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 Sec. 240.14a-11(c) or Sec. 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
(303) 741-2045
----------------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
----------------------------------------
TO BE HELD ON JULY 26, 2000
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Medix
Resources, Inc., a Colorado corporation (the "Company"), will be held at 180
Tices Lane, East Brunswick, New Jersey, on Wednesday, July 26, 2000 at 9:30
a.m., local time, for the following purposes:
1. To elect five (5) members to the Company's six-person Board of
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 ratify and approve the Board of Directors' adoption of the
Company's 1999 Stock Option Plan, authorizing the grant of
options covering up to 10 million shares of the Company's
common stock; and
3. 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 June 2, 2000, as
the record date (the "Record Date") for determining the Shareholders entitled to
receive notice of, and to vote at, the Annual Meeting. A complete list of
shareholders entitled to vote at the Annual Meeting will be available, upon
written demand, for inspection during normal business hours by any shareholder
of the Company prior to the Annual Meeting, for a proper purpose, at the
Company's offices located at the address set forth above. Only shareholders of
record on the record date are entitled to notice of, and to vote at, the Annual
Meeting and any and all adjournments or postponements thereof.
A copy of the Company's Annual Report to Shareholders for the fiscal year
ended December 31, 1999, a Proxy Statement and a proxy card accompany this
notice. These materials will be sent to shareholders on or about June 16, 2000.
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 CARD AS PROMPTLY AS
POSSIBLE IN THE POSTAGE-PREPAID ENVELOPE ENCLOSED FOR THAT PURPOSE. ANY
SHAREHOLDER ATTENDING THE ANNUAL MEETING MAY VOTE IN PERSON EVEN IF SUCH
SHAREHOLDER HAS PREVIOUSLY RETURNED A PROXY CARD.
By Order of the Board of Directors
Patricia A. Minicucci
Corporation Secretary
Englewood, Colorado
June 16, 2000
<PAGE>
MEDIX RESOURCES, INC.
7100 E. Belleview Ave., Suite 301
Englewood, Colorado 80111
(303) 741-2045
---------------------------------
PROXY STATEMENT
---------------------------------
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JULY 26, 2000
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 July 26, 2000, at 9:30 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 office at 180 Tices Lane, East Brunswick, New
Jersey. The telephone number of that office is (732) 937-5050. These proxy
solicitation materials were mailed on or about June 16, 2000 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 June 2, 2000 (the
"Record Date") are entitled to vote at the Annual Meeting. On the Record Date,
43,584,446 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 Card 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 ratification and approval of the Company's 1999 Stock Option
Plan, authorizing the grant of options covering up 10 million shares of the
Company's common stock, will be approved by the shareholders if the proposal
receives a majority of the total votes cast in person or by proxy, assuming a
quorum is present. Where brokers have not received any instructions from their
clients on how to vote on a particular proposal, brokers are permitted to vote
on routine proposals but not on non-routine matters. The absence of votes on
non-routine matters are "broker non-votes." 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. In voting on the
Company's 1999 Stock Option Plan, abstentions will have the effect of "no"
votes, and broker non-votes will not be counted as votes cast.
<PAGE>
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. The Company may retain the services of a professional proxy
solicitation firm, in which case the Company will pay such firm its standard
fees for such services and reimburse such firm for its out-of-pocket expenses.
Matters to Be Brought Before the Annual Meeting
The matters to be brought before the Annual Meeting include: (1) the
election of five (5) members of the Company's Board of Directors; (2) the
ratification and approval of the Board of Directors' adoption of the Company's
1999 Stock Option Plan, authorizing the grant of options covering up 10 million
shares of the Company's common stock; and (3) 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 2001 Annual Meeting of Shareholders must deliver such proposals to the
Company no later than January 31, 2001 in order to be included in the Proxy
Statement and form of Proxy relating to the 2001 Annual Meeting of Shareholders.
ELECTION OF DIRECTORS
Nominees
The Company's Board of Directors currently consists of six directors.
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
five of the Company's directors have been elected by the Board of Directors to
fill vacancies on the Board of Directors since the last Annual Meeting, five
directors will be elected at the upcoming Annual Meeting. The Board of Directors
has nominated the current directors to fill these five Board positions. 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 five nominees, as listed below.
Because of the Company's staggered Board of Directors, two directors will be
elected for terms of three and two years, respectively, and one director will be
elected to a term of one year. Mr. John R. Prufeta holds the other director
position, the term for which ends in 2001. Therefore, Messrs. John T. Lane and
Dr. David Skinner will be elected for three-year terms, Messrs. David R. Pfeil
and Samuel H. Havens will be elected for two-year terms, and Ms. Joan E. Herman
will be elected for a one-year 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. 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 or her respective term as stated above, and
until such person's successor has been elected and qualified.
The nominees are as follows:
<TABLE>
<CAPTION>
Name Position With the Company Age
---- ------------------------- ---
<S> <C> <C>
Samuel H. Havens(2)(3)(4) Director 56
Joan E. Herman(2)(4) Director 47
John T. Lane(1)(3)(4) Director; Chairman of the Board 57
David R Pfeil Director; President and COO of Cymedix Lynx Corporation 41
Dr. David B. Skinner(1)(2) Director 64
</TABLE>
--------------------
(1) Member of the Executive Committee
(2) Member of the Audit Committee
(3) Member of the Nomination Committee
(4) Member of the Compensation Committee
2
<PAGE>
Biographical Information.
Samuel H. Havens. Prior to his retirement in 1996, Mr. Havens served as
President of Prudential Healthcare for five years. He had begun his career with
The Prudential Insurance Company as a group sales representative in 1965, and
served in various posts in Prudential healthcare operations over three decades.
Since retiring, Mr. Havens has served on the Board and as a consultant to
various healthcare organizations. He is a member of the Board of Advisors of
Temple Law School and the Editorial Board of Managed Care Quarterly. Havens
completed the Executive Program in Business Administration at Columbia
University. He holds a JD degree from Temple Law School, a CLU from the American
College of Life Underwriters, and a BA degree from Hamilton College.
