SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for use of the Commission only (as permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Under Rule.14a-12
PROXYMED, INC.
(Name of Registrant as Specified in its Charter)
PROXYMED, 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 0-11:1
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 No.:
3) Filing Party:
4) Date Filed:
PROXYMED, INC.
2555 DAVIE ROAD, SUITE 110
FORT LAUDERDALE, FLORIDA 33317
(954) 473-1001
--------------------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
JULY 7, 2000
---------------------------------------------
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of
ProxyMed, Inc., a Florida corporation (the "Company"), will be held on Friday,
July 7, 2000, at 9 o'clock a.m., Eastern Daylight Time, at the Sheraton Fort
Lauderdale Airport, 1825 Griffin Road, Dania, Florida 33004, for the following
purposes, all of which are set forth more completely in the accompanying proxy
statement:
(1) The election of 6 persons to the Board of Directors to serve until the
next annual meeting of the shareholders or until election and
qualification of their respective successors;
(2) To ratify and approve the issuance and sale of the Company's Series B
Convertible Preferred Stock, par value $.01 per share ("Series B
Preferred"), and the related warrants, to approve the issuance of
shares of the Company's common stock, par value $.001 per share
("Common Stock") to be issued upon the conversion of the Series B
Preferred, the exercise of the related warrants and the payment of the
dividends on the Series B Preferred, to approve the issuance of
warrants in connection with the redemption of certain shares of Series
B Preferred, and to approve the issuance of Common Stock upon the
exercise of the warrants issued in connection with the redemption of
certain shares of Series B Preferred;
(3) To ratify and approve the issuance and sale of shares of a new series
of convertible preferred stock, warrants, notes and Common Stock in
connection with an agreement with an investment banking firm and a
proposed financing transaction;
(4) To vote on a proposal to amend the Company's Restated Articles of
Incorporation to increase the number of authorized shares of Common
Stock, par value $.001, from 50,000,000 to 100,000,000;
(5) To ratify and approve the Company's 2000 Stock Option Plan;
(6) To approve the Company's 2000 1/2Stock Option Plan; and
(7) To transact such other business as may properly come before the
meeting.
Pursuant to the Company's Bylaws, the Board of Directors has fixed the
close of business on May 8, 2000, as the record date for the determination of
shareholders entitled to notice of and to vote at the Annual Meeting.
The Annual Meeting may be postponed or adjourned from time to time
without any notice other than by announcement at the meeting of any
postponements or adjournments thereof, and any and all business for which notice
is hereby given may be transacted at any such postponed or adjourned meeting.
A FORM OF PROXY AND THE ANNUAL REPORT OF THE COMPANY FOR THE FISCAL
YEAR ENDED DECEMBER 31, 1999, ARE ENCLOSED. IT IS IMPORTANT THAT PROXIES BE
RETURNED PROMPTLY. THEREFORE, WHETHER OR NOT YOU PLAN TO BE PRESENT IN PERSON AT
THE ANNUAL MEETING, PLEASE SIGN AND DATE THE ENCLOSED PROXY AND RETURN IT IN THE
ENCLOSED ENVELOPE WHICH DOES NOT REQUIRE POSTAGE IF MAILED IN THE UNITED STATES.
BY ORDER OF THE
BOARD OF DIRECTORS
Frank M. Puthoff, Secretary
Fort Lauderdale, Florida
June 12, 2000
2
PROXYMED, INC.
2555 DAVIE ROAD, SUITE 110
FORT LAUDERDALE, FLORIDA 33317
(954) 473-1001
----------------------------
PROXY STATEMENT
----------------------------
The enclosed proxy is solicited by the Board of Directors of ProxyMed,
Inc., a Florida corporation (the "Company"), for use at the Annual Meeting of
Shareholders to be held on Friday, July 7, 2000. The approximate date on which
this statement and the enclosed proxy was sent to shareholders is June 12, 2000.
The form of proxy provides a space for you to withhold your vote for any
proposal. You are urged to indicate your vote on each matter in the space
provided; if no space is marked, it will be voted by the persons therein named
at the meeting (i) for the election of 6 persons to the Board of Directors as
set forth below; (ii) for the ratification and approval of the issuance and sale
of the Series B Preferred and the related warrants, for the approval of the
issuance of Common Stock upon the conversion of the Series B Preferred, the
exercise of the related warrants and the payment of dividends on the Series B
Preferred, for the approval of the issuance of warrants in connection with the
redemption of certain shares of Series B Preferred, and for the approval of the
issuance of Common Stock upon the exercise of the warrants in connection with
the redemption of certain shares of Series B Preferred; (iii) to ratify and
approve the issuance and sale of shares of a new series of convertible preferred
stock, warrants, notes and Common Stock in connection with an agreement with an
investment banking firm and a proposed financing transaction; (iv) to vote on a
proposal to amend the Company's Restated Articles of Incorporation to increase
the number of authorized shares of Common Stock, par value $.001, from
50,000,000 to 100,000,000; (v) for ratification and approval of the Company's
2000 Stock Option Plan; (vi) for approval of the Company's 2000 1/2 Stock Option
Plan; and (vii) in their discretion, upon such other business as may properly
come before the meeting. Whether or not you plan to attend the meeting, please
fill in, sign and return your proxy card to the transfer agent in the enclosed
envelope, which requires no postage if mailed in the United States.
The cost of this proxy solicitation will be borne by the Company. In
addition to solicitation by mail, directors, officers and employees of the
Company may solicit proxies personally and by telephone, all without extra
compensation.
At the record date for the meeting, the close of business on May 8,
2000, the Company had issued 19,734,429 shares of Common Stock. Only
shareholders of record at the close of business on May 8, 2000, are entitled to
notice of and to vote at the Annual Meeting. In the event that there are not
sufficient votes for approval of any of the matters to be voted upon at the
Annual Meeting, the Annual Meeting may be adjourned in order to permit further
solicitation of proxies. The quorum necessary to conduct business at the Annual
Meeting consists of a majority of the outstanding shares of Common Stock. The
approval of the proposals covered by this Proxy Statement will require an
affirmative vote of the holders of a majority of the shares of Common Stock
voting in person or by proxy at the Annual Meeting, with the exception of the
election of directors, each of whom is elected by a plurality.
All shares of Common Stock that are represented at the Annual Meeting by
properly executed proxies received prior to or at the Annual Meeting and not
revoked will be voted at the Annual Meeting in accordance with the instructions
indicated in such proxies. If no instructions are indicated, such proxies will
be voted for approval of each matter voted upon. Abstentions or broker non-votes
are counted as shares present in the determination of whether shares of Common
Stock represented at the meeting constitute a quorum. Abstentions and broker
non-votes are tabulated separately. Since only a plurality is required for the
election of directors, abstentions or broker non-votes will have no effect on
the election of directors (except for purposes of determining whether a quorum
is present at the Annual
3
Meeting). As to other matters to be acted upon at the Annual Meeting,
abstentions are treated as AGAINST votes, whereas broker non-votes are not
counted for the purpose of determining whether the proposal has been approved.
A SHAREHOLDER WHO SUBMITS A PROXY ON THE ACCOMPANYING FORM HAS THE POWER TO
REVOKE IT AT ANY TIME PRIOR TO ITS USE BY DELIVERING A WRITTEN NOTICE TO THE
SECRETARY OF THE COMPANY, BY EXECUTING A LATER-DATED PROXY OR BY ATTENDING THE
MEETING AND VOTING IN PERSON. UNLESS AUTHORITY IS WITHHELD, PROXIES WHICH ARE
PROPERLY EXECUTED WILL BE VOTED FOR THE PURPOSES SET FORTH THEREON.
The following table sets forth to the best knowledge of the Company
information regarding the beneficial ownership of the Company's Common Stock as
of May 8, 2000, with respect to (i) each person known to the Company to be the
beneficial owner of more than 5% of the Company's Common Stock, (ii) each
director, and (iii) each executive officer named in the Executive Compensation
chart, and (iv) all directors and officers of the Company as a group:
NAME AND ADDRESS(1) # OF SHARES (2) % OF CLASS
------------------- --------------- ----------
Harold S. Blue(3) 207,277 1.1%
John Paul Guinan(4) 189,167 *
Bennett Marks (5) 140,751 *
John B. Okkerse, Jr., Ph.D. 0 0
James H. Pickering(4) 83,667 *
Kevin E. Moley(4) 8,334 *
Bertram J. Polan(6) 92,500 *
Peter A. A. Saunders(7) 27,500 *
Eugene R. Terry(4) 80,000 *
Bellingham Industries Inc.(8) 2,228,073 11.2%
Urraca Building
Frederico Boyd Avenu
Panama City, Panama
All directors and officers 1,833,072 8.8%
AS A GROUP (27 PERSONS)(9)
- --------------------------
*Less than 1%
(1) The address for each person, unless otherwise noted, is 2555 Davie
Road, Suite 110, Fort Lauderdale, Florida 33317-7424.
(2) In accordance with Rule 13d-3 of the Exchange Act, shares that are not
outstanding, but that are subject to options, warrants, rights or
conversion privileges exercisable within 60 days from May 8, 2000, have
been deemed to be outstanding for the purpose of computing the
percentage of
4
outstanding shares owned by the individual having such right, but have
not been deemed outstanding for the purpose of computing the percentage
for any other person.
(3) Includes 30,000 shares held of record, 10,610 owned beneficially, and
166,667 shares issuable upon the exercise of currently exercisable
stock options.
(4) Represents shares issuable upon the exercise of currently exercisable
stock options.
(5) Includes 24,500 shares held of record, and 116,251 shares issuable upon
the exercise of currently exercisable stock options.
(6) Includes 12,500 shares held of record, and 80,000 shares issuable upon
the exercise of currently exercisable stock options.
(7) Includes 2,500 shares held of record, plus 25,000 shares issuable upon
exercise of currently exercisable stock options.
(8) Includes 1,978,073 shares held of record, and 250,000 shares issuable
upon the exercise of currently exercisable warrants. Share amounts were
provided by Bellingham.
(9) Includes 802,896 shares held of record, and 1,030,176 shares issuable
upon the exercise of currently exercisable stock options.
ITEM 1. ELECTION OF DIRECTORS
The Company currently has six directors, with each director holding
office until the next annual meeting of shareholders and until his successor is
duly elected and qualified or until the earlier death, resignation, removal or
disqualification of the director. Management of the Company has nominated six
directors currently serving as directors for election to the Board of Directors.
The Company's officers are elected annually by the directors.
The following nominees may be elected by plurality vote. THE BOARD OF
DIRECTORS RECOMMENDS A VOTE IN FAVOR OF EACH NOMINEE FOR ELECTION TO THE BOARD.
It is intended that proxies will be voted for the following nominees, unless
otherwise directed:
NAME AGE POSITION
- ---- --- --------
Harold S. Blue 39 Chairman of the Board
John B. Okkerse, Jr., Ph.D. 50 Chief Executive Officer and Director
Kevin E. Moley (2) 53 Director
Bertram J. Polan (1)(2) 49 Director
Peter A.A. Saunders (1)(2) 58 Director
Eugene R. Terry (1) 62 Director
- -------------------------
(1) Member of the Audit Committee, the Chairman of which is Mr. Saunders.
(2) Member of the Compensation Committee, the Chairman of which is Mr.
Polan.
HAROLD S. BLUE joined ProxyMed in 1993 and currently serves as Chairman
of the Board. He also held the position of Chief Executive Officer until
December 1999. Mr. Blue was also President and Chief Executive Officer of Health
Services, Inc., a physician practice management company, from 1992 to 1996, at
which time it was sold to InPhyNet Medical Management, Inc. In September 1984,
Mr. Blue founded Best Generics, Incorporated, which was later sold to
pharmaceutical manufacturer, IVAX Corporation, where Mr. Blue served as a member
of IVAX's Board of Directors from 1988 to 1990.
5
From 1979 to 1984, Mr. Blue was President and Chief Executive Officer of Budget
Drugs, Inc., a retail discount pharmacy chain located in South Florida.
JOHN B. OKKERSE, JR., PH.D. was appointed Chief Executive Officer and
Director of ProxyMed in December 1999. Prior to joining ProxyMed, Dr. Okkerse
spent 24 years at SmithKline Beecham working in the clinical laboratory
division. From April 1998 to August 1999, Dr. Okkerse was the Chief Operating
Officer for SB Healthcare Services. In this capacity, he oversaw the operations
of SmithKline's clinical laboratory, SmithKline Beecham Clinical Laboratories
(SBCL) and its pharmacy benefit management company, Diversified Pharmaceutical
Services. From October 1996 to April 1998, Dr. Okkerse was President of SBCL,
one of the largest commercial clinical laboratories. Prior to his appointment as
President, Dr. Okkerse was SBCL's Chief Technology Officer from 1994 to 1996 and
was Vice President and General Manager of SBCL's operation in Florida from 1988
to 1994. Dr. Okkerse has a Ph.D. in Cellular and Molecular Biology from the
University of Southern California.
KEVIN E. MOLEY has been a director of ProxyMed since June 1999. From
November 1998 to December 1999, Mr. Moley served as Chairman of the Board of
Patient Care Dynamics LLC, a provider of computer hardware and software to
physicians. From January 1996 to February 1998, he was President and Chief
Executive Officer of Integrated Medical Systems, Inc. where he served as a
director since 1994. From February 1993 to December 1995, Mr. Moley was Senior
Vice President to PCS Health Systems, Inc., a provider of prescription
management services. From 1989 to 1992, Mr. Moley served in the George Bush
administration as an Assistant Secretary of the U.S. Department of Health and
Human Services ("HHS"), and in 1992-1993 as Deputy Secretary of HHS. He also
serves as a director of Innovative Clinical Solutions, Ltd., a site management
organization, Merge Technologies, Inc., a medical imaging software company, Per
Se Technologies, a medical billing company, and Cephalon, Inc., a bio-technology
company.
BERTRAM J. POLAN has been a director of ProxyMed since August 1995. Mr.
Polan is the founder and President of Gemini Bio-Products, Inc., a
California-based supplier of biological products used in medical schools,
private medicine research institutes and the biotechnology industry, which he
founded in 1985. From 1973 to 1985, Mr. Polan was employed in various executive
capacities, most recently as vice president of sales and marketing, with
Northern American Biologicals, Inc., one of the world's largest independent
providers of human plasma products.
