. He began his
investment banking career in 1985 at Salomon Brothers Inc. as an equity research
analyst in biomedical technology for three years, followed by three years at CS
First Boston as Vice President of Healthcare Investment Banking and four years
at The Lodestar Group (later acquired by Societe Generale), initially as
Director and ultimately as Managing Director of Healthcare Investment Banking
before entering investment banking. Dr. Newman completed a two-year internship
in general surgery at The Hospital of The University of Pennsylvania, a research
fellowship at New York Hospital and a residency in anesthesia & critical care at
The Mount Sinai Hospital. He attended Yale University at the undergraduate level
and received an M.D. Degree from The Johns Hopkins School of Medicine.
John R. Prufeta. Mr. Prufeta is the Managing General Partner of The Creative
Group and Creative Health Concepts. In addition, Mr. Prufeta is the President
and Chief Executive Officer of Creative Management Strategies, and General
Partner of TCG Development. These companies cover a wide spectrum of services
within the healthcare industry, including but not limited to, formation of
business arrangements and healthcare start-ups, the recruitment and the
development of talent, arranging capital, provide full profit and loss
responsibility for national searches, nationwide management consulting
practices, contracting and development of networks for physicians and hospitals,
merger and acquisition intermediaries, among many others. He was elected to the
Company's Board of Directors on April 13, 1999. Mr. Prufeta managed the
acquisition of David Hertz Health Concepts and integrated D. J. Hertz &
Associatcs of which he has served as the Executive Vice President, Secretary and
Founder and Director of Executive Search, into Creative Management Strategies. A
1983 graduate of St. John's University with a B.S. in management, John Prufeta
is currently participating in the Owner/President Management Program at Harvard
University, Graduate School of Business.
Douglas Stahl. Mr. Stahl is an attorney specializing in securities and corporate
law. Since 1989, he has been the Managing Partner of Stahl & Zelmanovitz, a New
York City law firm he co-founded. Mr. Stahl began his career as a law clerk with
the New York Court of Appeals, followed by a total ot twelve years with three
major law firms, as an associate in the first and as a partner in two of those
firms. He received a B.A. Degree from the University of Pennsylvania and a J. D.
Degree from Brooklyn Law School, where he served as Editor-in-Chief of the
Brooklyn Law Review. He was elected to the Company's Board of Directors on April
13, 1999.
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 27, 1998 for John P. Yeros, the Chief Executive
Officer of the Company and Barry J. McDonald, the former 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 1998.
<TABLE>
<CAPTION>
Long-Term
Compensation
Annual Compensation Awards
Securities Underlying
Name and Principal Options/Warrants
Position Fiscal Year Salary Bonus Other (Shares)
- ------------------ ----------- -------- --------- --------- --------------
<S> <C> <C> <C> <C> <C>
John P. Yeros, 1998 180,442 -0- (1) 500,000(2)
Chief Executive 1997 $142,272 $15,000 (1) 523,455(3)
Officer and 1996 $154,000 -0- (1) 166,187(4)
Chairman of the
Board
Barry J. McDonald 1998 $ 94,818 $10,000 (1) 110,000(2)
Chief Operating 1997 $100,000 $10,000 $11,920 350,000(3)
Officer(5)
- ------------
</TABLE>
(1) Other annual compensation is made up of automobile allowances, and
disability and health insurance premiums. If such amounts are below 10%
of the officer's annual salary plus bonus, they are not required to be
reported.
(2) In April 1998, Mr. Yeros was granted options covering 500,000 shares and
Mr. McDonald was granted options covering 110,000 shares, both at an
exercise price of $.50 per share.
(3) In August 1997, 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.
(4) These 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, replaced previously granted options to
purchase 36,363 and 79,824 share of Common Stock, granted at $2.75 and $
2.50 per share, respectively.
(5) Mr. McDonald terminated his employment with the Company in November 1998.
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 1998:
<TABLE>
<CAPTION>
Percent of Total
Options/Warrants
Granted to Exercise
Options/Warrants Employees in or Base Expiration
Name Granted (Shares) 1998 (1) Price ($/Share) Date
- ---------- ---------------- ------------ --------------- ----------------
<S> <C> <C> <C> <C>
John P. Yeros 500,000(2) 50% $0.50 April 15, 2008
Barry J. McDonald 110,000(2) 11% $0.50 April 15, 2008
- --------------
</TABLE>
(1) The Company granted options to acquire a total of 1,000,000 shares of its
Common Stock to employees during 1998.