Joan E. Herman.. Ms Herman is the Group President of WellPoint's Senior,
Specialty, and State Sponsored Programs division and is responsible for the
Company's Dental, Life & AD&D, Pharmacy, Behavioral Health, Workers'
Compensation Managed Care Services, Senior Services, and Disability businesses.
She is also responsible for WellPoint's State Sponsored Programs, which include
MediCal and Healthy Families. In 1999, a Wellpoint affiliate entered into an
agreement with the Company to implement a pilot program for the introduction of
Cymedix(R) software to healthcare providers identified by such affiliate. Ms.
Herman serves on the Company's Board of Directors pursuant to the terms of that
agreement. Prior to joining WellPoint in 1998, Ms. Herman was the senior vice
president, Strategic Development and senior vice president, Group Insurance for
Phoenix Home Life Mutual Insurance Company. Ms. Herman has served as chairman of
the board of Leadership Greater Hartford and been a member of the board of
directors of the American Academy of Actuaries, the American Leadership Forum,
the Hartford Ballet, the Greater Hartford Arts Council, and the Children's Fund
of Connecticut. She is a member of the American Academy of Actuaries Health
Practice Council and a Fellow of the Society of Actuaries. Ms. Herman holds an
MA in Mathematics from Yale University, an MBA from Western New England College,
and an A.B. in mathematics from Barnard College.
John T. Lane. Prior to his retirement from J.P. Morgan & Company in 1994,
Mr. Lane was head of that firm's U.S. Private Clients Group. He also served as
Chairman of J.P. Morgan, Florida; a Director of Morgan Shareholder Services,
J.P. Morgan of California, and Morgan Futures; and a member of the firm's Credit
Policy committee. Earlier, he held a number of positions in the J. P. Morgan
organization, which he joined in 1968. Since retiring from J.P. Morgan, Lane has
served as a consultant to various organizations. Mr. Lane currently serves or
the Boards of Acme Metals Incorporated and Biospecifics Technologies Corp.,
whose common shares are publicly traded. Mr. Lane holds an MBA degree from the
University of Michigan, and a BA degree from Dartmouth College.
David R. Pfeil In addition to his current duties as President and COO of
our Cymedix, subsidiary, Mr Pfeil has acted as Chief Technology Officer for
Medix Resources, Inc. since April 1999. He has 20 years of senior management
experience in healthcare automation and information systems. In 1981, he founded
Dezine Healthcare Solutions (Dezine), a software company with separate divisions
for healthcare and engineering design. Mr. Pfeil successfully completed the sale
of Dezine to Blue Cross Blue Shield of South Carolina in 1997. In 1997, he
organized Arrow Professional Enterprises (Arrow), a health care automation
consulting company, and Automated Design Concepts, Inc. (ADC), an internet based
health care integration software company that was sold to us in 2000. Arrow
provides health care professionals with technical expertise in evaluating and
implementing information systems and strategies. He worked for Arrow and ADC
until he joined us as an employee in early 2000. Mr. Pfeil holds a BS degree in
Mechanical Engineering from Lehigh University, and a MS in Mechanical
Engineering from the University of Minnesota.
Dr. David B. Skinner. Dr. Skinner is President Emeritus of the
NewYork-Presbyterian Hospital and the NewYork-Presbyterian Healthcare System. He
was Vice Chairman/President and CEO of the Society of the New York Hospital and
its Healthcare System and subsequently of the merged institution for 13 years.
He is also a professor of cardiothoracic surgery and surgery at the Weill
Medical College of Cornell University, professor of surgery at Columbia
University College of Physicians and Surgeons, and an attending surgeon at
NewYork Presbyterian Hospital. He was professor of surgery at Johns Hopkins
University School of Medicine from 1968 to 1972, and professor and chairman of
surgery at the University of Chicago, Pritzker School of Medicine from 1973 to
1987. Dr. Skinner has been awarded numerous honorary degrees, faculty
appointments, corporate directorships, and domestic and international honors,
awards, and prizes. Dr. Skinner holds a BA degree, with high distinction, from
the University of Rochester and an MD degree, cum laude, from Yale University.
3
<PAGE>
Board Meetings in 1999
The Board of Directors of the Company held a total of six meetings during
the year ended December 31, 1999, and signed three Unanimous Written Consents in
lieu of a meeting. During 1999, all members of the Company's Board of Directors
attended over 75% of the meetings of the Board of Directors that occurred while
they were directors, except Charles Powell, a former director, who missed both
meetings while he was a director, and Dr. David B. Skinner, who missed the only
meeting held during 1999 while he was a director. The committees of the Board of
Directors identified above were not activated until the current year. The
Nominating Committee will consider Board nominee suggestions from our
shareholders. Any such suggestions in connection with the 2001 Annual Meeting
should be made to the Committee in writing on or before January 31, 2001.
Directors Compensation
In the last quarter of 1999, the Board of Directors adopted the following
compensation schedule for non-employee directors, $1,000 for attending each
regular quarterly Board meeting, and $250 for attending each special Board. The
Board of Directors has also authorized payment of reasonable travel or other
out-of-pocket expenses incurred by directors for attending Board or committee
meetings. During 1999, former directors Mr. Charles Powell, Dr. Brian McLean and
Mr. Thomas Oberle were paid $500, $250 and $750, respectively, for their
services as directors. During 1999, current directors Mr. Samuel Havens, Dr.
David Skinner and Mr. John Lane were each paid $250 for their services to the
Company as directors. From time to time, the Board of Directors grant
non-employee directors options to acquire shares of Common Stock as compensation
for their services to the Company as directors. During 1999, former directors
Mr. Oberle, Mr. Joel Newman, Mr. Douglas Stahl and Dr. McLean each received
options covering 250,000 shares of Common Stock, and Messrs Havens, Skinner and
Lane each received options covering 200,000 shares of Common Stock. During 1999,
the Company paid Mr. Havens $6,000 in fees for consulting services.
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.