PETER A.A. SAUNDERS, F.R.S.A. (Fellow of Royal Society of Arts) has been
a director of ProxyMed since May 1998, and was owner and Chairman, of Pass
Consultants, a marketing and business consulting firm founded by Mr. Saunders in
Surrey, England, since 1988. From 1992 through 1994, he also served as Managing
Director of United Artist Communications (London-U.K.), Ltd. From 1959 to 1984,
Mr. Saunders held various executive and directorship positions with Allders
Department Stores, a subsidiary of United Drapery Department Stores Group, and,
after its acquisition by Hanson Trust, P.L.C. in 1984, continued as a Director
until 1988. Since 1989, Mr. Saunders has been serving as a Director of
Theragenics Corporation, a public company located in Norcross, Georgia,
specializing in the treatment of prostate cancer; as a non-executive Director of
Mayday Healthcare NHS Trust, a 700-bed hospital in Surrey, England from 1992 to
1998; and as a non-executive Director of Eurbell (Sussex) Limited, a United
Kingdom cable television and telecommunications company from 1993 to 1998.
EUGENE R. TERRY has been a director of ProxyMed since August 1995. Mr.
Terry is a pharmacist and the founder and Chairman of Bloodline, Inc., a New
Jersey-based company engaged in the blood services business, which he founded in
1980. In 1971, Mr. Terry founded Home Nutritional Support, Inc. ("HNSI"), one of
the first companies established in the home infusion industry. In 1984, HNSI was
sold to Healthdyne, Inc. HNSI was later sold to the W.R. Grace Group. From 1975
to 1984, Mr. Terry was also founder and Chief Executive Officer of Paramedical
Specialties, Inc., a respiratory and durable
6
medical equipment company, which was also sold to Healthdyne, Inc.
MEETINGS - All directors attended more than 75% of the meetings of the
Board of Directors for the fiscal year ended December 31, 1999. There were a
total of thirteen Board meetings held during such year.
AUDIT COMMITTEE - Our Audit Committee consists of three outside
directors: Peter A. A. Saunders (Chair), Bertram J. Polan and Eugene R. Terry.
The Audit Committee is responsible for meeting with representatives of our
independent accountants and with representatives of senior management to review
the general scope of our annual audit, matters relating to internal audit
control systems and the fee charged by the independent accountants. In addition,
the Audit Committee is responsible for reviewing and monitoring the performance
of non-audit services by our independent accountants and for recommending the
engagement or discharge of our independent accountants.
COMPENSATION COMMITTEE - Our Compensation Committee consists of three
outside directors: Bertram J. Polan (Chair), Kevin E. Moley and Peter A. A.
Saunders. The Compensation Committee is responsible for approving and reporting
to the Board on the annual compensation for all officers, including salary,
stock options and other consideration, if any. The Committee is also responsible
for granting stock awards, stock options and other awards to be made under our
existing plans.
COMPENSATION OF DIRECTORS
Our employee directors are not compensated for their services as
directors. Outside directors receive $2,000 for each regularly scheduled board
meeting personally attended, $500 for each telephonic board meeting, and $500
each quarter for each committee a director is a member. All directors are
reimbursed for reasonable expenses incurred in attending board meetings. In
addition, outside directors receive stock options upon the directors' initial
election or appointment to the Board of Directors. In August 1995, Messrs. Polan
and Terry, upon joining the Board, were each granted options to purchase 75,000
shares of common stock at an exercise price of $3.17, the market price on the
date of grant. These options are now fully vested and expire on August 28, 2000.
In June 1999, Messrs. Polan, Saunders and Terry were each granted options to
purchase 15,000 shares of common stock at $13.50. These options vest at the end
of the next three years and will expire ten years after the date of grant. Upon
joining the Board in 1998, Mr. Saunders received 20,000 options at $7.19 per
share. Half of these options vested in September 1998, and the other half vested
in September 1999. These options expire ten years after the date of grant. Upon
joining the Board in 1999, Mr. Moley received 25,000 options at $13.00 per
share. These options will vest over three years and expire five years after the
date of grant.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities and Exchange Act of 1934 (the "Exchange
Act") requires our officers and directors, and persons who own more than 10% of
the registered class of our equity securities, to file reports of ownership and
changes in ownership with the Securities and Exchange Commission (the "SEC").
Officers, directors and greater than 10% shareholders are required by SEC
regulations to furnish us with copies of all Section 16(a) forms they file.
Based on our review of the copies of such forms received by us, or
written representations from certain reporting persons that no Forms 5 were
required for those persons, we believe that, during our fiscal year ended
December 31, 1999, all filing requirements applicable to our officers and
directors and greater than 10% beneficial owners were complied with, except that
(1) Mr. Saunders unknowingly failed to timely file a Form 4 for a transaction in
June 1998 and for a transaction in June 1999, but has
7
since timely filed a Form 5 covering these transactions; and (2) we have not
received from Bellingham Industries Inc. a Form 5 or a written representation
that no Form 5 is required.
EXECUTIVE COMPENSATION
The following table sets forth the compensation paid during the past
three fiscal years to our Chief Executive Officers and our other four most
highly compensated executive officers with annual compensation over $100,000 for
such years (the "named executive officers"), plus two additional individuals for
whom disclosure would have been provided but for the fact that the individuals
were not serving as executive officers at the end of the last completed fiscal
year:
SUMMARY COMPENSATION TABLE
------------------------------------- -----------
LONG-TERM COMPENSATION
------------------------------------ ------------------------------------- -----------
ANNUAL COMPENSATION AWARDS PAYOUTS
- ------------------------------- ------------------------------------ ------------------------------------- -----------
SECURITIES ALL
NAME AND OTHER RESTRICTED UNDERLYING OTHER
PRINCIPAL ANNUAL STOCK OPTIONS/ LTIP COMPEN-
POSITION YEAR SALARY BONUS COMP. AWARD(S) SARS PAYOUTS SATION
- ------------------------ ------ ------------- -------- ------------- ------------ ------------- ---------- -----------
John B. Okkerse, Jr.
CEO 1999 16,154(1) -- -- -- 400,000 -- --
Harold S. Blue
Chairman and CEO 1999 202,198 -- -- -- 50,000 -- --
1998 145,033 -- -- -- -- -- --
1997 125,000 -- -- -- -- -- --
John Paul Guinan
Pres., PROXYMED.COM 1999 180,609 5,000 -- -- 35,000 -- --
1998 163,943 15,063 -- -- -- -- --
1997 125,000 -- -- -- -- --
Bennett Marks
EVP & CFO 1999 182,198 15,000 -- -- 25,000 -- --
1998 145,305 20,000 -- -- 20,000 -- --
1997 128,646 15,000 -- -- -- -- --
James H. Pickering
President & COO 1999 201,236 -- 36,540(3) -- 20,000 -- --
1998 165,456 10,000 47,182(2) -- 130,000 -- --
Jeff K. Carpenter
Pres., Lab Division 1999 282,408 100,000 -- -- 142,000 -- --
Bruce S. Roberson
EVP-Business Dev. 1999 182,447 -- -- -- 35,000 -- --
1998 180,000 50,000 22,506(2) -- 20,000 -- --
1997 30,000 -- 24,759 -- -- --
- ------------------------ ------ ------------- -------- ------------- ------------ ------------- ---------- -----------
(1) Dr. Okkerse joined us on November 26, 1999.
(2) Consists of reimbursement of relocation expenses.
(3) Consists of reimbursement of certain commuting expenses.
8
The following table provides information on stock option grants during
fiscal year 1999 to each of the named executive officers:
OPTION/SAR GRANTS IN LAST FISCAL YEAR
- ----------------------------------------------------------------------------------------- ----------------------------
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES
OF STOCK PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM
- ----------------------------------------------------------------------------------------- ----------------------------
# OF % OF TOTAL
SECURITIES OPTIONS/SARS
UNDERLYING GRANTED TO
OPTIONS/ EMPLOYEE IN EXERCISE OR EXPIRATION
NAME SARS GRANTED FISCAL YEAR BASE PRICE DATE 5% 10%
- -------------------------- --------------- ---------------- ------------- --------------- ------------- --------------
Harold S. Blue 50,000 3% $13.25 6/28/04 $183,037 $ 404,463
- -------------------------- --------------- ---------------- ------------- --------------- ------------- --------------
John Paul Guinan 35,000 2% $13.25 6/28/04 $128,126 $ 283,124
- -------------------------- --------------- ---------------- ------------- --------------- ------------- --------------
Bennett Marks 25,000 2% $13.25 6/28/04 $91,518 $ 202,231
- -------------------------- --------------- ---------------- ------------- --------------- ------------- --------------
John B. Okkerse, Jr. 400,000 27% $10.25 11/26/09 $2,578,468 $6,534,344
- -------------------------- --------------- ---------------- ------------- --------------- ------------- --------------
James H. Pickering 20,000 1% $13.25 6/28/04 $ 73,215 $ 161,785
- -------------------------- --------------- ---------------- ------------- --------------- ------------- --------------
Jeff K. Carpenter 44,000 3% $11.75 1/4/09 $ 325,139 $ 823,965
- -------------------------- --------------- ---------------- ------------- --------------- ------------- --------------
Jeff K. Carpenter 98,000 7% $11.00 8/11/04 $ 297,832 $ 658,130
- -------------------------- --------------- ---------------- ------------- --------------- ------------- --------------
Bruce S. Roberson 35,000 2% $13.25 6/28/04 $ 128,126 $ 283,124
- -------------------------- --------------- ---------------- ------------- --------------- ------------- --------------
The following table sets forth certain information concerning
unexercised options held by each of the named executive officers:
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTIONS/SAR VALUES
-------------------------------- --------------------------------
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT FY-END (#) OPTIONS/SARS AT FY-END ($)*
- ----------------------- -------------- ------------- -------------------------------- --------------------------------
# OF SHARES
ACQUIRED ON $ VALUE
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------------- -------------- ------------- --------------- ---------------- ---------------- ---------------
Harold S. Blue -- -- 150,000 50,000 $ 937,500 --
- ----------------------- -------------- ------------- --------------- ---------------- ---------------- ---------------
John Paul Guinan -- -- 217,500 35,000 $1,232,475 --
- ----------------------- -------------- ------------- --------------- ---------------- ---------------- ---------------
Bennett Marks -- -- 107,917 38,333 $ 564,981 $34,132
- ----------------------- -------------- ------------- --------------- ---------------- ---------------- ---------------
John B. Okkerse, Jr. -- -- -- 400,000 -- --
- ----------------------- -------------- ------------- --------------- ---------------- ---------------- ---------------
James H. Pickering -- -- 44,000 106,000 $ 121,000 $232,700
- ----------------------- -------------- ------------- --------------- ---------------- ---------------- ---------------
Jeff K. Carpenter -- -- 44,000 98,000 -- --
- ----------------------- -------------- ------------- --------------- ---------------- ---------------- ---------------
Bruce S. Roberson 68,550 $261,014 38,117 48,333 $ 107,109 $37,466
- ----------------------- -------------- ------------- --------------- ---------------- ---------------- ---------------
*Year-end values for unexercised in-the-money options represent the positive
spread between the exercise price of such options and the fiscal year-end market
value of the common stock, which was $9.75 on December 31, 1999.
There were no awards made to named executive officers in the last
completed fiscal year under any long-term incentive plan for performance to
occur over a period longer than one fiscal year. We do not have any defined
benefit or actuarial plans for our employees. No stock options for named
executive officers were amended, cancelled, replaced or otherwise repriced
during the past ten years.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors is responsible for
administering, reviewing and approving compensation arrangements with respect to
executive compensation which includes base salaries, annual incentives and long
term stock option plans, as well as any executive benefits and/or perquisites.
In addition, the Compensation Committee is responsible for any awards and
administration of the Company's stock option plans and grant of options to
newly-hired employees, and any future equity incentive plans.
9
Mr. Blue has been Chairman of the Board and Chief Executive Officer of
the Company since February 1993 through November 1999, at which time Dr. Okkerse
became Chief Executive Officer. Mr. Blue's current base salary is $204,407. He
received no annual bonus during 1999. The Committee believes that his
compensation is within the low-to-middle range of compensation paid to similarly
situated executives at other similar companies. Dr. Okkerse's current annual
base salary is $200,000, and at the discretion of the Board, he has the
opportunity to earn an additional cash bonus of at least $200,000 per year and
to participate in any additional stock option or bonus plans which the Company
may now have or in the future develop. Dr. Okkerse also received options for
400,000 shares of common stock at an exercise price equal to the market price on
the date of the grant. These options expire ten years after the date of grant.
The Committee believes Dr. Okkerse's compensation is within the middle range of
compensation paid to similarly situated executives at other similar companies.
The Committee intends to review the performance and compensation of the
executive officers annually, in conjunction with performance of the Company.
The Committee's general philosophy with respect to the compensation of
the Chief Executive Officer and other executive officers is to offer competitive
compensation packages designed to attract and retain key executives critical to
the success of the Company. In general, subjective factors rather than specific
criteria of the Company's performance have been used in determining and
approving executive compensation. The Company's compensation programs include a
base salary, annual bonus awards based on individual and Company performance, as
well as the granting of stock options designed to provide long-term incentives
and aligning the interest of management with those of the Company's
shareholders.
Section 162(m) of the Internal Revenue Code generally disallows a tax
deduction to public companies for compensation over $1,000,000 paid to the
Company's Chief Executive Officer and the four (4) other most highly compensated
executive officers, unless such compensation is "performance based". For
purposes of Section 162(m), the Company currently intends to structure any
performance based portion of the compensation of its executive officers that it
might develop in a manner that complies with Section 162(m).
THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
Bertram J. Polan
Kevin E. Moley
Peter A. A. Saunders
10
PERFORMANCE GRAPH
[OBJECT OMITTED]
EMPLOYMENT AGREEMENTS WITH THE NAMED EXECUTIVE OFFICERS
On April 1, 1996, we entered into an employment agreement with Mr. Blue
for a period of three years, which is automatically extended from year to year
unless terminated by either party upon 60 days' written notice. Mr. Blue
receives an annual base salary of $204,407 and is entitled to such bonuses as
may be awarded from time to time by the Board of Directors and to participate in
any stock option or bonus plans which we may now have or in the future develop.
Mr. Blue may be terminated for "cause", as defined in the agreement. If he is
terminated for cause, he will be entitled to base salary earned, and he will
retain all vested stock options which shall remain exercisable for 90 days after
the date of termination. If he is terminated "without cause", then he will be
entitled to receive an amount equal to his base salary plus bonus, if any, and
continuation of health insurance for six months following termination. In
addition, the agreement contains confidentiality and non-competition covenants.
Mr. Guinan has an employment agreement with us for a three-year term commencing
on December 5, 1995, which is substantially similar to Mr. Blue's, with an
annual base salary of $200,391. The employment agreements were renewed by their
terms for an additional year.
In November 1996, we entered into an employment agreement with Mr.
Marks. In November 1997, we entered into an employment agreement with Mr.