(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 27, 1998:
<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 1,759,768 0 $0 -
Barry J. McDonald 460,000 0 $0 -
- -------------
</TABLE>
(1) The fair market value of the Common Stock at December 27, 1998 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.
1997 Repricing of Options. In August 1997, certain options and warrants held by
employees and directors of the Company, including options and warrants covering
1,009,768 shares held by Mr. Yeros, options covering 100,000 shares held by Mr.
McDonald, options covering 113,250 shares held by Mr. Oberle and options
covering 110,000 shares held by Mr. Powell 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. This re-pricing, authorized by the Board of Directors, was
determined to be in the best interest of the Company because the precipitous
drop in the price of the Company's common stock that had occurred during the
prior eighteen months had negated the incentive value of the Company's stock
options.
Employment Agreements. Mr. Yeros entered into an Employment Agreement with the
Company effective October 15, 1993, which was amended and extended effective
January 1, 1997 and amended again effective January 1, 1999. 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 term. The Employment Agreement provides for termination by the
employee with or without cause or by the Company with cause. The 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. The Employment Agreement contains 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 Agreement
contains 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 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.
Effective January 1, 1999, the Board of Directors amended Mr. Yeros' Employment
Agreement to provide that upon the accomplishment of the following goals: (1)
the sale of all the business operations of the Company other than the operations
of its wholly-owned subsidiary, Cymedix Lynx Corporation; (2) the election by
the Board of Directors of the Company of a successor President and Chief
Executive Officer who has experience in successfully operating a software
company or marketing medical software products; (3) obtaining financing to
provide working capital to the Company and to fund the development, marketing,
sales and servicing of Cymedix computer software, in an amount of at least
$1,000,000; and (4) adding at least three additional members to the Board of
Directors of the Company, who have experience and expertise in one or more
disciplines that are important to the success of a company operating in the
computer software business, the Employment Agreement between Mr. Yeros and the
Company shall be terminated, Mr. Yeros shall become a consultant to the Company
with a compensation of $100,000 annually for a period of three years and the
Company shall issue to Mr. Yeros shares of its Common Stock equal in number to
the number of shares of its Common Stock currently covered by options and
warrants to purchase shares of Common Stock currently held by Mr. Yeros, and
such options and warrants held by Mr. Yeros shall be cancelled and terminated.
Mr. McDonald entered into an Employment Agreement with the Company, effective
February 1, 1997, that contained similar substantive provisions, but provided
for a two-year term to February 1, 1999. Mr. McDonald's Employment Agreement
provided that he would receive a minimum annual salary of $110,000 for 1997. Mr.
McDonald terminated his employment with the Company in November 1998.
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
1998, 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. 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
16, 1999, options for 35,000 shares of Common Stock were outstanding pursuant to
the Incentive Plan, all at the exercise price of $.25 per share.
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 16, 1999, options for 332,375
shares of Common Stock were outstanding under the Omnibus Plan at exercise
prices ranging from $.25 to $2.50 per share.
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 16, 1999,
options for 2,431,690 shares of Common Stock were outstanding under the 1996
Plan at exercise prices of between $.25 and $1.88 per share.
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. All the
warrants are vested and exercisable. These warrants expire on November 23, 2001,
if not exercised. The Compensation Committee of the Board of Directors approved
the granting of these warrants.
The Company has issued non-plan options to employees and consultants from time
to time. As of April 16, 1999, there were options for 1,673,050 shares of Common
Stock outstanding, at exercise prices of $.0163 to $1.50 per share.
SECURITY OWNERSHEP OF CERTAIN BENEFICLAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership of Common Stock as of April 16, 1999 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 named 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.
Name and Address Number of Shares Percentage of Class
---------------- ---------------- -------------------
John P. Yeros 1,889,768(1) 8.0%
7100 East Belleview
Ave, Suite 301,
Englewood, Colorado
80111
Barbara Asbell 1,699,150(1) 7.8%
One Boardwalk, Suite
200,
Thousand Oaks, CA 91360
Joel C. Newman 1,042,221(1) 4.8%
245 East 58th Street
New York, New
York 10021
Brian McLean 271,914 1.2%
660 Madison Avenue
New York, New York
10021
John R. Prufeta 185,500(2) 0.9%
305 Madison Avenue
New York, New York
10165
Thomas J. Oberle 313,250(3) 1.4%
7100 East Belleview
Ave, Suite 301,
Englewood, Colorado
80111.