EXECUTIVE OFFICERS
The following table sets forth the (i) the names of the current
executive officers of the Company, (ii) their ages, and (iii) the capacities in
which they serve the Company. All of the Company's executive officers devote
full-time to the Company's business and affairs.
<TABLE>
<CAPTION>
Name Age Position(s) With the Company
---- --- ----------------------------
<S> <C> <C>
John R. Prufeta 39 President and Chief Executive Officer
David R Pfeil 41 President and COO of Cymedix Lynx Corporation
Patricia A. Minicucci 50 Executive Vice President, Operations
Michael W. Knepper 36 Senior Vice President, Mergers and Acquisitions
Brian R. Ellacott 43 Senior Vice President, Business Development
</TABLE>
Executive Officers Biographical Information
John R. Prufeta. Mr. Prufeta joined the Company as a full time employee and
as its President and Chief Executive Officer on March 1, 2000. Mr. Prufeta also
is the Chairman of the Board of the Company's Cymedix Lynx subsidiary. He had
been appointed to the position of Chief Executive Officer while a consultant to
the Company in October 1999. Prior to that he was the Managing General Partner
of The Creative Group, Creative Health Concepts, and TCG Development, and the
President and Chief Executive Officer of Creative Management Strategies, Inc.
for over 11 years. Those affiliated companies cover a wide spectrum of services
within the healthcare industry. He was elected to the Company's Board of
Directors in April 1999. A 1983 graduate of St. John's University with a B.S. in
management, Mr. Prufeta graduated from the Executive Program, OPM at Harvard
University, Graduate School of Business.
4
<PAGE>
David R. Pfeil. In addition to his current duties as President and COO of
our Cymedix(R) subsidiary, Mr Pfeil has acted as Chief Technology Officer for
Medix Resources, Inc. since April 1999. He has 20 years of senior management
experience in healthcare automation and information systems. In 1981, he founded
Dezine Healthcare Solutions (Dezine), a software company with separate divisions
for healthcare and engineering design. Mr. Pfeil successfully completed the sale
of Dezine to Blue Cross Blue Shield of South Carolina in 1997. In 1997, he
organized Arrow Professional Enterprises (Arrow), a health care automation
consulting company, and Automated Design Concepts, Inc. (ADC), an internet based
health care integration software company that was sold to us in 2000. Arrow
provides health care professionals with technical expertise in evaluating and
implementing information systems and strategies. He worked for Arrow and ADC
until he joined us as an employee in early 2000. Mr. Pfeil holds a BS degree in
Mechanical Engineering from Lehigh University, and a MS in Mechanical
Engineering from the University of Minnesota.
Patricia A. Minicucci In March 2000, Ms. Minicucci joined the Company as
Executive Vice President, Operations. Prior to joining Medix's staff, Ms.
Minicucci served as executive vice president and a principal of Creative Health
Concepts. In 1995, she founded and was chief executive officer of Practice
Paradigms, an organization serving primary care physicians. Prior to founding
Practice Paradigms, Minicucci was senior vice president-managed care with Empire
Blue Cross Blue Shield and, before that, president-employee benefits division
with Washington National Corporation. Ms. Minicucci began her career in
healthcare at CIGNA Corporation where she held numerous positions, including
president-South Central Division, CIGNA Healthplan Inc.; vice president-human
resources division, Employee Benefits Group; vice president-human resources
department, Group Insurance Division; and regional vice president-field claim
operations, Group Insurance Division. She holds a B.A. in History from Russell
Sage College.
Michael W. Knepper. In March 2000, Mr. Knepper joined the Company as Senior
Vice President, Mergers and Acquisitions. From 1997 to 1999, Mr. Knepper served
as vice president of health technology research for Punk, Ziegel & Co. Mr.
Knepper was responsible for re-building the firm's healthcare technology
investment franchise. Prior to joining Punk, Ziegel in 1997, he was a research
analyst at Volpe Brown Whelan & Co. in San Francisco. Earlier, Mr. Knepper held
positions as senior software engineer at TRW; product support engineer at Verdix
Corporation; and software engineer at Honeywell Federal Systems. He holds an MBA
in Finance from Columbia University and an AB in Computer Science from Brown
University.
Brian R. Ellacott In March 2000, Mr. Ellacott joined the Company as Senior
Vice President, Business Development. Mr. Ellacott served as president of
Cosmetic Surgery Consultants from November 1998 until March 2000, when he joined
Medix Resources, Inc. From 1996 to 1998 he was executive vice president of
Alignis Inc., an alternative healthcare PPO. Before that, he was president-Bibb
Hospitality (Atlanta) for The Bibb Company. Mr. Ellacott began his career in
healthcare at Baxter International/American Hospital Supply where he held
numerous positions, including director of national accounts (Chicago); director
of marketing (Australia); director of marketing (Canada); systems manager
(Canada); regional manager (British Columbia); and product manager (hospital
products). He holds a B.A. in Business Administration, with Honors, from Wilfrid
Laurier University (Waterloo, Canada).
5
<PAGE>
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 31, 1999, awarded or paid to, or earned by, John P.
Yeros, John R. Prufeta, David R. Pfeil and David Kinsella (the "Named
Officers"). No officer or employee of the Company other than these four earned
an annual salary and bonus exceeding $100,000 in 1999.
<TABLE>
<CAPTION>
Long-Term
Compensation
-----------------
Securities
Annual Compensation Underlying
-------------------------------------- Options/Warrants
Name and Principal Position Fiscal Year Salary Bonus Other (Shares)
--------------------------- ----------- ------ ----- ----- -----------------
<S> <C> <C> <C> <C> <C>
John P. Yeros 1999 $199,650 0 (2) 1,250,000
Former President and CEO(1) 1998 $180,442 0 500,000
1997 $142,272 $15,000 1,259,768 (3)
John R. Prufeta 1999 $171,000 (4) 925,000 (4)
President and CEO
David R. Pfeil 1999 $287,000 (5) 800,000
President and COO
of Company Subsidiary
David Kinsella(6) 1999 $88,462 $30,000 450,000
Secretary and Controller 1998 $77,692 0 110,000
1997 $23,000 0 50,000
</TABLE>
------------
(1) Mr. Yeros resigned as Chief Executive Officer on October 14, 1999,
and as President, Chairman of the Board and a Director on March 1,
2000.