Pickering. The agreements are for a three-year term and automatically extend
from year to year thereafter unless terminated by us upon 90 days' written
notice or by the employee upon 30 days' written notice prior to the end of the
initial term or any extension. Mr. Marks and Mr. Pickering receive an annual
base salary of $200,325 and $225,325, respectively, and are entitled to such
bonuses as may be awarded from time to time and to participate in any stock
option or bonus plans which we may now have or in the future develop. They may
be terminated for "cause" as defined in their agreements. If terminated for
cause, they will be entitled to base salary earned, and they will retain all
vested stock options which shall remain exercisable for 90 days after the date
of termination. If, upon 90 days' prior written notice, they are terminated
"without cause", they will be entitled to receive an amount equal to their base
salary plus bonus, if any, and continuation of health insurance for six months
following termination, plus any unvested options shall vest. In addition, the
agreements contain confidentiality and non-competition covenants. Mr. Marks'
employment agreement was renewed by its terms for an additional year.
11
In November 1999, we entered into an employment agreement with Dr.
Okkerse. The agreement is for a three-year term and automatically extends from
year to year thereafter unless terminated by us upon 90 days' written notice or
by the employee upon 30 days' written notice prior to the end of the initial
term or any extension. He receives an annual base salary of $200,000 and is
entitled to bonuses as may be awarded from time to time and has the opportunity
to earn an additional cash bonus of at least $200,000 per year, and to
participate in any stock option or bonus plans which we may now have or in the
future develop. He may be terminated for "cause" as defined in his agreement. If
terminated for cause, he will be entitled to base salary earned, and he will
retain all vested stock options which shall remain exercisable for 90 days after
the date of termination. If, upon 90 days' prior written notice, he is
terminated "without cause", he will be entitled to receive an amount equal to
his base salary plus bonus, if any, and continuation of health insurance for
nine months following termination, plus any unvested options shall vest. In
addition, the agreement contains confidentiality and non-competition covenants.
LIABILITY AND INDEMNIFICATION OF OUR DIRECTORS AND OFFICERS
We have entered into indemnification agreements with each of our
directors and executive officers limiting their personal liability for monetary
damages for breach of their fiduciary duties as officers and directors, except
for liability that cannot be eliminated under the Florida Business Corporation
Act. The Florida Business Corporation Act provides that directors of a
corporation will not be personally liable for monetary damages for breach of
their fiduciary duty as directors, except for liability (i) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (ii) for any unlawful payment of a dividend or unlawful stock
repurchase or redemption, as provided in Section 607.0834 of the Florida
Business Corporation Act, (iii) for any transaction from which the director
derived an improper personal benefit, or (iv) for a violation of criminal law.
Our Restated Articles of Incorporation and Bylaws also provide that we shall
indemnify our directors and officers to the fullest extent permitted by Section
607.0831 of the Florida Business Corporation Act, including circumstances in
which indemnification is otherwise discretionary. We have procured and maintain
a policy of insurance under which our directors and officers are insured,
subject to the limits of the policy, against certain losses arising from claims
made against such directors and officers.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On April 30, 1997, the Company loaned a total of $350,000 to Mr. Blue.
The funds were advanced pursuant to two demand promissory notes in the principal
amounts of $290,000 and $60,000, respectively, each bearing interest at a rate
of 7 3/4% per year. Mr. Blue and the Compensation Committee are in current
discussions with respect to the repayment terms and collateral for such notes.
ITEM 2. RATIFICATION AND APPROVAL OF THE ISSUANCE AND SALE OF THE SERIES B
PREFERRED AND THE RELATED WARRANTS, THE ISSUANCE OF COMMON STOCK UPON
THE CONVERSION OF THE SERIES B PREFERRED, THE EXERCISE OF THE RELATED
WARRANTS AND THE PAYMENT OF DIVIDENDS ON THE SERIES B PREFERRED, THE
ISSUANCE OF WARRANTS IN CONNECTION WITH THE REDEMPTION OF CERTAIN OF
THE SHARES OF SERIES B PREFERRED, AND THE ISSUANCE OF COMMON STOCK UPON
THE EXERCISE OF THE WARRANTS ISSUED IN CONNECTION WITH THE REDEMPTION
OF CERTAIN OF THE SHARES OF SERIES B PREFERRED
GENERAL
On December 23, 1999, the Company issued 15,000 shares of its Series B
Preferred Stock, par value $.01 per share (the "Series B Preferred") and
warrants to purchase 800,000 shares of its Common Stock, par value $.001 per
share (the "Common Stock") in a private placement to institutional investors.
12
The net proceeds of the offering, after expenses, were approximately
$14,200,000. J.C. Bradford & Co. served as the Company's placement agent for
this transaction. The shares of Series B Preferred are non-voting and carry a
cumulative dividend at a rate of 6% per annum, payable quarterly or upon
conversion or redemption, which may be paid in cash or Common Stock, at the
Company's option, subject to certain conditions. The shares of Series B
Preferred mature on December 23, 2001, subject to extension in certain
circumstances, at which time the Series B Preferred will be redeemed or
converted at the Company's option, subject to certain conditions. The conversion
price of the Series B Preferred at maturity is 95% of the average of the closing
trade price on the Nasdaq National Market of the Common Stock for the 30
consecutive trading days immediately preceding December 23, 2001. The net
proceeds from this financing transaction have been, and the proceeds from the
exercise of the related warrants will be, used by the Company for working
capital and general corporate purposes including, without limitation, the
repayment of outstanding debt and potential acquisitions.
In connection with the sale of the Series B Preferred, the Company
issued warrants (the "Old Warrants") to purchase up to 800,000 shares of Common
Stock, subject to adjustment in certain events. The original exercise price of
the Old Warrants was $12.05 per share, subject to adjustment in certain events.
The Old Warrants expire on December 23, 2002. In addition, in order to obtain
the consent of Transamerica Business Credit Corporation to the sale of the
Series B Preferred, a warrant to purchase 25,000 shares of Common Stock at an
original exercise price price of $11.62 per share was issued to Transamerica
(the "Transamerica Warrant") on substantially the same terms as the Old
Warrants. If the Old Warrants which have not been exchanged for Exchanged
Warrants (as defined below) and the Transamerica Warrant were exercised to
purchase 881,892 shares of Common Stock (after giving effect to dilution
adjustment provisions contained therein), the Company would receive proceeds of
$ 1,575,837. The exercise price and number of shares of Common Stock which may
be purchased upon exercise of such warrants continue to be subject to further
adjustment upon the occurrence of certain dilution events including, without
limitation, certain issuances of Common Stock, stock options or convertible
securities or certain corporate transactions such as stock splits, mergers or
asset sales.
REDEMPTION AND EXCHANGE AGREEMENT
The Series B Preferred converts into Common Stock at a floating rate
based on the market price of the Common Stock. The lower the price of the Common
Stock at the time the holder converts, the greater the number of shares of
Common Stock the holder will receive. The terms of the Series B Preferred
provide that the holder cannot exercise their rights to convert the Series B
Preferred prior to December 23, 2000, unless certain triggering events occur.
One such triggering event occurs if the closing price of the Common Stock is
below $4.21 for a period of ten consecutive trading days. As of May 1, 2000, the
closing price of the Common Stock had been below $4.21 for 10 trading days, thus
causing the restriction on conversions to cease to be in effect.
In order to attempt to prevent the conversion of all of the shares of
Series B Preferred and the resulting significant dilution to the holders of
Common Stock, the Company engaged in negotiations with the holders of the Series
B Preferred to restructure certain terms of the Series B Preferred. Effective
May 4, 2000, the Company entered into a Redemption and Exchange Agreement (the
"Redemption Agreement") with holders of 13,000 shares of the Series B Preferred.
Under the terms of the Redemption Agreement, the Company has redeemed 4,000
shares of the Series B Preferred, and is required to redeem an additional 2,500
shares of the Series B Preferred on each of June 19, 2000, August 1, 2000, and
August 31, 2000, and an additional 1,500 shares of the Series B Preferred on
September 29, 2000. The Redemption Agreement provides that the redemption of the
Series B Preferred will be made at 116.5% of the Conversion Amount (as defined
in the Articles of Amendment to the Company's Articles of Incorporation creating
the Series B Preferred, the "Articles of Amendment") of such Series B Preferred
on the date of such redemption. The Redemption Agreement also provides for the
exchange of 693,333 of the Old Warrants issued to the holders of the Series B
Preferred subject to the Redemption Agreement have been exchanged for warrants
(the "Exchanged Warrants") with an exercise price of $1.50 per share. In
addition, such holders are receiving, in the aggregate, 650,000 additional
warrants (the "New Warrants") at an exercise price of $1.50 per share. The
Exchanged Warrants expire on December 23, 2002 and the New Warrants expire on
May 5, 2003. The exercise price and number of shares of Common Stock which may
be purchased upon exercise of the Exchanged Warrants and the New Warrants are
subject to adjustment upon the occurrence of certain dilution events which occur
183 days after the date of issuance of such warrants including, without
limitation, certain issuances of Common Stock, stock options or convertible
securities or certain corporate transactions such as stock splits, mergers or
asset sales. Subject to certain restrictions, the holders of the Exchanged
Warrants and the New Warrants have agreed not to exercise such warrants for a
period of 180 days following their date of issuance. The redemption of the
Series B Preferred in accordance with the Redemption Agreement are subject to
certain closing conditions on each date of redemption. So long as the Company
remains in
13
compliance with the terms of the Redemption Agreement, such holders are
prohibited from converting their shares of Series B Preferred into shares of
Common Stock.
Under the terms of the Redemption Agreement, the Company has agreed to
pay the holders of Series B Preferred subject to such agreement the aggregate
amount of $4,333,333 if there is a change of control of the Company on or before
December 23, 2002.
The Company has not entered into an agreement to redeem the shares of
Series B Preferred held by the holder of 2000 shares of the Series B Preferred.
As of May 8, 2000, this holder has converted 1,690 shares of the Series B
Preferred into an aggregate of 1,401,516 shares of Common Stock and 310 shares
of the Series B Preferred remain outstanding.
REQUIREMENT TO OBTAIN ADDITIONAL FINANCING
In order for the Company to comply with the terms of the Redemption
Agreement and continue to fund its operating requirements, the Company will be
required to raise significant amounts of additional capital. The Redemption
Agreement provides that the Company must raise at least $4,000,000 of additional
funds by June 17, 2000, an additional $5,000,000 of new funds by July 31, 2000,
and an additional $4,000,000 of new funds by August 30, 2000. The Company,
however, may need or elect to raise additional funds in excess of such amounts
prior to or after such dates. The Company's capital requirements will depend on
many factors, including the Company's ability to meet the conditions under the
Redemption Agreement, the problems, delays, expenses and complications
frequently encountered by other eHealth companies; the costs associated with
developing improved products and services in response to technological changes;
the costs associated with any marketing or other arrangements; changes in
economic, regulatory, or competitive conditions or the Company's business; and
the cost of retaining management personnel.
To satisfy its capital requirements, the Company must raise funds
through the issuance of equity or debt in the public or private capital markets.
The Company's ability to raise additional funds may be adversely affected if,
among other things, the Company is unable to meet the terms and conditions set
forth in the Redemption Agreement or if the Company does not continue to improve
its operating performance and achieve increased market acceptance of its
products and services. There can be no assurance that any additional funding
will be available to the Company, or if available, that it will be available on
acceptable terms. If adequate funds are not available, the Company will not be
able to meet the conditions set forth in the Redemption Agreement and the
holders of the Series B Preferred would be entitled to exercise their conversion
and other rights under the terms of the designations for the Series B Preferred
and the Redemption Agreement. If the Company is successful in obtaining
additional financing, the terms of the financing may have the effect of
significantly diluting or adversely affecting the holdings or the rights of the
holders of Common Stock. See Item 3 for a description of a plan of financing
which management believes will provide adequate financing to meet its redemption
obligations as well as additional working capital.
REQUIREMENT OF SHAREHOLDER APPROVAL; POSSIBLE DELISTING FROM NASDAQ
In accordance with Rule 4460 of the Nasdaq Stock Market Marketplace
Rules, which generally requires shareholder approval of transactions that would
result in the issuance of securities representing 20% or more of an issuer's
outstanding listed securities, the Company is not obligated to issue shares of
Common Stock upon conversion or the payment of dividends on the Series B
Preferred in excess of 3,663,730 shares, representing 19.9% of its outstanding
shares of Common Stock on December 23, 1999, the date of issuance of the Series
B Preferred.
The terms of the Series B Preferred provide that the Company must obtain
shareholder approval of the issuance of (i) the Series B Preferred, (ii) the Old
Warrants, (iii) Common Stock issuable upon conversion or exercise thereof, and
(iv) Common Stock as dividends thereon ("Shareholder Approval"), by the earlier
to occur of its next annual meeting of shareholders or within 60 days after the
date that the number of shares of
14
Common Stock then issuable upon conversion of the Series B Preferred equals or
exceeds 2,747,461 shares (15% of the number of shares of Common Stock
outstanding on the date of issuance of the Series B Preferred for any three of
five consecutive days). On April 13, 2000, the Company received a notice from
counsel to the holders of the Series B Preferred, pursuant to Section 4(g) of
the Securities Purchase Agreement between the buyers of the Series B Preferred
and the Company dated as of December 23, 1999 (the "Securities Purchase
Agreement"), that for the three days ending on and including April 12, 2000, the
number of shares of Common Stock issuable upon conversion of all the outstanding
shares of Series B Preferred, based upon the Conversion Price (as defined in the
Articles of Amendment) on the applicable date (without regard to any limitation
upon the conversion of the shares of Series B Preferred) equaled or exceeded
2,747,461 shares, requiring the Company to hold a shareholders meeting on or
before June 11, 2000. The Company will not hold a shareholders meeting and,
consequently will not obtain Shareholder Approval, on or before June 11, 2000.
As a result of not obtaining Shareholder Approval of the Series B
Preferred on or prior to June 11, 2000, if the Company receives a notice from a
holder of Series B Preferred which would require the Company to convert such
holder's Series B Preferred into a number of shares of Common Stock which, when
added to all previous shares of Common Stock issued pursuant to the conversion
of Series B Preferred, would equal or exceed 20% of the number of shares of
Common Stock outstanding at that time, then the Company will be required to
either redeem all of the Series B Preferred submitted for redemption or
voluntarily delist its shares from Nasdaq within five business days after the
notice of conversion referred to above. In addition, failure to obtain
Shareholder Approval by June 11, 2000, or delisting of the Common Stock from
Nasdaq, would constitute a "Liquidity Default". See "Effects of Certain Breaches
or Default." The Company may not have sufficient available cash to redeem the
Series B Preferred at that time, and thus may be forced to pursue the option of
delisting. In that event, trading in the Common Stock would likely decrease
substantially, and the price of the Common Stock may decline. If the Company
fails to obtain such Shareholder Approval, there is no limit on the number of
shares of Common Stock that could be issued upon conversion of, or the payment
of dividends in lieu of cash on, the Series B Preferred. Notwithstanding the
failure to hold a shareholders meeting on or before June 11, 2000, pursuant to
the Redemption Agreement, holders of 13,000 shares of the Series B Preferred
agreed that they would not convert any of their 9,000 remaining shares of Series
B Preferred into Common Stock as a result of such failure to hold a meeting if
the Company received Shareholder Approval on or before July 17, 2000 and the
remaining holder of Series B Preferred has only 310 shares of Series B Preferred
as of May 8, 2000.