Charles Powell 310,000(3) 1.4%
7100 East Belleview
Ave, Suite 301,
Englewood, Colorado
80111.
Douglas Stahl 184,575 0.9%
430 Park Avenue
New York, New York
10022
All directors and executive
officers as a group
(8 persons) 4,567,228 18.6%
- -------------------
(1) For Ms. Asbell this number includes 133,333 shares subject to currently
exercisable options, for Mr. Yeros this number includes 1,759,768 shares
subject to currently exercisable warrants and options, and for Mr. Newman
this number includes 125,000 shares subject to a currently exercisable
warrant in the name of a company controlled by him.
(2) Mr.Prufeta also holds 100 shares of the Company's 1999 Series A Convertible
Preferred Stock (33.3% of the outstanding shares of that class), which are
not currently exercisable, but which may be converted into 400,000 shares
of the Company's Common Stock after October 1, 1999.
(3) Represents shares subject to currently exercisable options.
CERTAIN BUSINESS RELATIONSHIPS
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.
In connection with the acquisition of certain health services assets in 1996,
Mr. John Yeros pledged 100,000 of his personal shares as collateral to secure
certain obligations to the seller. In January 1997, the seller exercised its
rights to take the security pledged by Mr Yeros. The Board of Directors of the
Company approved the issuance to Mr. Yeros of 100,000 shares of common stock and
options to purchase 250,000 shares of common stock to compensate him for the
loss of his personal shares.
During 1998, in connection with its acquisition of the Cymedix Corporation, the
Company assumed an obligation to pay Mr. Stahl's firm $82,127 in fees and
reimbursements owed to it by Cymedix Corporation. During 1998, the Company paid
$30,000 of those fees to Mr. Stahl's firm and incurred $2,978 for additional
legal services. Mr. Stahl became a director of the Company in April 1999.
Prior to being invited to become a Director of the Company, companies affiliated
with each of Mr. Newman and Mr. Prufeta, entered into agreements with the
Company to provide their respective services to the Company. An affiliate of Mr.
Newman is providing the Company with financial consulting services, and an
affiliate of Mr. Prufeta is providing executive search services and sales and
marketing services to the Company. In connection with the agreement with the
affiliate of Mr. Newman, the Company issued a 5-year warrant that grants to such
company the right to acquire up to 125,000 shares of the Company's Common Stock
at an exercise price of $0.21 per share.
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 required by Securities
and Exchange Commission regulations to furnish the Company with copies of all
Section 16(a) reports they file. Based soley upon such reports, the Company
believes that none of such persons failed to comply with the requirements of
Section 16(a) during 1998.
ARTICLES OF AMENDMENT TO ARTICLES OF INCORPORATION
The Board of Directors has determined that it is in the best interest of the
Company to amend the Company's Articles of incorporation to increase the number
of authorized shares of the Company's Common Stock from 25,000,000 to
50,000,000. The text of the proposed Articles of Amendment is attached hereto as
Ehibit A. As of April 16, there are 21,786,438 shares of the Company's Common
Stock outstanding, leaving 3,213,562 shares of Common Stock authorized but
unissued. However, as of April 16, 1999, the Company had entered into
commitments to issue (i) 4,472,115 shares of its Common Stock upon the exercise
of outstanding options, (ii) 3,888,954 shares of its Common Stock upon the
exercise of outstanding warrants, and (iii) 3,201,800 shares of its Common Stock
upon the conversion of outstanding Preferred Stock of the Company. These
commitments, in the aggregate, obligate the Company, on a contingent basis, to
issue up to 11,562,869 shares of the Company's Common Stock, while it has only
3,213,562 shares of authorized and unissued Common Stock out of which it can
satisfy such obligation.
In addition to satisfying the Company's current commitments as described above,
the Company will be required to raise additional capital to pay off its current
and long-term liabilities, to finance its operations and to finance the
development of its subsidiary's Cymedix software products. The purpose of the
proposed Amendment includes providing the Company with greater flexibility in
financing such cash requirements. Currently, the Company is restricted in its
financing options due to the limited amount of authorized but unissued shares of
Common Stock provided for in its Articles of Incorporation. The Board of
Directors has determined that the Company's Articles of Incorporation must
authorize additional shares of Common Stock that may then be issued as approved
by the Company's Board of Directors.