(2) Other annual compensation is made up of automobile allowances, and
disability and health insurance premiums, in amounts less than 10% of
the officer's annual salary plus bonus.
(3) In August 1997, options and warrants covering 736,313 shares of
Common Stock granted to Mr. Yeros in prior years, and 273,455 shares
of Common Stock granted to him earlier in 1997, were re-priced to an
exercise price of $0.25 per share, the then market price of a share
of the Company's Common Stock. In addition, Mr. Yeros was granted new
options covering 250,000 shares at an exercise price of $0.25 per
share.
(4) During 1999, Mr. Prufeta served as a consultant to the Company
pursuant to a consulting agreement between the Company and his
employer, Creative Management Strategies, Inc., which company was
paid or accrued the amount shown above and received options to
purchase 25,000 shares of Common Stock, included in the amount shown.
(5) During 1999, we paid two companies affiliated with Mr. Pfeil
approximately $135,000 for Mr. Pfeil's services, approximately
$36,000 for travel related expenses and approximately $113,000 for
software development and web-site hosting and development services
and purchase of computer equipment. As of December 31, 1999 we owe
the two affiliated companies approximately $3,000.
(6) Mr. Kinsella resigned from his positions and employment with the
Company, effective April 7, 2000.
6
<PAGE>
Stock Option Awards. In 1996, we adopted our 1996 Stock Incentive Plan
(the " 1996 Plan"). Such Plan could only grant non-qualified stock options, as
described below. In August 1999, our Board of Directors approved and authorized
our 1999 Stock Option Plan (the "1999 Plan"), which is intended to grant either
non-qualified stock options or incentive stock options, as described below.
However, the 1999 Plan has yet to be approved by our stockholders, which
approval is being sought at Meeting of Shareholders in connection to which this
Proxy Statement has been distributed. The purpose of the either Plan is to
enable our company to provide opportunities for certain officers and key
employees to acquire a proprietary interest in our company, to increase
incentives for such persons to contribute to our performance and further
success, and to attract and retain individuals with exceptional business,
managerial and administrative talents, who will contribute to our progress,
growth and profitability. As of June 2, 2000, we had issued 2,996,234 shares of
our Common Stock upon exercise of options and warrants to current or former
employees and directors, and have 7,044,643 shares currently covered by
outstanding options and warrants held by current or former employees and
directors, with exercise prices ranging form $.19 to $4.97.
Options granted under our 1999 Plan include both incentive stock options
("ISOs"), within the meaning of Section 422 of the Internal Revenue Code of
1986, as amended (the "Code"), and non-qualified stock options ("NQOs"). Under
the terms of the Plan, all officers and employees of our company are eligible
for ISOs. Our company determines in its discretion, which persons will receive
ISOs, the applicable exercise price, vesting provisions and the exercise term
thereof. The terms and conditions of option grants differ from optionee to
optionee and are set forth in the optionees' individual stock option agreement.
Such options generally vest over a period of one or more years and expire after
up to ten years. In order to qualify for certain preferential treatment under
the Code, ISOs must satisfy the statutory requirements thereof. Options that
fail to satisfy those requirements will be deemed NQOs and will not receive
preferential treatment under the Code. Upon exercise, shares will be issued upon
payment of the exercise price in cash, by delivery of shares of Common Stock, by
delivery of options or a combination of any of these methods. In order for
grants under the 1999 Plan to be treated as ISOs, the Plan must be approved by
the shareholders of the Company. Such approval is being sought at the Meeting of
Shareholders in connection with which this Proxy Statement is being distributed.
However, if such approval is not received within 12 months of the Board's
adoption of the Plan, the terms of the Plan provide that all grants under the
1999 Plan that have already been made will become NQOs.
Option information for fiscal 1999 relating to the Named Officers is set
forth below:
Option Grants in Fiscal 1999
<TABLE>
<CAPTION>
Number of Shares
of Common Stock Percentage of Total
Underlying Options Granted to
Options Granted in Employees in
Name 1999 1999 Exercise Price Expiration Date
---- ---- ---- -------------- ---------------
<S> <C> <C> <C> <C>
John P. Yeros 1,250,000 34.4 $.26 8/16/09
John R. Prufeta 25,000(1) 0.7 $.55 4/21/02
500,000 13.7 $.26 8/16/09
400,000 11.0 $.50 10/14/09
David R. Pfeil 100,000 2.7 $.55 4/21/02
500,000 13.7 $.26 8/16/09
200,000 5.5 $.50 10/14/09
David Kinsella 200,000 5.5 $.25 3/19/09
250,000 6.9 $.26 8/16/09
</TABLE>
-----------
(1) These options, covering 25,000 shares of Common Stock, were granted
to a company that is an affiliate of Mr. Prufeta for executive search
services.
7
<PAGE>
Option Exercises and Year-End Values in Fiscal 1999
<TABLE>
<CAPTION>
Number of Shares Value of Unexercised
Underlying Unexercised In-the-Money Options
Options at Year-End at Year-End (1)
Shares Value ---------------------------- ---------------------------
Name Exercised Realized Exercisable Unexercisable Exercisable Unexercisable
---- --------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
John P. Yeros 0 0 2,309,768 700,000 $6,221,362 $1,918,000
John R. Prufeta 0 0 137,500 (2) 787,500 $ 369,500 $2,061,750
David R. Pfeil 0 0 350,000 450,000 $ 930,000 $1,185,000
David Kinsella 0 0 422,500 187,500 $1,133,750 $ 513,750
</TABLE>
--------------
(1) The dollar values are calculated by determining the difference
between $3.00 per share, the fair market value of the Common Stock at
December 31, 1999, and the exercise price of the respective options.
(2) Options covering 25,000 of these shares were granted to a company
that is an affiliate of Mr. Prufeta for executive search services.