REDEMPTION; CONVERSION
Pursuant to the Securities Purchase Agreement, on or prior to June 23,
2000, the Company is required to either redeem or convert 4,500 shares of Series
B Preferred. Such redemption would be at a price of 107% of the "Conversion
Amount," which is defined for each share of Series B Preferred as the sum of the
amount originally paid for a share of Series B Preferred ($1,000), plus any
unpaid default interest and any unpaid dividends to the date of determination. A
conversion would be at the applicable conversion rate which is the number of
shares of Common Stock equal to the Conversion Amount defined in the previous
sentence divided by 93% of the lowest closing sale price of the Common Stock on
the three consecutive trading days ending on and including the date of
determination (the "Conversion Rate"). On or prior to September 22, 2000, the
Company is required to either redeem or force the conversion of an additional
4,500 shares of Series B Preferred at the redemption and conversion prices
described above in this paragraph.
Notwithstanding the terms of the Securities Purchase Agreement described
in the preceding paragraph, pursuant to the Redemption Agreement, the Company
redeemed 4,000 shares of Series B Preferred as of May 4, 2000 and is required to
redeem an additional 9,000 shares of Series B Preferred on or before September
29, 2000. The redemption price is 116.5% of the Conversion Amount.
15
POSSIBLE EFFECTS ON THE MARKET PRICE OF COMMON STOCK
Because the Series B Preferred converts into Common Stock at a floating
rate based on the market price of Common Stock (PROVIDED, that the conversion
price may not exceed $21.26), the lower the price of Common Stock at the time
the holder converts, the greater the number of shares of Common Stock the holder
will receive. To the extent the Series B Preferred is converted or dividends on
the Series B Preferred are paid in shares of Common Stock rather than cash, a
significant amount of Common Stock may be sold into the market, which could
decrease the price of Common Stock due to the additional supply of shares
relative to demand in the market. In that case, the Company could be required to
issue an increasingly greater number of shares of Common Stock upon future
conversions of Series B Preferred, sales of which could further depress the
market price of Common Stock. If the sale of a large number of shares of Common
Stock upon conversion of, or the payment of dividends in shares of Common Stock
lieu of cash on, the Series B Preferred results in a decline in the price of
Common Stock, this event could encourage short sales of Common Stock. Short
sales could place further downward pressure on the market price of Common Stock.
The conversion of, and the payment of dividends in shares of Common
Stock in lieu of cash on, the Series B Preferred may result in substantial
dilution to the interests of other holders of Common Stock. Even though no
holder of Series B Preferred may convert its Series B Preferred into more than
4.99% of the Company's then outstanding Common Stock (excluding for purposes of
such determination shares of Common Stock issuable upon conversion of shares of
Series B Preferred which have not been converted and upon exercise of warrants
which have not been exercised), this restriction does not prevent a holder of
Series B Preferred from selling a substantial number of shares in the market. By
periodically selling shares into the market, an individual holder could
eventually sell more than 4.99% of the Company's outstanding Common Stock while
never holding more than 4.99% at any specific time.
In addition, the exercise price and number of shares of Common Stock
which may be purchased upon exercise of the Warrants are subject to adjustment
upon certain issuances by the Company of Common Stock, stock options, warrants
or convertible securities. If shares of convertible preferred stock are issued
in an equity financing transaction by the Company with a conversion price below
the exercise price of the Warrants, or warrants are issued with an exercise
price below the exercise price of the Warrants, the number of shares of Common
Stock which may be purchased upon exercise of the Warrants may be substantially
increased. A substantial increase in the number of shares of Common Stock
issuable upon exercise of the Warrants will have the effect of significantly
diluting or adversely affecting the holdings or the rights of the holders of
Common Stock.
NUMBER OF SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION OF SERIES B PREFERRED
The following table sets forth the number of shares of Common Stock that
the Company would be required to issue upon conversion of all 9,310 shares of
Series B Preferred currently outstanding at the applicable conversion price of
$1.74 per share of Common Stock as of May 8, 2000 (93% of the market price), and
the resulting percentage of the Company's total shares of Common Stock
outstanding after such conversion. The table also sets forth the results of such
calculations assuming (1) increases of 25%, 50% and 75% in the applicable
conversion price; (2) decreases of 25%, 50% and 75% in the applicable conversion
price; and (3) the fixed conversion price of $21.26 which is the maximum
permitted conversion price. The table includes the 9,000 shares of Series B
Preferred that the Company has agreed to redeem pursuant to the Redemption
Agreement. The table does not reflect the number of shares that the Company
would be required to issue if a Liquidity Default occurs and the conversion rate
is reduced to 68%. The result of such event would be to materially increase the
number of shares of Common Stock outstanding. See "Effects of Certain Beaches or
Defaults."
16
NO. OF SHARES PERCENTAGE OF
ASSUMED CONVERSION COMMON STOCK OUTSTANDING COMMON
PRICE PER SHARE ISSUABLE UPON STOCK AFTER CON
OF COMMON STOCK CONVERSION(1) VERSION(1)
--------------- ------------- ----------
$1.74 5,339,068 22.6%
$2.18 25% 4,271,254 18.9%
$2.62 50% 3,559,379 16.3%
$3.05 75% 3,050,896 14.3%
$21.26 $21.26 437,912 2.3%
$1.31 -25% 7,118,757 28.0%
$0.87 -50% 10,678,136 36.8%
$0.44 -75% 21,356,272 53.9%
- --------------------
(1) The number of shares of Common Stock issuable upon conversion and the
percentage of outstanding Common Stock after such conversion set forth
above do not take into account any shares of Common Stock that may be
issuable as dividends on the Series B Preferred, or upon exercise of
the Old Warrants which have not been exchanged for Exchanged Warrants,
the Transamerica Warrant, the Exchanged Warrants and the New Warrants
(collectively, the "Warrants").
If the 9,310 Series B Preferred currently outstanding had been converted
in full and all of the Warrants had been fully exercised as of May 8, 2000, the
Company would have been required to issue an additional 12,440,735 shares of
Common Stock, equivalent to 38.7% of the 32,175,164 shares of Common Stock which
would then be outstanding.
POSSIBLE PAYMENT OF DIVIDENDS IN COMMON STOCK
At the Company's option, subject to certain conditions, the quarterly
dividend may be paid in cash or Common Stock, subject to satisfaction of certain
conditions. If the Company chooses to pay dividends in Common Stock, the number
of shares to be issued in payment of the dividend on the Series B Preferred will
be equal to (1) the sum of any unpaid default interest and any unpaid dividends
to the date of determination divided by (2) 93% of the lowest closing sale price
of the Common Stock on the three consecutive trading days ending on and
including the date which is two trading days prior to the date that the dividend
is payable. On March 31, 2000, the Company issued 29,278 shares of Common Stock
as dividends on the Series B Preferred.
EFFECTS OF CERTAIN BREACHES OR DEFAULTS
If certain defaults or breaches of the Articles of Amendment, the Old
Warrants, the Securities Purchase Agreement or the related registration rights
agreement occur (each defined as a "Liquidity Default"), the holders of the
Series B Preferred have the right to require the Company to make certain
additional cash payments to the holders of the Series B Preferred or, depending
upon the nature of the Liquidity Default, adjust downward the maximum conversion
price. If the Company defaults under certain provisions of the Articles of
Amendment, including a failure to timely make a payment required by a Liquidity
Default (a "Triggering Event"), then, except in the case of the Triggering Event
involving failure to obtain the shareholder approval on or before June 11, 2000
(which is described above in connection with the possible delisting of the
Common Stock from Nasdaq), the Company would be required to redeem the Series B
Preferred at a price equal to the greater of (1) 125% of the liquidation
preference described in the following paragraph; or (2) the Conversion Rate in
effect when a holder of Series B Preferred demands redemption multiplied by the
closing sale price of the Common Stock on the trading day immediately preceding
the date of such Triggering Event.
17
If certain defaults or breaches of the Redemption Agreement, the
Exchanged Warrants, the New Warrants or the related registration rights
agreement occur, or if certain Triggering Events or Liquidity Events occur under
the Stock Purchase Agreement, the restrictions on conversion of Series B
Preferred into Common Stock set forth in the Redemption Agreement will no
longer be applicable.
LIQUIDATION RIGHTS
In the event of the Company's liquidation, the holders of the Series B
Preferred will be entitled to a liquidation preference before any amounts are
paid to the holders of Common Stock. The liquidation preference is equal to the
amount originally paid for the Series B Preferred ($1,000 per share) plus
accrued and unpaid dividends (and any unpaid default interest) on any
outstanding Series B Preferred through the date of determination.
VOTING RIGHTS
Other than as required by law, the holders of the Series B Preferred
have no voting rights except that the consent of holders of at least two-thirds
of the outstanding Series B Preferred will be required to (1) effect any change
in the Company's Articles of Incorporation that would change any of the rights
of the Series B Preferred; or (2) issue any Series B Preferred other than
pursuant to the Securities Purchase Agreement.
FOR MORE INFORMATION
Complete copies of the Articles of Amendment, the form of the Old
Warrants and the Securities Purchase Agreement are contained in the Company's
Current Report on Form 8-K filed with the Securities and Exchange Commission on
December 28, 1999 and are incorporated herein by reference. Complete copies of
the Redemption Agreement, the Exchanged Warrants and the New Warrants are
contained in the Company's Current Report on Form 8-K filed with the Securities
and Exchange Commission on May 8, 2000 and are incorporated herein by reference.
The descriptions of these documents are summaries of the material terms and
conditions only and are qualified in their entirety by reference to the complete
documents which are publicly available from the Securities and Exchange
Commission.
In connection with the Company's issuance of the Series B Preferred, the
Old Warrants and the Transamerica Warrant, the Company filed a registration
statement on Form S-3 with the Securities and Exchange Commission (File No.
333-95883) which was declared effective on February 11, 2000. That registration
statement covers the resale of the Common Stock from time to time on the Nasdaq
National Market or in privately negotiated transactions of the Common Stock
which is issuable upon conversion of the Series B Preferred, in lieu of cash
dividends on the Series B Preferred and upon exercise of the Old Warrants and
the Transamerica Warrant.
In connection with the Company's issuance of the Exchanged Warrants and
the Old Warrants, the Company filed a registration statement on Form S-3 with
the Securities and Exchange Commission (File No. ____________) which was
declared effective by on _________, 2000. That registration statement covers the
resale of the Common Stock from time to time on the Nasdaq National Market or in
privately negotiated transactions of the Common Stock which is issuable upon
exercise of the Exchanged Warrants and the New Warrants.
CHANGE IN CONTROL; OTHER PREFERRED STOCK
The Company's Articles of Incorporation and the Florida Business
Corporation Act contain provisions that could have the effect of delaying,
deferring or preventing a change in control and the
18
opportunity to sell the Company's Common Stock at a premium over current market
prices. Although intended to protect the Company and its shareholders from
unwanted takeovers, their effect could hinder or prevent transactions in which
holders might otherwise receive a premium for their Common Stock over then
current market prices, and may limit the holders' ability to approve
transactions that may be in their best interests. As a result, the mere
existence of these provisions could adversely affect the price of the Company's
Common Stock.
The Company's Board of Directors has the authority to issue a total of
up to 2,000,000 shares of preferred stock, of which 15,000 have already been
issued (9,310 of which are presently outstanding), and to fix the rights,
preferences, privileges and restrictions, including voting rights, of the
preferred stock, which typically are senior to the rights of the common
shareholders, without any further vote or action by the common shareholders. The
rights of common shareholders will be subject to, and may be adversely affected
by, the rights of the holders of the preferred stock that has been issued, or
might be issued in the future. Preferred stock also could have the effect of
making it more difficult for a third party to acquire a majority of the
outstanding voting stock of the Company. This could delay, defer or prevent a
change in control. Furthermore, holders of preferred stock may have other
rights, including economic rights, senior to the Common Stock. As a result, the
existence and issuance of preferred stock could have a material adverse effect
on the market value of the Common Stock. The Company has in the past issued and
may, from time to time in future, issue preferred stock for financing or other
purposes with rights, preferences or privileges senior to the Common Stock.
To avoid the adverse consequences of the failure to obtain shareholder
approval including, without limitation, the possible conversion of additional
shares of Series B Preferred, monetary penalties, dilutive adjustments to the
conversion price of the Series B Preferred and possible delisting from the
Nasdaq National Market, the Board of Directors recommends a vote "FOR" the
ratification and approval of the issuance and sale of the Series B Preferred,
the Warrants and the approval of the issuance of Common Stock upon the
conversion of the Series B Preferred, the exercise of the Warrants and the
payment of dividends on the Series B Preferred.
ITEM 3. RATIFICATION AND APPROVAL OF THE ISSUANCE OF SHARES OF A NEW SERIES
OF CONVERTIBLE PREFERRED STOCK, WARRANTS, NOTES AND COMMON STOCK, IN
CONNECTION WITH AN AGREEMENT WITH AN INVESTMENT ADVISOR AND A PROPOSED
FINANCING TRANSACTION
GENERAL
On May 8, 2000, the Company retained an investment banking firm (the
"Investment Bank") to assist the Company in raising capital to fund the
redemption payments due under the Redemption Agreement and for general working
capital purposes. The agreement with the Investment Bank provides that the
Investment Bank will act as exclusive placement agent for the Company in
connection with a "best efforts" private placement of up to $20 million of
equity securities plus a $10 million "over-allotment option" (the "Private
Placement"). The agreement also provides that, at the option of both the
Investment Bank and the Company, the Investment Bank may, also on "best efforts"
basis, arrange for up to $6 million of bridge financing prior to the
consummation of the Private Placement (the "Bridge Financing"). The agreement
relating to the Private Placement and the Bridge Financing (the "Financing
Agreement") generally cannot be terminated by the Company, and the Company
cannot enter into any similar agreement with any other party, prior to August
30, 2000. In the event the Company breaches any of the provisions of the
Financing Agreement, elects not to proceed with a financing thereunder or fails
to proceed in good faith, the Investment Bank will be entitled, in its sole
discretion, to either a cash fee of $1,000,000 or 500,000 shares of Common
Stock. The transactions described in this Item 3 will trigger the anti-dilution
provisions of certain of the securities described in Item 2.