The Company's shareholders will have no appraisal rights under Colorado law with
respect to the Amendment or any equity financing that the Company may undertake
after its adoption. In addition, shareholders will not have any preemptive
rights to participate in any future issuance of Common Stock. The issuance of
additional shares could also have the effect of diluting the earnings per share
and book value of existing shares of Common Stock. Although the authorization of
the additional shares is not intended as an anti-takeover device, the additional
shares could be used to dilute the stock ownership of persons seeking to gain
control of the Company, which could preclude existing shareholders from taking
advantage of such a situation.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE 'FOR' THE ARTICLES OF AMENDMENT TO THE
ARTICLES OF INCORPORATION. SUCH AMENDMENT SHALL BE APPROVED 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 1999 fiscal year 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 they 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
1999 FISCAL YEAR. 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 27, 1998, 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., 7100 East Belleview
Ave., Suite 301, Englewood, CO 80111
By Order of the Board of Directors
DATED: April 26, 1999
ARTICLES OF AMENDMENT
Exhibit A
TO
ARTICLES OF INCORPORATION
OF
MEDIX RESOURCES, INC.
Pursuant to the provisions of the Colorado Business Corporation Act, as amended
(the "Act"), Medix Resources, Inc., a corporation organized under the laws of
the State of Colorado, by its Chief Executive Officer and Secretary, does hereby
certify as follows:
1. The name of the Corporation is Medix Resources, Inc.
2. The Board of Directors of said Corporation has consented to, authorized by
unanimous written consent and passed resolutions declaring that the
amendment to the Articles of Incorporation contained herein is advisable
and decided to present such amendment to the shareholders of the
Corporation at the Annual Meeting of shareholders.
3. Upon notice given to each shareholder of record entitled to vote on such
amendment to the Articles of Incorporation in accordance with the
requirements of the Act, the Annual Meeting of the shareholders of the
Corporation was held on June 11, 1999, at which meeting holders
representing quorum power were present in person or represented by proxy,
and the number of votes cast for the amendment by each voting group
entitled to vote separately on the amendment was sufficient for approval by
the voting group.
4. The amendment approved was as follows:
Section I of Article IV of the Corporation's Articles of Incorporation is
amended in its entirety to read as follows:
ARTICLE IV
CAPITAL STOCK
Section 1. Classes and Shares Authorized. The total number of shares of Common
Stock that the Corporation shall have authority to issue is Fifty Million
(50,000,000) shares of Common Stock, $0.001 par value per share. The total
number of shares of Preferred Stock that the Corporation shall have authority to
issue is Two Million Five Hundred Thousand (2,500,000) shares of Preferred
Stock, $1.00 par value per share.
IN WITNESS WHEREOF, Medix Resources, Inc. has caused these Articles of Amendment
to Articles of Incorporation to be signed by its Chief Executive Officer and
Secretary, effective as of the date of filing of these Articles of Amendment to
Articles of Incorporation with the Secretary of State of the State of Colorado.
MEDIX RESOURCES, INC.
By: _____________________
John P. Yeros
Its: Chief Executive Officer and Secretary
<PAGE>
[Form of Proxy Card]
MEDIX RESOURCES, INC.
7100 East Belleview Ave., Suite 301
Englewood, Colorado 80111
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
June 11,1999
The undersigned hereby appoints each of John P. Yeros and David Kinsella,
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 1999
Annual Meeting of Shareholders to be held on June 11, 1999 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: Class 1(3 years) - John P. Yeros and Joel C Newman
Class 2(2 years) - Thomas J. Oberle and John R. Prufeta
Class 3(1 year) - Brian McLean and Douglas Stahl
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 amend the Articles of
Incorporation to increase the authorized number of shares of common stock of
the Company from 25,000,000 to 50,000,000:
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. Ratify the selection by the Board of Directors of Ehrhardt Keefe Steiner &
Hottman PC as independent public accountants, to audit the financial
statements of the Company for the 1999 fiscal year:
FOR [ ] AGAINST [ ] ABSTAIN [ ]
Please sign exactly as name appears at left:
Signature:__________________________
Signature (if held
jointly):___________________________
Date: ______________________________
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.