The Company has no retirement, pension or profit-sharing program for the
benefit of its directors, executive officers or other employees, although the
Company does maintain a 401(k) Plan for participation by all employees,
including executive officers, for contributions by employees, but with no
matching by the Company. In the future, the Board of Directors may recommend one
or more such programs for adoption by the Company.
Employment Agreements.
During 1999, Mr. Yeros' employment was pursuant to a five-year Employment
Agreement, which would have terminated on December 31, 2001. Such Employment
Agreement provided for Mr. Yeros to receive a minimum annual salary of $165,000
for the fiscal 1997 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.
On March 1, 2000, this employment agreement was terminated by mutual agreement
and Mr. Yeros resigned as President, Chairman of the Board and a Director of the
Company. At the same time, Mr. Yeros and the Company entered into a Consulting
Agreement with a term that ends on December 31, 2001, and retains Mr. Yeros'
services for the Company, on a part-time basis, to undertake special projects
from time to time as directed by the Company's President and CEO. Mr. Yeros will
be compensated at the same levels provided for in the terminated employment
agreement during the term of the Consulting Agreement.
Mr. Prufeta's Employment Agreement, which has an initial term of two
years, ending on January 31, 2002, provides that he will be compensated at the
base salary of $120,000 annually, plus a commission of 2.5% of certain gross
revenue of the Company, subject to certain exclusions. He will hold the
positions of President and Chief Executive Officer and report to the Board of
Directors. Pursuant to his Employment Agreement, Mr. Prufeta has been granted
options to purchase 400,000 shares of Common Stock at $.50 per share, and
600,000 shares of Common Stock at $4.97 per share, which vest upon the
occurrence of certain performance goals. His Employment Agreement provides for
termination at any time by the employee with or without cause or by the Company
with cause. The Employment Agreement is also subject to termination by the
Company without cause after the initial one-year term, subject to the right of
the employee to continue to receive compensation for 6 months. The Employment
Agreement also contains 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. The Employment Agreement contains provisions
providing that, upon the occurrence of a "Triggering Event" (defined to include
a change in ownership of 50% of the outstanding shares of the Company's Common
Stock through a merger or otherwise) during the term of his employment, he will
receive a lump sum payment equal to his then current year's base and bonus pay.
Mr. Pfeil's Employment Agreement, which has an initial term of two
years, ending on January 31, 2002, provides that he will be compensated at the
base salary of $200,000 in 2000, and $220,000 in 2001. His Employment Agreement
is with the Company's wholly-owned subsidiary, Cymedix Lynx Corporation, and he
will hold the positions of President and Chief Operating Officer of the
subsidiary. He will report to the subsidiary's Board of Directors and Chairman
of the Board. Pursuant to his Employment Agreement, Mr. Pfeil has been granted
options to purchase 200,000 shares of the Company's Common Stock at $.50 per
share, which vest upon the occurrence of certain performance goals. His
Employment Agreement provides for termination at any time by the employee with
or without cause or by the Company with cause. The Employment Agreement is also
8
<PAGE>
subject to termination by the Company without cause after the initial one-year
term, subject to the right of the employee to continue to receive compensation
for 6 months. The Employment Agreement also contains 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. The Employment
Agreement contains provisions providing that, upon the occurrence of a
"Triggering Event" (defined to include a change in ownership of 50% of the
outstanding shares of the Company's Common Stock through a merger or otherwise)
during the term of his employment, he will receive a lump sum payment equal to
his then current year's base and bonus pay.
Ms. Minicucci's Employment Agreement, which has an initial term of two
years, ending on March 1, 2002, provides that she will be compensated at the
salary of $200,000 annually. She will hold the position of Executive Vice
President, Operations, and report to the President and CEO. Pursuant to her
Employment Agreement, she has been granted options to purchase 400,000 shares of
Common Stock at $4.97 per share, which vest over the 2-year term of his
Employment Agreement. Her Employment Agreement provides for termination at any
time by the employee with or without cause or by the Company with cause. The
Employment Agreement is also subject to termination by the Company without cause
after the initial one-year term, subject to the right of the employee to
continue to receive compensation for 6 months. The Employment Agreement also
contains 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. The Employment Agreement contains provisions providing that, upon
the occurrence of a "Triggering Event" (defined to include a change in ownership
of 50% of the outstanding shares of the Company's Common Stock through a merger
or otherwise) during the term of her employment, she will receive a lump sum
payment equal to her then current year's base and bonus pay.
Mr. Knepper's Employment Agreement, which has an initial term of two
years, ending on March 7, 2002, provides that he will be compensated at the
salary of $175,000 annually. He will hold the position of Senior Vice President
for Mergers and Acquisitions, and report to the President and CEO. Pursuant to
his Employment Agreement, he has been granted options to purchase 400,000 shares
of Common Stock at $3.97 per share, which vest over one year from the beginning
of his Employment Agreement. His Employment Agreement provides for termination
at any time by the employee with or without cause or by the Company with cause.
The Employment Agreement is also subject to termination by the Company without
cause after the initial one-year term, subject to the right of the employee to
continue to receive compensation for 6 months. The Employment Agreement also
contains 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. The Employment Agreement contains provisions providing that, upon
the occurrence of a "Triggering Event" (defined to include a change in ownership
of 50% of the outstanding shares of the Company's Common Stock through a merger
or otherwise) during the term of his employment, he will receive a lump sum
payment equal to his then current year's base and bonus pay.
Mr. Ellacott's Employment Agreement, which has an initial term of two
years, ending on March 1, 2002, provides that he will be compensated at the
salary of $150,000 annually. He will hold the position of Senior Vice President,
Business Development. Pursuant to his Employment Agreement, he has been granted
options to purchase 150,000 shares of Common Stock at $3.97 per share, which
vest over the 2-year term of his Employment Agreement. His Employment Agreement
provided for termination at any time by the employee with or without cause or by
the Company with cause. The Employment Agreement is also subject to termination
by the Company without cause, subject to the right of the employee to continue
to receive compensation for 6 months. The Employment Agreement also contains 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.