19
The Company has also entered into a 12-month advisory agreement with the
Investment Bank for the provision of certain financial advisory services (the
"Advisory Agreement"). As compensation for its services, the Company paid the
Investment Bank $175,000 upon signing of the Advisory Agreement and has agreed
to reimburse the Investment Bank for reasonable expenses up to $25,000. The
Company also issued to the Investment Bank a warrant to purchase 1,000,000
shares of the Company's common stock at an exercise price of $1.50 per share
(the "Investment Bank Warrant"). The exercise price and number of shares of
Common Stock which may be purchased upon exercise of the Investment Bank Warrant
are subject to adjustment upon the occurrence of certain dilution events,
including without limitation, subdivisions and combinations of the Common Stock,
certain distributions to holders of Common Stock and certain issuances by the
Company of Common Stock, stock options, warrants or convertible securities.
In connection with the consummation of any sale of all or a part of the
Company (a "Sale Transaction"), the Investment Bank would be entitled to a fee
of between 0.75% and 1.5% of the value of such transaction. The Investment
Advisor is also entitled to receive an additional fee of .5% of the
consideration received by the Company in connection with any Sale Transaction
where the Investment Bank identified or introduced the other party to the
transaction.
Upon the closing of a Private Placement, the Investment Bank is entitled
to a cash fee equal to 10% of the gross proceeds of the offering and the
issuance of warrants to purchase a number of shares of Common Stock equal to 25%
of the Common Stock underlying the New Preferred Stock (as defined below) issued
to the investors in the Private Placement, at an exercise price per share equal
to New Stock Conversion Price (as defined below) (the "Private Placement
Warrant"). In connection with the closing of any Bridge Financing, the
Investment Bank is entitled to a cash fee equal to 10% of the gross proceeds of
the Bridge Financing and the issuance of warrants to purchase a number of shares
of Common Stock equal to the 25% of the fully-diluted shares of common stock
issuable pursuant to conversion features of the notes issued in connection with
the bridge financing, at an exercise price per share equal to New Stock
Conversion Price (as defined below) (the "Bridge Financing Warrants"). The
exercise price and number of shares of Common Stock which may be purchased upon
exercise of the Private Placement Warrant and the Bridge Financing Warrant will
be subject to adjustment upon the occurrence of certain dilution events,
including without limitation, subdivisions and combinations of the Common Stock,
certain distributions to holders of Common Stock and certain issuances by the
Company of Common Stock, stock options, warrants or convertible securities. In
connection with a Private Placement or Bridge Financing, the Investment Bank is
also entitled to reimbursement for out of pocket expenses incurred in connection
with such transactions up to a maximum of $150,000 (the Company has paid a
$25,000 non-refundable expense allowance to The Investment Bank which will be
credited toward the $150,000).
There can be no assurance that the Investment Bank will be successful in
closing a Private Placement or a Bridge Financing. In addition, the Investment
Bank's obligation to pursue a Private Placement or a Bridge Financing is subject
to the satisfaction of certain conditions, including there being no material
adverse change in the business of the Company or in general market conditions
and approval of the Private Placement by the shareholders.
THE PRIVATE PLACEMENT
If consummated, the Private Placement will consist of the issuance and
sale of up to $20,000,000 of a new series of Preferred Stock of the Company (the
"New Preferred Stock"). The Investment Bank will have an "over-allotment option"
to issue and sell up to an additional $10,000,000 of New Preferred Stock. The
New Preferred Stock will rank junior to the Series B Preferred.
In the event of the Company's liquidation, the holders of the New
Preferred Stock will be entitled to a liquidation preference before any amounts
are paid to the holders of Common Stock, but after any amounts due to the
holders of the Series B Preferred have been paid. The per share liquidation
preference of the New Preferred Stock will be equal to $100 plus accrued and
unpaid dividends (the "Liquidation Value").
20
The holders of the New Preferred Stock will be entitled to receive
quarterly dividends at a rate of 7% per annum. At the Company's option, the
dividend can be paid in cash or shares of Common Stock at the conversion price
(the "New Stock Conversion Price"). The New Stock Conversion Price shall be
determined prior to the closing of the Private Placement and will be equal to
the lesser of (i) $1.25 per share or (ii) 65% of the average closing bid price
for the 10 trading days ending on the date prior to the closing of the Private
Placement, in each case subject to adjustment pursuant to the anti-dilution
provisions described below.
The holders of the New Preferred Stock will at anytime be able to elect
to convert each share of New Preferred Stock into the number of shares of Common
Stock determined by dividing (A) the Liquidation Value of the New Preferred
Stock by (B) the New Stock Conversion Price. The number of shares to be issued
upon such conversion are referred to as the Conversion Shares. Assuming the sale
of $20,000,000 of New Preferred Stock and a New Stock Conversion Price of $1.25
per share, and assuming a Liquidation Value of $100, the total number of shares
of Common Stock issuable upon conversion of the New Preferred Stock would be
approximately 16,000,000 or approximately 44.8% of the Company's outstanding
Common Stock after giving effect to the Private Placement. The issuance of
Conversion Shares will result in a significant increase in the number of shares
of Common Stock outstanding and will have the effect of significantly diluting
the existing holders of Common Stock. This number maybe greater if the
Conversion Price and the number of shares of Common Stock that are issuable upon
conversion of the New Preferred Stock are adjusted as provided below.
The New Preferred Stock will automatically convert into shares of
Common Stock at the New Stock Conversion Price upon the completion of a public
offering or private placement of the Company's Common Stock which generates
gross proceeds in excess of $30,000,000 at a per share price in excess of 2.5
times the New Stock Conversion Price at the time of closing of such financing.
The New Preferred Stock will also automatically convert into shares of Common
Stock at the then New Stock Conversion Price at such time as the closing bid
price for the Common Stock of the Company has remained at three times the New
Stock Conversion Price for a period of 20 consecutive trading days, provided the
Common Stock of the Company is trading on a national securities exchange or the
NASDAQ Small Cap or National Market System, and the Conversion Shares are fully
registered for resale and not subject to any lock-up provisions.
The Conversion Price and the number of shares of Common Stock that are
issuable upon conversion of the New Preferred Stock will be subject to
adjustment upon the occurrence of certain dilution events, including without
limitation, in the event of certain subdivisions and combinations of the Common
Stock and upon certain issuances by the Company of Common Stock, preferred
stock, options, warrants or convertible securities at a price per share less
than the Conversion Price or less than the then current market price. Any such
adjustments could result in a substantial increase in the number of shares
issuable upon conversion of the New Preferred Stock. A substantial increase in
the number of shares of Common Stock issuable upon conversion of the New
Preferred Stock will have the effect of significantly further diluting the
rights of the holders of Common Stock.
The Company has agreed to file a Registration Statement with the SEC,
within six months after the initial closing of the Private Placement, to
register the shares of Common Stock issuable upon conversion of the New
Preferred Stock. In addition, the holders of the New Preferred Stock will be
entitled to include any shares of Common Stock issuable upon conversion of the
New Preferred Stock in certain Registration Statements, if any, filed by the
Company. Subject to certain exceptions, the holders of the New Preferred Stock
will be prohibited from selling any Common Stock issuable upon conversion of the
New Preferred Stock for a period of one-year from the date of the closing of the
Private Placement.
The holders of the New Preferred Stock will be entitled to one vote per
share of Common Stock issuable upon conversion of New Preferred Stock as of the
record date for any such vote on all matters submitted to a vote of shareholders
of the Company. The holders of New Preferred Stock will vote as a
21
single class with the holders of Common Stock on all matters, except as
otherwise required under applicable law.
CHANGE IN THE COMPOSITION OF THE BOARD
The Private Placement Transaction if consummated, will require the size
of the Board of Directors to be set at seven, and the Investment Bank and the
holders of the New Preferred Stock will have the right to appoint four of the
seven members. As a result, at least three of the directors elected at this
Annual Meeting will be required to resign from the Board and the holders of the
New Preferred Stock will control a majority of the Company's Board of Directors.
THE BRIDGE FINANCING
If consummated, the Bridge Financing will consist of the issuance of up
to $6,000,000 of senior secured convertible promissory notes (the "Bridge
Notes") and five year warrants to purchase up to 500,000 common shares of the
Company for every $1,000,000 of Bridge Financing, at an exercise price equal to
the $1.25 per share (the "Bridge Investor Warrants"). The Bridge Notes will
accrue interest at the rate of 8% per annum, and will be payable in full at the
Maturity Date (as defined below). The Bridge Notes will be secured by all the
assets of the Company and will be senior to all other existing or future
indebtedness of the Company, subject to liens granted to certain existing
creditors and purchase money security interests and capital leases. The exercise
price and number of shares of Common Stock that may be purchased upon exercise
of the Bridge Investor Warrants will be subject to adjustment upon the
occurrence of certain dilution events, including without limitation,
subdivisions and combinations of the Common Stock, certain distributions to
holders of Common Stock and certain issuances by the Company of Common Stock,
stock options, warrants or convertible securities.
The Maturity Date of the Bridge Notes will be the earlier of (i) January
1, 2001, (ii) the date on which the Company defaults on its obligations under
the Redemption Agreement, or (iii) the occurrence of certain business
combinations, sales of assets or changes in control of the Company.
In lieu of repayment, the principal and accrued interest of the Bridge
Notes may be converted, at the option of the holder, into either (i) shares of
Common Stock at $1.25 per share or (ii) into the same type of securities as are
issued by the Company in the first equity financing transaction following the
consummation of the Bridge Financing.
The Company will be considered to be in default under the Bridge Notes
upon the occurrence of any default by the Company under the terms of the
Redemption Agreement. Upon the occurrence of any such default, at the option of
the holder, the Bridge Notes shall be convertible into Common Stock at a price
equal to the lesser of (i) the lowest price at which any shares of the Series B
Preferred can then convert into Common Stock, (ii) the lowest exercise price
then in effect under the warrants issued to the holders of the Series B
Preferred, or (iii) the exercise price of the Bridge Warrants. In addition, the
holders of the Bridge Notes will have the right to immediately appoint a
majority of the Company's Board of Directors.
If the Investment Bank is prepared to proceed with a Bridge Financing
and the Company elects not to proceed with such Bridge Financing for any reason,
or the Company is acquired or agrees to be acquired prior to any closing of the
Bridge Financing which precludes the consummation of the Bridge Financing, then
the Company shall be required to issue to the Investment Bank such number of
Bridge Financing Warrants as would have been issuable had the Bridge Financing
been completed.
22
REQUIREMENT OF SHAREHOLDER APPROVAL
Rule 4460 of the Nasdaq Stock Market Marketplace Rules generally
requires shareholder approval of transactions that would result in the issuance
of securities representing 20% or more of an issuer's outstanding listed
securities. The issuances of Common Stock upon exercise of the Investment Bank
Warrant, the Private Placement Warrant, the Bridge Financing Warrant and the
Bridge Investor Warrants, the issuance of Common Stock upon conversion of the
New Preferred Stock and the Bridge Notes, and the issuance of Common Stock in
payment of dividends due on the New Preferred Stock will exceed 20% of the
Company's outstanding Common Stock. In order to comply with the requirements of
Rule 4460 of the Nasdaq Stock Market Marketplace Rules, the Board of Directors
is proposing this Item # 3 to the Company's shareholders for approval. Failure
to obtain shareholders approval may make it more difficult for the Company to
obtain future financing on as favorable terms.
To avoid the adverse consequences of the failure to obtain shareholder
approval, including without limitation, the failure to redeem the Series B
Preferred subject to the Redemption Agreement, the Board of Directors recommends
a vote "FOR" the ratification and approval of (i) the issuance and sale of the
New Preferred Stock, the Investment Bank Warrant, the Private Placement Warrant,
the Bridge Financing Warrant and the Bridge Investor Warrants, (ii) the
issuances of Common Stock upon exercise of the Investment Bank Warrant, the
Private Placement Warrant, the Bridge Financing Warrant and the Bridge Investor
Warrants, (iii) the issuance of Common Stock upon conversion of the New
Preferred Stock and the Bridge Notes, and , (iv) the issuance of Common Stock
for payment of dividends on the New Preferred Stock.
ITEM 4. AMEND THE COMPANY'S RESTATED ARTICLES OF INCORPORATION TO INCREASE
THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK FROM 50,000,000 TO
100,000,000
There will be submitted to the shareholders a proposal to amend Article
THIRD of the Company's Restated Articles of Incorporation, as amended (the
"Restated Articles") to increase the authorized number of shares of Common
Stock, $.001 par value, from 50,000,000 to 100,000,000. The full text of the
proposed amendment to the Restated Articles is set forth as Exhibit A to this
Proxy Statement.
The Company is presently authorized to issue 50,000,000 shares of Common
Stock. As of the close of business on May 8, 2000 (the "Record Date"), the
Company had 19,734,429 shares of Common Stock issued and outstanding. A balance
of 30,265,571 authorized shares of Common Stock remains available for issuance
without shareholder action. The Company believes this amount is inadequate to
fulfill its obligations pursuant to the terms of the Series B Preferred, the
Warrants, the Company's stock option and purchase plans and other agreements.
The 50,000,000 additional shares of Common Stock for which authorization is
sought would have the same rights and privileges as the Common Stock presently
outstanding. The shares of Common Stock have no preemptive rights or other
rights to subscribe for additional shares.
In view of the foregoing, the Board of Directors of the Company believes
that it is desirable to have additional shares of Common Stock and thus has
adopted a resolution recommending the approval of a proposed amendment to the
Restated Articles that would increase the number of shares of Common Stock which
the Company is authorized to issue from 50,000,000 to 100,000,000 shares. The
proposed amendment does not change any other provision of the Restated Articles.
The additional shares of Common Stock will be available for issuance from time
to time for general corporate purposes as determined by the Company's Board of
Directors, including possible future equity financings, stock dividends, stock
splits, employee benefit programs, issuances under stock options heretofore or
hereafter granted or in connection with the acquisition of the stock or assets
of other companies. The Company does not expect to obtain shareholder votes with
respect to such issuances, except as may be required, in any given instance, by
the policies of the Nasdaq National Market or any stock exchange or other
quotation system on which the Company's securities may listed or quoted in the
future or pursuant to the requirements of Florida law.
23
The Board of Directors recommends that all shareholders vote "FOR" the
proposed amendment to the Restated Articles.
ITEM 5. ADOPTION OF THE 2000 STOCK OPTION PLAN
The Board of Directors and a majority of the Company's shareholders by
written proxy on August 16, 1999, adopted and approved the 2000 Stock Option
Plan (the "2000 Plan") for its employees, officers and directors. Under the
rules, although the 2000 Plan had been approved by the majority of shareholders
and was effective as of August 11, 2000, it must be submitted to a vote for
ratification and approval at this shareholders meeting. Of the 300,000 shares of
Common Stock available for issuance under the 2000 Plan, 210,000 have been
issued.
The following description of the 2000 Plan is qualified by reference to
the complete text of such 2000 Plan which is set forth on Exhibit B.