Mr. Kinsella's Employment Agreement, which had an initial term of two
years, ending on September 30, 2001, provided that he be compensated at the
salary of $100,000 annually. He held the position of Chief Accounting Officer,
and reported to the President and CEO. His Employment Agreement provided for
termination at any time by the employee with or without cause or by the Company
with cause. The Employment Agreement was also subject to termination by the
Company without cause after the initial one-year term, subject to the right of
the employee to continue to receive compensation for 3 months. The Employment
Agreement also contained 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. Mr. Kinsella resigned from his positions and
employment with the Company effective April 7, 2000.
9
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership of Common Stock as of June 2, 2000 by (i) each person known by the
Company to own beneficially more than 5 % of the outstanding shares of Common
Stock, (ii) each director, named executive officer and (iii) all executive
officers and directors as a group. On such date, we had 43,584,446 shares of
Common Stock outstanding. 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>
Name and Address Number of Shares Percentage of Class
---------------- ---------------- -------------------
<S> <C> <C>
John P. Yeros 2,912,762(1) 6.4%
9763 S. Tall Grass Circle
Lone Tree, Colorado
John R. Prufeta 1,173,000(2) 2.6%
305 Madison Avenue
New York, New York
David R. Pfeil 410,400(3) 0.9%
72 Brunswick Woods Drive
East Brunswick, New Jersey
John T. Lane 550,000(4) 1.3%
94 Sixth Street
Garden City, New Jersey
Dr. David B. Skinner 200,000(5) 0.5%
525 East 68th Street
New York, New York
Samuel H. Havens 200,000(5) 0.5%
58 Winged Foot Drive
Livingston, New Jersey
Joan E. Herman _ 0%
One Wellpoint Way
Thousand Oaks, California
Patricia A. Minicucci 100,000(5) 0.2%
305 Madison Avenue
New York, New York
Michael W. Knepper 230,000(6) 0.5%
305 Madison Avenue
New York, New York
Brian R. Ellacott 62,500(5) 0.1%
101 Village Parkway
Building One
Marietta, Georgia
All directors and executive officers 2,925,900 6.2%
as a group (9 persons)
</TABLE>
-------------------
(1) Mr. Yeros owns 1,290,620 shares of Common Stock, with the remainder
available upon the conversion or exercise of convertible preferred
stock, warrants and options beneficially owned by him, including 25
shares of the Company's 1999 Series C Convertible Preferred Stock
(1.25% of the outstanding shares of that class).
10
<PAGE>
(2) Mr. Prufeta owns 185,500 shares of Common Stock, with the remainder
available upon the conversion or exercise of convertible preferred
stock, warrants and options beneficially owned by him, including 100
shares of the Company's 1999 Series A Convertible Preferred Stock
(33.33% of the outstanding shares of that class), 25 shares of the
Company's 1999 Series C Convertible Preferred Stock (1.25% of the
outstanding shares of that class), and options covering 25,000 shares
of Common Stock held by an affiliate of Mr. Prufeta.
(3) Mr. Pfeil owns 60,400 shares of Common Stock, with the remainder
available upon the exercise of outstanding stock options.
(4) All of Mr. Lane's beneficial holdings are available upon the
conversion or exercise of convertible preferred stock, warrants and
options held by him, including 50 shares of the Company's 1999 Series
B Convertible Preferred Stock (2.73% of the outstanding shares of
that class), and 25 shares of the Company's 1999 Series C Convertible
Preferred Stock (1.25% of the outstanding shares of that class).
(5) Represents shares of Common Stock available upon the exercise of
outstanding options.
(6) Mr. Knepper owns 30,000 shares of Common Stock, with the remainder
available upon the exercise of options held by him.
CERTAIN BUSINESS RELATIONSHIPS
We have 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 our disinterested directors. This policy provides that no such
transaction by 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 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 or a
committee thereof that approves such a transaction. We have 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.
Prior to being elected to our Board of Directors in 1999, Creative
Management Services, Inc. ("CMS"), a company affiliated with Mr. John Prufeta,
entered into agreements with us to provide executive search services and sales
and marketing services to us. In connection with those agreements, we issued a
3-year option to acquire up to 25,000 shares of our Common Stock at an exercise
price of $0.55 per share. We recorded Black/Scholes expense of approximately
$13,000 related to the issuance of the option. We also paid such company $71,000
during 1999. In addition, for Mr. Prufeta's service to us as Chief Executive
Officer, and the above services provided by the affiliated company we have
accrued $100,000 as of December 31, 1999, and an additional $10,000 in 2000 in
payments to such company, to be paid over 12 months. At the time Mr. Prufeta
became a full-time employee of the Company, such agreements with CMS were
terminated.
Three of our executive officers, including Mr. Prufeta, are operating out
the New York City offices of CMS. We have entered into an agreement with CMS to
reimburse CMS for its rental costs of the space occupied by our employees, the
amount of time certain clerical employees spend on matters for us, and the cost
of utilities including telephone lines and charges that relate to us. CMS has
agreed to provide us with secure storage space and communications facilities in
order to protect the confidentiality of our business records. In addition, CMS
will provide us with employee search services from time to time as appropriate,
at its standard billing rates. CMS is a recognized provider of executive and
employee search services to all areas of the health care industry.
During 1999, we paid two companies affiliated with Mr. David Pfeil,
approximately $135,000 for Mr. Pfeil's services, approximately $36,000 in
reimbursements for his travel and related expenses, and approximately $113,000
for software development and web-site hosting and development services and
purchases of computer equipment. As of December 31, 1999 we owed the two
affiliated companies approximately $3,000.
11
<PAGE>
On March 15, 2000, our subsidiary, Cymedix Lynx Corporation, merged with
Automated Design Concepts, Inc. ("ADC"), which had been wholly-owned by Mr.
Pfeil. Mr. Pfeil received $100,000 in cash and 60,400 shares of our common stock
valued at $300,000, as consideration for such acquisition. In connection with
that acquisition, we leased certain office space used by the acquired business
from Mr. Pfeil and his wife. The lease has a term two-year term ending February
28, 2002 and provides for rental payments at the rate of $1,000 per month. The
operations acquired by the Company from him continue to be operated out of this
office. Prior to the merger, the leased offices were used by ADC and another
company owned by Mr. Pfeil, who moved from a consulting role to positions as
President and Chief Operating Officer of Cymedix Lynx Corporation in connection
with the merger.