The 2000 Plan provides for the issuance of up to 300,000 shares upon
exercise of options designated as either "incentive stock options" or
"non-qualified options" within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code"). The purpose of the 2000 Plan is
to encourage stock ownership by certain directors, officers, other key employees
and consultants of the Company and give them a greater personal interest in the
success of the Company. The 2000 Plan is administered by the Compensation
Committee of the Board of Directors which determines, among other things, the
persons to be granted options under the 2000 Plan, the number of shares subject
to each option and the option price. The exercise price of any incentive stock
option granted under the 2000 Plan may not be less than the fair market value of
the shares subject to the option on the date of grant; provided, however, that
the exercise price of any incentive stock option granted to an eligible employee
owning more than 10% of the outstanding Common Stock may not be less than 110%
of the fair market value of the shares underlying such options on the date of
grant. Non-qualified options may not be granted with exercise prices less than
the fair market value of the shares subject to the option on the date of grant.
The term of each option and the manner in which it may be exercised is
determined by the Board of Directors or a committee appointed by the Board of
Directors provided that no option may be exercisable more than ten years after
the date of grant and, in the case of an incentive stock option granted to an
eligible employee owning more than 10% of the Common Stock, no more than five
years after the date of grant. Incentive stock options may be granted only to
employees and no option granted to an employee may be exercised unless, at the
time of exercise, the grantee is an employee of the Company or a subsidiary, and
in the event of death, options may be exercised during a twenty-four month
period following such event. The Company may grant an employee options for any
numbers of shares, except that the value of the shares subject to one or more
incentive stock options first exercisable in any calendar year may not exceed
$100,000 (determined at the date of grant). Options are not transferable, except
upon the death of the optionee or for estate planning purposes under certain
circumstances and if approved by the Board of Directors. The 2000 plan has no
change of control provisions.
A summary of the federal income tax treatment under the Code, as
presently in effect, of options granted under the 2000 Plan is as follows. The
Company recommends that optionees seek independent tax advice with respect to
their options.
With respect to incentive stock options, an optionee will not recognize
any taxable income at the time an ISO is granted and the Company will not be
entitled to a federal income tax deduction at that time. No ordinary income will
be recognized by the holder of an ISO at the time of exercise. The excess of the
market value of the shares of the Company's Common Stock at the time of exercise
over the
24
aggregate option price will be an adjustment to alternative minimum taxable
income for purposes of the federal "alternative minimum tax" at the date of
exercise. If the optionee holds the shares of the Company's Common Stock
acquired upon exercise of the ISO for the greater of two years after the date
the option was granted or one year after the acquisition of such shares, the
difference between the aggregate option price and the amount realized upon
disposition of the shares will constitute a long-term capital gain or loss, as
the case may be, and the Company will not be entitled to a federal income tax
deduction. If the shares of the Company's Common Stock are disposed of in a
sale, exchange of other "disqualifying disposition" within two years after the
date of grant or within one year after the date of exercise, the optionee will
realize ordinary income in an amount equal to the excess of the market value of
the shares of the Company's Common Stock at the time of exercise, over the
aggregate option price. The Company may be entitled to a federal income tax
deduction equal to such amount.
With respect to non-qualified stock options, the granting of a NQSO does
not produce taxable income to the recipient or a tax deduction to the Company.
Taxable ordinary income will be recognized by the holder at the time of such
exercise in an amount equal to the excess of the market value of shares of the
Company's Common Stock purchased at the time of such exercise over the aggregate
option price. The Company may be entitled to a corresponding federal income tax
deduction. Upon a subsequent disposition of the shares of the Company's Common
Stock, optionee will generally recognize taxable capital gain or loss based upon
the difference between the per share market value at the time of exercise and
the per share selling price. Taxable income at the time or exercise will
constitute wages subject to withholding of income tax and the Company will be
required to make whatever arrangements are necessary to insure that funds
equaling the amount of tax required to be withheld are available for payment.
The tax basis for the shares of the Company's Common Stock acquired is the
option price plus the taxable income recognized.
To avoid the adverse consequences of the failure to obtain shareholder
approval, including without limitation, the lack of authorized shares to fulfill
the Company's obligations pursuant to the term of the Series B Preferred, the
Warrants and other agreements, the Board of Directors recommends that all
shareholders vote "FOR" approval of the 2000 Stock Option Plan.
ITEM 6. ADOPTION OF THE PROPOSED 2000 1/2 STOCK OPTION PLAN
The Board of Directors has adopted the 2000 1/2 Stock Option Plan (the
"2000 1/2 Plan"), for its employees, officers and directors. The 2000 1/2 Plan
is effective July 7, 2000, upon shareholder approval. Of the 5,000,000 shares of
Common Stock available for issuance under the 2000 1/2 Plan, no shares have been
issued. The purpose of the 2000 1/2 Plan is to attract and retain directors,
officers, other key employees and consultants, to encourage stock ownership by
such persons and to give them a greater personal interest in the success of the
Company.
The following description of the 2000 1/2 Plan is qualified by reference
to the complete text of such Plan which is set forth on Exhibit C.
The 2000 1/2 Plan provides for the issuance of up to 5,000,000 shares
upon exercise of options designated as either "incentive stock options" or
"non-qualified options" within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code"). The 2000 1/2 Plan is administered
by the Compensation Committee of the Board of Directors which determines, among
other things, the persons to be granted options under the 2000 1/2 Plan, the
number of shares subject to each option and the option price. The exercise price
of any incentive stock option granted under the 2000 1/2 Plan may not be less
than the fair market value of the shares subject to the option on the date of
grant; provided, however, that the exercise price of any incentive stock option
granted to an eligible employee owning more than 10% of the outstanding Common
Stock may not be less than 110% of the fair market value of the shares
underlying such options on the date of grant. Non-qualified options may not be
granted with exercise prices less than the fair market value of the shares
subject to the option on the date of grant. The term of
25
each option and the manner in which it may be exercised is determined by the
Board of Directors or a committee appointed by the Board of Directors provided
that no option may be exercisable more than ten years after the date of grant
and, in the case of an incentive stock option granted to an eligible employee
owning more than 10% of the Common Stock, no more than five years after the date
of grant. Incentive stock options may be granted only to employees and no option
granted to an employee may be exercised unless, at the time of exercise, the
grantee is an employee of the Company or a subsidiary, and in the event of
death, options may be exercised during a twelve month period following such
event. The Company may grant an employee options for any numbers of shares,
except that the value of the shares subject to one or more incentive stock
options first exercisable in any calendar year may not exceed $100,000
(determined at the date of grant). Options are not transferable, except upon the
death of the optionee or for estate planning purposes under certain
circumstances and if approved by the Board of Directors. The 2000 1/2 Plan has
change of control provisions.
A summary of the federal income tax treatment under the Code, as
presently in effect, of options granted under the 2000 1/2 Plan is as follows.
The Company recommends that optionees seek independent tax advice with respect
to their options.
With respect to incentive stock options, an optionee will not recognize
any taxable income at the time an ISO is granted and the Company will not be
entitled to a federal income tax deduction at that time. No ordinary income will
be recognized by the holder of an ISO at the time of exercise. The excess of the
market value of the shares of the Company's Common Stock at the time of exercise
over the aggregate option price will be an adjustment to alternative minimum
taxable income for purposes of the federal "alternative minimum tax" at the date
of exercise. If the optionee holds the shares of the Company's Common Stock
acquired upon exercise of the ISO for the greater of two years after the date
the option was granted or one year after the acquisition of such shares, the
difference between the aggregate option price and the amount realized upon
disposition of the shares will constitute a long-term capital gain or loss, as
the case may be, and the Company will not be entitled to a federal income tax
deduction. If the shares of the Company's Common Stock are disposed of in a
sale, exchange of other "disqualifying disposition" within two years after the
date of grant or within one year after the date of exercise, the optionee will
realize ordinary income in an amount equal to the excess of the market value of
the shares of the Company's Common Stock at the time of exercise, over the
aggregate option price. The Company may be entitled to a federal income tax
deduction equal to such amount.
With respect to non-qualified stock options, the granting of a NQSO does
not produce taxable income to the recipient or a tax deduction to the Company.
Taxable ordinary income will be recognized by the holder at the time of such
exercise in an amount equal to the excess of the market value of shares of the
Company's Common Stock purchased at the time of such exercise over the aggregate
option price. The Company may be entitled to a corresponding federal income tax
deduction. Upon a subsequent disposition of the shares of the Company's Common
Stock, optionee will generally recognize taxable capital gain or loss based upon
the difference between the per share market value at the time of exercise and
the per share selling price. Taxable income at the time or exercise will
constitute wages subject to withholding of income tax and the Company will be
required to make whatever arrangements are necessary to insure that funds
equaling the amount of tax required to be withheld are available for payment.
The tax basis for the shares of the Company's Common Stock acquired is the
option price plus the taxable income recognized.
The Board of Directors recommends that all shareholders vote "FOR"
approval of the proposed 2000 1/2 Stock Option Plan.
26
INDEPENDENT ACCOUNTANTS
The Board has appointed PricewaterhouseCoopers LLP, Miami, Florida, as
independent accountants to audit the consolidated financial statements of the
Company for the fiscal year ending December 31, 2000. Representatives of
PricewaterhouseCoopers LLP will be present at the Annual Meeting of Shareholders
and will be afforded the opportunity to make a statement if they desire to do so
and to respond to appropriate questions.
OTHER MATTERS
The Board of Directors is not aware of any other business that may come
before the meeting. However, if additional matters properly come before the
meeting, proxies will be voted at the discretion of the proxy holders.
SHAREHOLDER PROPOSALS
Shareholder proposals intended to be presented at the Year 2001 Annual
Meeting of Shareholders of the Company must be received by the Company not later
than December 31, 2000, at its principal executive offices, 2555 Davie Road,
Suite 110, Fort Lauderdale, Florida 33317, Attention: Sara L. Wilkins, Vice
President-Investor Relations and Corporate Communications, for inclusion in the
proxy statement and proxy relating to the Year 2001 Annual Meeting of
Shareholders.
ADDITIONAL INFORMATION
Accompanying this proxy statement is a copy of the Company's annual
report, which includes a copy of the Annual Report on Form 10-K. Additional
copies of the Company's Annual Report on Form 10-K may be obtained from the
Company on written request. Items 6-9 of the Company's Annual Report on Form
10-K are hereby incorporated by reference.
BY ORDER OF THE
BOARD OF DIRECTORS
Frank M. Puthoff, Secretary
June 12, 2000
Fort Lauderdale, Florida
27
EXHIBIT A
ARTICLES OF AMENDMENT
TO
RESTATED ARTICLES OF INCORPORATION
OF
PROXYMED, INC., A FLORIDA CORPORATION
Pursuant to the provisions of Section 607.1006, Florida Statutes, ProxyMed,
Inc., (the "Corporation") adopts the following Articles of Amendment to its
Restated Articles of Incorporation:
FIRST: Article III of the Corporation's Restated Articles of Incorporation is
amended by striking out the first paragraph thereof and by substituting
in lieu of said paragraph the following new first paragraph to Article
III:
"The Corporation is authorized to issue 100,000,000 shares of Common
Stock, par value $.001 per share, and 2,000,000 shares of preferred
stock, par value $.01 per share."
SECOND: This Amendment was adopted by the shareholders at the Corporation's
Annual Meeting of Shareholders held on July 7, 2000. The number of
votes cast were sufficient for approval.
Dated as of the _____ day of __________, 2000.
ProxyMed, Inc.
By: ________________________________
John B. Okkerse, Jr.
Chief Executive Officer and Director
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[OBJECT OMITTED]
EXHIBIT B
2000 STOCK OPTION PLAN
1. PURPOSE OF THE PLAN
The purpose of this Plan is to further the growth of ProxyMed, Inc., a Florida
corporation, and its subsidiaries (the "Company") by offering an incentive to
officers, directors, other key employees and consultants of the Company to
continue in the employ of the Company, and to increase the interest of these
individuals in the Company through additional ownership of its common stock.
2. DEFINITIONS
Whenever used in this Plan, the following terms shall have the meanings set
forth in this Section:
a) "Board of Directors" means the Board of Directors of the Company.
b) "Code" means the Internal Revenue Code of 1986, as amended.
c) "Committee" means the Compensation Committee or similar committee of
the Board of Directors.
d) "Common Stock" means the common stock, par value $.001 per share, of
the Company.
e) "Date of Grant" means, as the case may be: (i) the date the
Committee approves the grant of an Option pursuant to this Plan; or (ii) such
later date as may be specified by the Committee as the date a particular Option
granted pursuant to this Plan will become effective.
f) "Employee" means any person employed by the Company within the
meaning of Section 3401(c) of the Code and the regulations promulgated
thereunder. For purposes of any Non-Qualified Option only, any officer or
director of the Company shall be considered an Employee even if he is not an
employee within the meaning of the first sentence of this subsection.
g) "Exercise Price" means the price per share which must be paid upon
exercise of an Option in cash or property or a combination of both.
h) "Fair Market Value" means: (i) if the Common Stock is traded in a
market in which actual transactions are reported, the mean of the high and low
prices at which the Common Stock is reported to have traded on the relevant date
in all markets on which trading in the Common Stock is reported or, if there is
no reported sale of the Common Stock on the relevant date, the mean of the
highest reported bid price and lowest reported asked price for the Common Stock
on the relevant date; (ii) if the Common Stock is Publicly Traded but only in
markets in which there is no reporting of actual transactions, the mean of the
highest reported bid price and the lowest reported asked price for the Common
Stock on the relevant date; or (iii) if the Common Stock is not Publicly Traded,
the value of a share of Common Stock as determined by the most recent valuation
prepared by an independent expert at the request of the Committee.
i) "Incentive Stock Option" means any Option which, at the time of the
grant, is an incentive stock option within the meaning of Section 422 of the
Code.
j) "Non-Qualified Option" means any Option that is not an Incentive
Stock Option pursuant to the terms of this Plan.
k) "Option" means any option granted pursuant to this Plan.
l) "Publicly Traded" means that a class of stock is required to be
registered pursuant to Section 12 of the Exchange Act, or that stock of that
class has been sold within the preceding 12 months in an underwritten public
offering, or stock that is regularly traded in a public market.
m) "Retirement" means a Termination of Employment by reason of an
Employee's retirement at a time when the Employee is at least 65 years old,
other than by reason of a termination by resignation, discharge, death or Total
Disability or the resignation, failure to stand for re-election or dismissal
from the Board of Directors.
n) "Termination of Employment" means the time when the
employee-employer relationship between an Employee and the Company ceases to
exist for any reason including, but not limited to, a termination by
resignation, discharge, death, Total Disability or Retirement, or the
resignation, failure to stand for re-election or dismissal from the Board of
Directors.
o) "Total Disability" means the inability of an Employee to perform the
material duties of his or her job by reason of a medically determinable physical
or mental impairment that can be expected to result in death or that has lasted
or can be expected to last for a continuous period of not less than 12 months.