During 1999, we entered into an agreement with Wellpoint Pharmacy
Management ("WPM") to implement a pilot program for the introduction of
Cymedix(R) software to healthcare providers identified by WPM. After the
required testing of the software, the agreement provides for a production
program to install the software broadly among WPM managed providers. The
agreement provides that the Company will nominate a representative of WPM to be
elected to the Company's Board of Directors, and granted warrants covering up to
6,000,000 shares of Common Stock, which vest upon the occurrence of certain
performance criteria. The agreement provides for the grant of warrants covering
3,000,000 shares with an exercise price of $0.30 per share, and warrants
covering 3,000,000 shares with an exercise price of $0.50 per share, all
expiring five years from the date of grant. The warrants vest in 1,000,000 share
increments. At June 2, 2000, warrants covering 1,000,000 shares had vested. The
following table reflects the remaining performance criteria outlined in the
agreement.
<TABLE>
<CAPTION>
Shares Vesting Event
--------- -------------
<S> <C>
1,000,000 Completion of certain administrative performance criteria as defined
1,000,000 25,000 total Providers in the Production Programs
1,000,000 50,000 total Providers in the Production Programs
1,000,000 75,000 total Providers in the Production Programs
1,000,000 100,000 total Providers in the Production Programs
</TABLE>
We have entered into a consulting agreement with Mr. Samuel Havens, which
provides that we pay Mr. Havens $5,000 per month for his consulting services in
connection with our marketing efforts.
During 1998, in connection with its acquisition of the predecessor Cymedix
Corporation, the Company assumed an obligation to pay the law firm of Douglas
Stahl, Esq., a former director of the Company, $82,127 in fees and
reimbursements owed to it by Cymedix Corporation. During 1998, the Company paid
$32,978 of those fees and fees for additional legal services to Mr. Stahl's
firm. During 1999, the Company paid Mr. Stahl's firm $66,355.
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
directors and executive officers, and persons who own more than 10% of a
registered class of a company's equity securities, to file with the U. S.
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 solely upon such reports, we believe that
none of such persons failed to comply with the requirements of Section 16(a)
during 1999, except for John Prufeta, who inadvertently omitted to list certain
securities of the Company on his Firm 3. Such omission was later corrected.
RATIFICATION AND APPROVAL OF THE COMPANY'S 1999 STOCK OPTION PLAN
At a Board meeting on August 16, 1999, the Company's Board of Directors
adopted its 1999 Stock Option Plan (the "Plan") to replace earlier stock
incentive plans. The purposes of the Plan are to enable the Company to provide
opportunities for certain employees to acquire a proprietary interest in the
Company, to increase incentives for such persons to contribute to the Company's
performance and further success, and to attract and retain individuals with
exceptional business, managerial and administrative talents, who will contribute
to the progress, growth and profitability of the Company. Employees will
typically receive grants of incentive stock options for tax purposes, as
described below. In addition, grants are made, from time to time, at the
determination of the Compensation Committee or the Board of Directors, under the
Plan to the Company's non-employee directors and consultants in order that the
Company may attract, retain, and provide incentives to non-employee directors
and consultants who will serve and advise the Company regarding the
establishment and satisfaction of its long-term strategic objectives.
12
<PAGE>
Non-employee directors and consultants may only be granted non-qualified stock
options for tax purposes, as described below. The Plan, as adopted, did not
require shareholder approval, except to gain the ability to grant incentive
stock options to employees. Therefore, the Plan provides that if the
shareholders do not approve the adoption of the Plan by the Board of Directors
at the upcoming meeting, the grants that have been previously made will remain
effective, however, they will be treated as non-qualified stock options for tax
purposes, as described below.
Currently, the Plan authorizes reservation of 10,000,000 shares of the
Company's Common Stock for issuance under the Plan. As of June 2, 2000, grants
had been made under the Plan covering 6,705,000 shares of the Company's Common
Stock. As permitted by applicable law, the shareholder vote to approve the Plan
may be obtained up to twelve months after such Board authorization. As of June
2, 2000, the total aggregate market value of the 10,000,000 shares that could be
issued under the Plan was $20,000,000. As of June 2, 2000, the Company had
issued 2,000,000 shares upon exercise of options under the Plan, had options
covering 4,705,000 shares outstanding (of which options covering 2,200,000 had
vested), and had 3,295,000 shares currently reserved for issuance under the
Plan. As of June 2, 2000, outstanding options under the Plan were held by 14
employees or former employees, eight directors or former directors, and one
former consultant of the Company. The exercise price of options granted under
the Plan range from $0.25 to $4.97.
The following table sets forth the Named Officers, current Executive
Officers and directors who have been granted options under the Plan and the
number of shares granted:
Name and Position(1) Shares Covered by Option Grants (2)
-------------------- -----------------------------------
John R. Prufeta 1,525,000 (4)
David R. Pfeil 800,000 (4)
David Kinsella(3) 250,000
John P. Yeros(3) 1,250,000
Current Executive Officers,
as a Group(5 persons) 3,275,000 (4)
Current Non-Employee Directors,
as a Group(4 persons) 600,000
Current Non-Executive Employees,
as a Group(11 persons) 355,000 (4)
--------------
(1) Each person's position with the Company is set forth earlier in this
Proxy Statement.
(2) The exercise price of all of these grants were made at or above the
closing price of the Common Stock in its principal trading market on
the date of the grant.
(3) The person is no longer an employee, officer or director of the
Company.
(4) Not all of these options have vested. See "SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT."