All determinations as to the date and extent of disability of an Employee will
be made in accordance with the written policy pertaining to Employee disability,
if any, of the Company by which the Employee is employed. In the absence of a
written policy pertaining to Employee disability, all determinations as to the
date and extent of disability of an Employee will be made by the Committee in
its sole and absolute discretion. In making its determination, the Committee may
consider the opinion of the personal physician of the Employee or the opinion of
an independent licensed physician of the Company's choosing.
3. EFFECTIVE DATE OF THE PLAN
The "effective date" of this Plan is August 11, 1999.
4. ADMINISTRATION OF THE PLAN
Either the Board of Directors or the Committee shall be responsible for the
administration of this Plan, and shall grant Options pursuant to this Plan.
Subject to the express provisions of this Plan, the Committee shall have full
authority to interpret this Plan, to prescribe, amend and rescind rules and
regulations relating to it, and to make all other determinations which it
believes to be necessary or advisable in administering this Plan. The
determinations of the Committee on the matters referred to in this section shall
be conclusive. The Committee may not amend this Plan. No member of the Committee
shall be liable for any act or omission in connection with the administration of
this Plan unless it resulted from the member's willful misconduct.
5. THE COMMITTEE
The Committee shall hold its meeting at such times and places as it may
determine and shall maintain written minutes of its meetings. A majority of the
members of the Committee shall constitute a quorum at any meeting of the
Committee. All determinations of the Committee shall be made by the vote of a
majority of the members who participate in a meeting. The members of the
Committee may participate in a meeting of the Committee in person or by
conference telephone or similar communications equipment by means of which all
members can hear each other. Any decision or determination by written consent of
all of the members of the Committee shall be as effective as if it had been made
by a vote of a majority of the members who participate in a meeting.
6. STOCK SUBJECT TO THE PLAN
The maximum number of shares of Common Stock as to which Options may be granted
pursuant to this Plan is 300,000 shares. The maximum number of shares of such
Common Stock shall be reduced each year
2
by the grant of Options as provided herein. If any Option expires or is canceled
without being exercised in full, the number of shares as to which the Option is
not exercised will once again become shares as to which new Options may be
granted. The Common Stock that is issued on exercise of Options may be
authorized but unissued shares or shares that have been issued and reacquired by
the Company.
7. PERSONS ELIGIBLE TO RECEIVE OPTIONS
Options may be granted only to Employees, as defined in Section 2(i) above.
8. GRANTS OF OPTIONS
a) IN GENERAL. Except as otherwise provided herein, the Committee shall
have complete discretion to determine when and to which Employees Options are to
be granted, the number of shares of Common Stock as to which Options granted to
each Employee will relate, whether Options granted to an Employee will be
Incentive Stock Options or Non-Qualified Options or partly Incentive Stock
Options and partly Non-Qualified Options and, subject to the limitations in
Sections 9 and 10 below, the Exercise Price and the term of Options granted to
an Employee. Any Options that are not designated as Incentive Stock Options when
they are granted shall be Non-Qualified Options. No grant of an Incentive Stock
Option may be conditioned upon a Non-Qualified Option's having yet been
exercised in whole or in part, and no grant of a Non-Qualified Option may be
conditioned upon an Incentive Stock Option's having not been exercised in whole
or in part.
9. OPTION PROVISIONS
a) EXERCISE PRICE. The Exercise Price of each Option shall be as
determined by the Committee; provided, however, that in the case of Incentive
Stock Options, the Exercise Price shall not be less than 100% of the Fair Market
Value of the Common Stock on the Date of Grant of the Option.
b) TERM. The term of each Option shall be as determined by the
Committee, but in no event shall the term of an Option (whether or not an
Incentive Stock Option) be longer than ten (10) years from the Date of Grant.
c) MANNER OF EXERCISE. An Option that has vested pursuant to the terms
of this Plan may be exercised in whole or in part, in increments of a minimum of
100 shares, at any time, or from time to time, during its term. To exercise an
Option, the Employee exercising the Option must deliver to the Company, at its
principal office:
i) a written notice of exercise of the Option, which states
the extent to which the Option is being exercised and which is executed by the
Employee;
ii) a check in an amount, or Common Stock with a Fair Market
Value, equal to the Exercise Price of the Option times the number of shares
being exercised, or a combination of the foregoing; and
iii) a check equal to any withholding taxes the Company is
required to pay as a result of the exercise of the Option by the Employee. If
permitted by the Board of Directors or the Committee, either at the time of the
grant of the Option or the time of exercise, the Employee may elect, at such
time and in such manner as the Board of Directors or the Committee may
prescribe, to satisfy such withholding obligation by (A) delivering to the
Company Common Stock (which in the case of Common Stock acquired from the
Company shall have been owned by the Employee for at least six months prior to
the delivery date) having a fair market value equal to such withholding
obligation, or (B) requesting that the Company withhold from the shares of
Common Stock to be delivered upon the exercise a number of shares of Common
Stock having a fair market value equal to such withholding obligation.
3
The day on which the Company receives all of the items specified in this
subsection shall be the date on which the Option is exercised to the extent
described in the notice of exercise.
d) DELIVERY OF STOCK CERTIFICATES. As promptly as practicable after an
Option is exercised, the Company shall cause the transfer agent to deliver to
the Employee who exercises the Option certificates, registered in that person's
name, representing the number of shares of Common Stock that were purchased by
the exercise of the Option. Unless the Common Stock was issued in a transaction
that was registered pursuant to the Securities Act of 1933, as amended (the
"Securities Act"), each certificate may bear a legend to indicate that if the
Common Stock represented by the certificate was issued in a transaction that was
not registered pursuant to the Securities Act, and may only be sold or
transferred in a transaction that is registered pursuant to the Securities Act
or is exempt from the registration requirements of the Securities Act.
e) VESTING OF OPTIONS. Except as otherwise provided in this Plan, the
Options granted hereunder to Employees shall be subject to such conditions as to
vesting as shall be determined by the Committee, in its sole and absolute
discretion, at the Date of Grant of the Option, and the terms of such vesting
shall be clearly set forth in the instrument granting the Option. Upon exercise
of an Option and the delivery the stock certificates as provided herein, the
Common Stock acquired upon exercise of the Option shall not be subject to
forfeiture by the Employee for any reason whatsoever.
f) NON-TRANSFERABILITY OF OPTIONS. During the lifetime of a person to
whom an Option is granted pursuant to this Plan, the Option may be exercised
only by that person or by his or her guardian or legal representative, except to
the extent the Board of Directors or the Compensation Committee shall otherwise
determine, whether at the time the option is granted or thereafter, and then
only for estate planning purposes to a trust wherein the option holder is the
trustee, and except to the extent the Board of Directors or the Committee shall
otherwise determine, whether at the time Option is granted or thereafter. An
Option may not be assigned, transferred, sold, pledged or hypothecated in any
way; shall not be subject to levy or execution or disposition under the
Bankruptcy Code of 1978, as amended, or any other state or federal law granting
relief to creditors, whether now or hereafter in effect; and shall not be
transferable otherwise than by will or the laws of descent and distribution. The
Company will not recognize any attempt to assign, transfer, sell, pledge,
hypothecate or otherwise dispose of an Option contrary to the provisions of this
Plan, or to levy any attachment, execution or similar process upon any Option
and, except as expressly stated in this Plan, the Company shall not be required
to, and shall not, issue Common Stock on the exercise of an Option to anyone who
claims to have acquired that Option from the person to whom it was granted in
violation of this subsection.
g) RETIREMENT OF HOLDER OF OPTION. If there is a Termination of
Employment of an Employee to whom an Option has been granted due to Retirement,
each Stock Option held by the retired Employee, whether or not then vested, may
be exercised until the earlier of: (x) the end of the twenty-four (24) month
period immediately following the date of such Termination of Employment; or (y)
the expiration of the term specified in the Option.
h) TOTAL DISABILITY OF HOLDER OF OPTION. If there is a Termination of
Employment of an Employee to whom an Option has been granted by reason of his or
her Total Disability, each Option held by the Employee, whether or not then
vested, may be exercised until the earlier of: (x) the end of the twenty-four
(24) month period immediately following the date of such Termination of
Employment; or (y) the expiration of the term specified in the Option.
i) DEATH OF HOLDER OF OPTION. If there is a Termination of Employment
of an Employee to whom an Option has been granted by reason of (i) his or her
death, or (ii) the death of a former Employee within twenty-four (24) months
following the date of his or her Retirement, or (iii) the death of a former
Employee within twenty-four (24) months following the date of his or her
Termination of Employment by
4
reason of Total Disability, then each Option held by the person at the time of
his or her death, whether or not then vested, may be exercised by the person or
persons to whom the Option shall pass by will or by the laws of descent and
distribution (but by no other persons) until the earlier of: (x) the end of the
twenty-four (24) month period immediately following the date of death (or such
longer period as is permitted by the Committee); and (y) the expiration of the
term specified in the Option, provided, however, that in no event is the term of
the Option to be deemed to expire prior to the end of three (3) months from the
date of death of the Employee.
j) TERMINATION OF EMPLOYMENT OTHER THAN FOR RETIREMENT, DEATH OR
DISABILITY. Unless the Committee or the Board of Directors states otherwise with
respect to a specific Option, if there is a Termination of Employment of an
Employee to whom an Option has been granted pursuant to this Plan for any reason
other than the Retirement, death or Total Disability of the Employee, then all
Options held by such Employee which are then vested may be exercised until the
earlier of: (x) the twenty-four (24) month period immediately following the date
of such Termination of Employment; or (y) the expiration of the term specified
in the Option.
k) STOCK OPTION AGREEMENT. As promptly as practicable after an Employee
is granted an Option pursuant to this Plan, the Committee shall send the
Employee a document setting forth the terms and conditions of the grant. The
form of grant document shall be substantially as set forth in Exhibit "A"
attached hereto. Each Option granted pursuant to this Plan must be clearly
identified as to whether it is or is not an Incentive Stock Option and shall set
forth all other terms and conditions relating to the exercise thereof. In the
case of an Incentive Stock Option, the document shall include all terms and
provisions that the Committee determines to be necessary or desirable in order
to qualify the Option as an Incentive Stock Option within the meaning of Section
422 of the Code. If an Employee is granted an Incentive Stock Option and a
Non-Qualified Option at the same time, the Committee shall send the Employee a
separate document relating to each of the Incentive Stock Option and the
Non-Qualified Option.
l) REGISTRATION OF PLAN. The Company shall have no obligations to
register the Plan unless directed to do so by the Board of the Company based on
the Company's best interests.
10. SPECIAL PROVISIONS RELATING TO INCENTIVE STOCK OPTIONS
No Incentive Stock Option may be granted pursuant to this Plan after ten (10)
years from the first to occur of: (i) the date this Plan is adopted by the Board
of Directors; or (ii) the date this Plan is approved by the stockholders of the
Company. No Incentive Stock Option may be exercised after the expiration of ten
(10) years from the Date of Grant or such shorter period as is provided herein.
Notwithstanding Section 8(b) hereof, Incentive Stock Options may not be granted
to an Employee who, at the time the Option is granted, owns more than ten (10%)
percent of the total combined voting power of the stock of the Company, unless:
(i) the purchase price of the Common Stock pursuant to the Incentive Stock
Option is at least 110 percent of the Fair Market Value of the Common Stock on
the Date of Grant; and (ii) the Incentive Stock Option by its terms is not
exercisable after the expiration of five (5) years from the Date of Grant. The
Committee is authorized, pursuant to the last sentence of Section 422(b) of the
Code, to provide at the time an Option is granted, pursuant to the terms of such
Option, that such Option shall not be treated as an Incentive Stock Option even
though it would otherwise qualify as an Incentive Stock Option. The terms of any
Incentive Stock Option granted hereunder shall, in the hands of any individual
grantee thereof, be subject to the dollar limitations set forth in Section
422(d) of the Code (pertaining to the $100,000 per year limitation).
11. RECAPITALIZATION
a) IN GENERAL. If the Company increases the number of outstanding
shares of Common Stock through a stock dividend or a stock split, or reduces the
number of outstanding shares of Common Stock through a combination of shares or
similar recapitalization then, immediately after the record date for the
5
change: (i) the number of shares of Common Stock issuable on the exercise of
each outstanding Option granted pursuant to this Plan (whether or not then
vested) shall be increased in the case of a stock dividend or a stock split, or
decreased in the case of a combination or similar recapitalization that reduces
the number of outstanding shares, by a percentage equal to the percentage change
in the number of outstanding shares of Common Stock as a result of the stock
dividend, stock split, combination or similar recapitalization; (ii) the
Exercise Price of each outstanding Option granted pursuant to this Plan (whether
or not then vested) shall be adjusted so that the total amount to be paid upon
exercise of the Option in full will not change; and (iii) the number of shares
of Common Stock that may be issued on exercise of Options granted pursuant to
this Plan (whether or not then vested) and that are outstanding or remain
available for grant shall be increased or decreased by a percentage equal to the
percentage change in the number of outstanding shares of Common Stock. Any
fractional shares will be rounded up to whole shares.
12. RIGHTS OF OPTION HOLDER
a) STOCKHOLDER. The holder of an Option (whether or not then vested)
shall not have any rights as a stockholder by reason of holding that Option.
Upon exercise of an Option granted pursuant to this Plan, the holder shall be
deemed to acquire the rights of a stockholder when, but not before, the issuance
of Common Stock as a result of the exercise is recorded in the stock transfer
records of the Company.
b) EMPLOYMENT. Nothing in this Plan or in the grant of an Option shall
confer upon any Employee the right to continue in the employ of the Company or
shall interfere with or restrict in any way the rights of the Company to
discharge any Employee at any time for any reason whatsoever, with or without
cause.
13. LAWS AND REGULATIONS
The obligation of the Company to sell and deliver shares of Common Stock on
vesting and exercise of Options granted pursuant to this Plan shall be subject
to the condition that counsel for the Company be satisfied that the sale and
delivery thereof will not violate the Securities Act or any other applicable
laws, rules or regulations. In addition, the Company may, as a condition to such
sale and delivery, require the Employee to represent and warrant at the time of
any such exercise that the shares are being purchased only for investment and
without any present intention to sell or distribute such shares if, in the
opinion of counsel for the Company, such a representation is required pursuant
to such securities laws.