Options granted under the Plan include both incentive stock options
("ISOs"), within the meaning of Section 422 of the Internal Revenue Code of
1986, as amended (the "Code"), and non-qualified stock options ("NQOs"). Under
the terms of the Plan, all officers and employees of the Company are eligible
for ISOs. As of June 2, 2000, there were 42 eligible officers and employees. The
Board of Directors or Compensation Committee determines in its discretion, which
persons will receive ISOs, the applicable exercise price, vesting provisions and
the exercise term thereof. The terms and conditions of each option grant may
differ and are set forth in the optionee's individual stock option agreement.
Such options generally vest over a period of several years and expire after up
to ten years. The Plan provides that in no event shall the exercise price of
either ISOs or NQOs be less than the fair market value per share of the Common
Stock on the date of such grant. In order to qualify for certain preferential
treatment under the Code, ISOs must satisfy the statutory requirements thereof.
Options that fail to satisfy those requirements will be deemed NQOs and will not
receive preferential treatment under the Code. Upon exercise, shares will be
issued upon payment of the exercise price in cash, by delivery of shares of the
Company's Common Stock, by delivery of options granted under the Employee Plan
or a combination of any of these methods.
13
<PAGE>
The Plan is administered by the Compensation Committee of the Board (the
"Committee"). The Committee is made up of two or more directors who are
"Non-Employee Directors" as defined in Rule 16b-3 issued under the Securities
Exchange Act of 1934 (the "Act"). The Committee may correct any defect, supply
any omission, accelerate the vesting schedule of options already granted, or
reconcile any inconsistency in the Plan or any stock option agreement, subject
to the requirements of the Code. The Board, without further action of the
shareholders of the Company, except as may be required by the Code or the
American Stock Exchange listed company regulations, may at any time suspend or
terminate the Plan in whole or in part or amend the Plan in such respects as the
Board may deem appropriate and in the best interests of the Company, subject,
however, to the rights of optionees with outstanding options. Any increase in
the number of shares authorized to be issued under the Plan will be presented to
shareholders for approval under the current requirements of the Code for ISOs.
Optionees are not taxed on the grant (or generally on the exercise) of
ISOs. The difference between the exercise price of an ISO and the fair market
value of a share of Common Stock received upon the exercise of the ISO may be
subject to the federal alternative minimum tax. If an optionee exercises an ISO
and disposes of any shares of Common Stock received by such optionee as a result
of such exercise within two years of the date of grant or within one year after
the issuance of such shares to such optionee, the Company is entitled to a tax
deduction and the optionee will be taxed, as ordinary income, on the lesser of
the gain on sale or the difference between the exercise price and the fair
market value of a share at the time of exercise. The optionee will also have a
capital gain to the extent that the sale price exceeds the fair market value on
the date of exercise. If the shares are not sold by the optionee before the end
of those periods, the optionee will have a capital gain or capital loss upon
sale of the shares to the extent that the sale price differs from the exercise
price. No tax effect will result to the Company by reason of grant or exercise
of ISOs, or upon the disposition of shares after expiration of two years from
the date of grant or one year from the date of exercise.
NQOs are not taxed upon grant. The optionee is taxed, as ordinary income,
on the exercise of such option to the extent that the fair market value on the
date of exercise exceeds the exercise price. The optionee's basis for
determining capital gain or capital loss upon the sale of the shares is the
higher of the fair market value on the date of exercise and the exercise price.
The Company is entitled to a deduction equal to the ordinary income realized by
the optionee upon the exercise of NQOS.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE 'FOR' THE RATIFICATION AND
APPROVAL OF THE COMPANY'S 1999 STOCK OPTION PLAN. THE PLAN SHALL BE APPROVED IF
A MAJORITY OF THE SHARES REPRESENTED AT THE ANNUAL MEETING VOTE IN FAVOR OF
RATIFICATION AND APPROVAL OF THE PLAN.
INDEPENDENT PUBLIC ACCOUNTANTS
The Denver accounting firm of Ehrhardt Keefe Steiner & Hottman PC, audited
the Company's financial statements for the 1999 fiscal year and several prior
fiscal years. That firm currently is serving as the Company's principal
accounting advisers. However, the Company is currently evaluating its accounting
needs and has not chosen an accounting firm to audit its 2000 financial
statements. The Company's Board of Directors will authorize the appointment of
such auditors upon the completion of management's evaluation. A representative
of Ehrhardt Keefe Steiner & Hottman PC is expected to be present at the Annual
Meeting, and will have the opportunity to make a statement if he desires, and is
expected to be available to respond to appropriate questions.
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, 1999, as filed with the Securities and Exchange Commission,
is enclosed herewith in the Company's Annual Report to Shareholders and
additional copies thereof may be obtained by Shareholders, without charge, by
written request to Investor Relations Department, Medix Resources, Inc., 7100
East Belleview Ave., Suite 301, Englewood, CO 80111
By Order of the Board of Directors
June 16, 2000
14
<PAGE>
Proxy Card
MEDIX RESOURCES, INC.
7100 East Belleview Ave., Suite 301
Englewood, Colorado 80111
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
July 26, 2000
The undersigned hereby appoints each of John R. Prufeta and Patricia A.
Minicucci, 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 2000 Annual Meeting of Shareholders to be held on July 26, 2000 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 IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
1. Election of Directors [ ] FOR ALL NOMINEES (except as indicated below)
[ ] WITHHOLD AUTHORITY to vote for all nominees
Nominees: Class 3(3 years) - John T. Lane and Dr. David B. Skinner
Class 2(1 year ) - Joan E. Herman
Class 1(2 years) - David R. Pfeil and Samuel H. Havens
To withhold authority to vote for any individual nominee, write that
individual's name in this space:
--------------------------------------------------------------------------
2. To ratify and approve of the Board of Directors' adoption of the Company's
1999 Stock Option Plan, authorizing the grant of options covering up 10 million
shares of the Company's common stock. [ ]For [ ]Against [ ]Abstain
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER, hereby revoking any proxy or proxies
heretofore given by the undersigned. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED "FOR" ITEMS 1, AND 2. 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. In the event any nominee listed below
is unable or declines to serve as a director at the time of the Annual Meeting,
this proxy will be voted for any nominee who shall be designated by the then
Board of Directors to fill the vacancy.
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.