14. WITHHOLDING OF TAXES
a) IN GENERAL. In addition to the requirement set forth in Section 9(c)
above that, in order to exercise an Option granted pursuant to this Plan a
person must make a payment to the Company or authorize withholding in order to
enable the Company to pay any withholding taxes due as a result of the exercise
of that Option, if an Employee who exercised an Incentive Stock Option disposes
of shares of Common Stock acquired through exercise of that Incentive Stock
Option either (x) within two years after the Date of Grant of the Incentive
Stock Option or (y) within one year after the issuance of the shares on exercise
of the Incentive Stock Option then, promptly thereafter, the Employee shall
notify the Company of the occurrence of the event and the amount realized upon
the disposition of such Common Stock by the Employee, and pay any federal, state
and other taxes due as a result thereof.
b) WITHHOLDING OF TAXES. If, whether because of a disposition of Common
Stock acquired on exercise of an Incentive Stock Option, the exercise of a
Non-Qualified Option or otherwise, the Company becomes required to pay
withholding taxes to any federal, state or other taxing authority and the
Employee fails to provide the Company with the funds with which to pay that
withholding tax, then the Company may withhold, subject to applicable state law,
up to 50% of each payment of salary or bonus to the Employee
6
(which will be in addition to any other required or permitted withholding),
until the Company has been reimbursed for the entire withholding tax it was
required to pay.
15. RESERVATION OF SHARES
The Company shall at all times keep reserved for issuance on exercise of Options
granted pursuant to this Plan a number of authorized but unissued or reacquired
shares of Common Stock equal to the maximum number of shares the Company may be
required to issue on exercise of outstanding Options (whether or not then
vested) granted pursuant to this Plan.
16. AMENDMENT OF THE PLAN
The Board of Directors may, at any time and from time to time, modify or amend
this Plan in any respect effective at any date the Board of Directors
determines; provided, however, that, without the approval of the stockholders of
the Company the Board of Directors may not increase the maximum number of
Incentive Stock Options that may be granted under the Plan. No modification or
amendment of this Plan shall, without the consent of the holder of an
outstanding Option (whether nor not then vested), adversely affect the holder's
rights pursuant to that Option.
17. TERMINATION OF THE PLAN
The Board of Directors may suspend or terminate this Plan at any time
or from time to time, but no such action shall adversely affect the rights of a
person holding an outstanding Option, whether or not then vested, granted
pursuant to this Plan prior to that date.
7
STOCK OPTION AGREEMENT
This Agreement is made as of ___________, by and between PROXYMED, INC.
(the "Company") and _____________, who is an employee, officer or director of
the Company or one of its subsidiaries (the "Employee").
WHEREAS, the Employee is a valuable and trusted employee, officer or
director of the Company, and the Company considers it desirable and in its best
interests that the Employee be given an inducement to acquire a further
proprietary interest in the Company, and an added incentive to advance the
interests of the Company by possessing a right (the "Option Right") to purchase
shares of the Company's common stock, $.001 par value (the "Option Stock"), in
accordance with the PROXYMED, INC. 2000 Stock Option Plan (the "Plan").
NOW, THEREFORE, in consideration of the premises, it is agreed by and
between the parties as follows:
1. DEFINITIONS. All terms not defined herein and defined in the Plan shall
be given the meaning expressed in the Plan.
2. GRANT OF OPTION. The Company hereby grants to the Employee the right,
privilege and option to purchase the number of shares of Option Stock,
at the purchase price as shown on Schedule I attached hereto (the
"Option Price"), in the manner and subject to the conditions
hereinafter provided in this Agreement and as provided in the Plan. The
Option Right granted hereunder is either an Incentive Stock Option or
Non-Qualified Option, as specified on Schedule I.
3. TIME OF EXERCISE OF OPTION. The aforesaid Option Right may be exercised
at any time, subject to Section 4, below, and from time to time, until
the termination thereof as provided in Paragraph 6, below, or as
otherwise provided in the Plan; provided, however, that the Option
Right granted herein may not be exercised after the termination date as
shown on Schedule I, unless provided otherwise in the Plan.
4. VESTING OF OPTION RIGHT. The Option Right shall vest as provided in
Schedule I.
5. METHOD OF EXERCISE. The Option Right shall be exercised in whole or in
part, in increments of a minimum of one hundred (100) shares, at any
time, or from time to time, during its term. To exercise an option, the
Employee shall deliver written notice in the form attached hereto as
Schedule II to the Company at its principal place of business,
accompanied by payment of the Option Price per share and compliance
with such other conditions and requirements as set forth in the Plan.
Payment shall be made by a check, plus a check equal to any withholding
taxes that the Company is required to pay as a result of the exercise
of the Option by the Employee.
1
Subject to the terms and conditions set forth in the Plan, as promptly
as practicable after an Option is exercised, the Company shall deliver
such shares issuable upon exercise of the Option.
6. TERMINATION OF EMPLOYMENT. The rights and obligations of the Employee
upon Termination of Employment shall be as set forth in the Plan.
7. RESTRICTIONS ON CERTAIN RESALES. The shares issuable upon exercise of
this Option have not been registered under the Securities Act of 1933,
as amended (the "Securities Act") or under any state securities laws,
and are being offered and sold in reliance upon federal and state
exemptions for transactions not involving any public offering. The
holder may not resell the shares purchased hereunder except pursuant to
registration under the Securities Act or an exemption therefrom.
Resales of shares issuable hereunder may be subject to other state and
federal securities laws. The Employee is advised to consult with legal
counsel as to compliance with the Securities Act, the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and such other
laws prior to resale of such shares.
The Company, as a condition to the exercise of an Option to acquire
shares not registered under the Securities Act, may require the
Employee to represent and warrant at the time of any exercise that the
shares are being purchased only for investment and without any present
intention to sell or distribute such shares if, in the opinion of
counsel for the Company, such a representation is required by the
Securities Act.
8. RECLASSIFICATION, MERGER, ETC. The rights and obligations of the
Company and the Employee as a result of the transactions specified in
Section 11 of the Plan shall be as provided therein.
9. RIGHTS PRIOR TO EXERCISE OF OPTION. This Option Right is nonassignable
and nontransferable by the Employee except as provided in the Plan and,
during his lifetime, is exercisable only by him. The Employee shall
have no rights as a stockholder with respect to the Option Stock until
payment of the Option Price and delivery to him of such shares as
herein provided. Nothing in this Agreement shall confer any right in an
employee to continue in the employment of the Company or interfere in
any way with the right of the Company to terminate such employment at
any time.
10. BINDING EFFECT. This Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective heirs, executors,
administrators, successors and assigns.
11. DISCREPANCIES. If there appears to be any discrepancies between this
Agreement and the Plan, they shall be interpreted and determined by the
terms and conditions of the Plan.
2
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed on the day and year first above written.
PROXYMED, INC.
By:_________________________________ By: __________________________________
Frank M. Puthoff, Secretary Harold S. Blue, Chairman of the Board
and Chief Executive Officer
I hereby accept the stock option right offered to me by the Company, as
set forth in this Stock Option Agreement dated as of _________, and Schedule I
which is attached thereto.
Accepted by:
Employee:
_____________________________________
EMPLOYEE SIGNATURE
_____________________________________
DATE
3
SCHEDULE I
The information set forth in this Schedule I is subject to all of the
terms of the PROXYMED, INC. Stock Option Agreement to which this Schedule is
attached.
1. Name of Employee, Officer or Director:
__________________________________
2. Address:
__________________________________
__________________________________
3. Social Security Number: __________________________________
4. Number of Shares: __________________________________
5. Exercise Price: $____ per share [closing price at close of
business on _____].
6. Type of Option (check one):
[ ] Incentive Stock Option
[ ] Qualified Stock Option
7. NUMBER OF SHARES DATE VESTED TERMINATION DATE
---------------- ----------- ----------------
REFERENCE IS MADE TO THE 2000 STOCK OPTION PLAN FOR CERTAIN EVENTS SUCH AS
DEATH, DISABILITY AND TERMINATION OF EMPLOYMENT THAT CAUSE THESE OPTIONS TO
EXPIRE PRIOR TO THE TERMINATION DATE SET FORTH ABOVE.
4
SCHEDULE II
NOTICE OF EXERCISE
I, the undersigned Employee, hereby give notice of the exercise of the
Option described below, to the extent and in the manner specified herein,
subject to the all of the terms and conditions of the PROXYMED, INC. STOCK
OPTION AGREEMENT granting this Option and the PROXYMED, INC. 2000 STOCK OPTION
PLAN. If the shares to be acquired pursuant to this exercise of the Option are
not registered under the Securities Act of 1933, as amended, the undersigned
represents and warrants that the shares are being purchased only for investment
and without any present intention to sell or distribute such shares.
1. Name of Employee, Officer or Director:
__________________________________
2. Address:
__________________________________
__________________________________
__________________________________
3. Social Security Number: __________________________________
4. Number of Shares Being Exercised on This Date: ______________
5. Exercise Price: $____ per share
6. Manner of Payment:
______ Check (amount enclosed: $_________________)
__________________________________
EMPLOYEE SIGNATURE
__________________________________
DATE
SIGNATURE GUARANTEE:
__________________________
[OBJECT OMITTED]
EXHIBIT C
2000 1/2 STOCK OPTION PLAN
1. PURPOSE OF THE PLAN
The purpose of this Plan is to further the growth of ProxyMed, Inc., a Florida
corporation, and its subsidiaries (the "Company") by offering an incentive to
officers, directors, other key employees and consultants of the Company to
continue in the employ of the Company, and to increase the interest of these
individuals in the Company, through additional ownership of its common stock.
2. DEFINITIONS
Whenever used in this Plan, the following terms shall have the meanings set
forth in this Section:
a) "Board of Directors" means the Board of Directors of the
Company.
b) "Change of Control" means any of the following events:
i) an acquisition (other than directly from the Company) of
any voting securities of the Company (the "Voting Securities") by any Person (as
defined in the Exchange Act of 1934, as amended (the "1934 Act") immediately
after which such Person has "Beneficial Ownership" (within the meaning of Rule
13d-3 promulgated under the 1934 Act) of twenty percent (20%) or more of the
combined voting power of the Company's then outstanding Voting Securities;
provided, however, that in determining whether a Change in Control has occurred,
Voting Securities which are acquired in a Non-Control Acquisition (as
hereinafter defined) shall not constitute an acquisition which would cause a
Change in Control. A "Non-Control Acquisition" shall mean an acquisition by (x)
an employee benefit plan (or a trust forming a part thereof) maintained by (A)
the Company or (B) any corporation or other Person of which a majority of its
voting power or its equity securities or equity interest is owned directly or
indirectly by the Company (a "Subsidiary"), (y) the Company or any Subsidiary,
or (z) any Person in connection with a Non-Control Transaction (as hereinafter
defined).
ii) the individuals who, as of the date this Plan is approved
by the Company's Board of Directors (the "Board"), are members of the Board (the
"Incumbent Board") cease for any reason to constitute at least two-thirds (2/3)
of the Board; provided, however, that the voluntary resignation of a member of
the Incumbent Board unrelated to a Change of Control shall not affect such
calculation; provided, further, however, that if the election or nomination for
election by the Company's stockholders or Board of any new director was approved
by a vote of at least two-thirds (2/3) of the Incumbent Board, such new director
shall, for purposes of this Agreement, be considered a member of the Incumbent
Board; provided further, however, that no individual shall be considered a
member of the Incumbent Board if such individual initially assumed office as a
result of either an actual or threatened solicitation of proxies or consents by
or on behalf of a person other than the Board (a "proxy contest"), including by
reason of any agreement intended to avoid or settle any election contest or
proxy contest; or
iii) approval by stockholders of the Company of:
a) a merger, consolidation or reorganization
involving the Company, unless
(1) the stockholders of the Company, immediately
before such merger, consolidation or reorganization, own, directly or indirectly
immediately following such merger, consolidation or reorganization, at least
seventy-five percent (75%) of the combined voting power of the
outstanding Voting Securities of the corporation resulting from such merger or
consolidation or reorganization or the ultimate entity controlling such
corporation (the "Surviving Corporation") in substantially the same proportion
as their ownership of the Voting Securities immediately before such merger,
consolidation or reorganization;
(2) the individuals who are members of the
Incumbent Board immediately prior to the execution of the agreement providing
for such merger, consolidation or reorganization constitute at least two-thirds
(2/3) of the members of the board of directors of the Surviving Corporation and
no agreement, plan or arrangement is in place to change the composition of the
board following the merger, consolidation or reorganization such that the
Incumbent Board would constitute less than two-thirds (2/3) of the reconstituted
board;
(3) no person (other than the Company, any
Subsidiary, or any employee benefit plan (or any trust forming a part thereof)
maintained by the Company, the Surviving Corporation or any Subsidiary, or any
Person who immediately prior to such merger, consolidation or reorganization had
Beneficial Ownership of twenty percent (20%) or more of the then-outstanding
Voting Securities) has Beneficial Ownership of twenty percent (20%) or more of
the combined voting power of the Surviving Corporation's then-outstanding Voting
Securities; and
(4) a transaction described in clauses (1)
through (3) shall herein be referred to as a "Non-Control Transaction".
b) a complete liquidation or dissolution of the
Company; or
c) an agreement for the sale or other disposition of
all of the operating assets of the Company to any Person (other than a transfer
to a Subsidiary).
Notwithstanding the foregoing, a Change in Control shall not be deemed
to occur solely because any Person (the "Subject Person") acquired Beneficial
Ownership of more than the permitted amount of the outstanding Voting Securities
as a result of the acquisition of Voting Securities by the Company which, by
reducing the number of Voting Securities outstanding, increases the proportional
number of shares Beneficially Owned by the Subject Person; provided that if a
Change in Control would occur (but for the operation of this sentence) as a
result of the acquisition of Voting Securities by the Company, and after such
share acquisition by the Company the Subject Person becomes the Beneficial Owner
of any additional Voting Securities which increases the percentage of the
then-outstanding Voting Securities Beneficially Owned by the Subject Person,
then a Change in Control shall occur.
c) "Code" means the Internal Revenue Code of 1986, as amended.
d) "Committee" means the Compensation Committee or similar committee of
the Board of Directors.
e) "Common Stock" means the common stock, par value $.001 per share, of
the Company.
f) "Corporate Transaction" means any (i) reorganization or liquidation
of the Company, (ii) reclassification of the Company's capital stock, (iii)
merger of the Company with or into another corporation, or (iv) the sale of all
or substantially all the assets of the Company, which results in a significant
number of employees being transferred to a new employer or discharged or in the
creation or severance of a parent-subsidiary relationship.
g) "Date of Grant" means, as the case may be: (i) the date the
Committee approves the grant of an Option pursuant to this Plan; or (ii) such
later date as may be specified by the Committee as the date a particular Option
granted pursuant to this Plan will become effective.
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h) "Employee" means any person employed by the Company within the
meaning of Section 3401(c) of the Code and the regulations promulgated
thereunder. For purposes of any Non-Qualified Option only, any officer or
director of the Company shall be considered an Employee even if he is not an
employee within the meaning of the first sentence of this subsection.
i) "Exercise Price" means the price per share which must be paid upon
exercise of an Option in cash or property or a combination of both.
j) "Fair Market Value" means: (i) if the Common Stock is traded in a
market in which actual transactions are reported, the mean of the high and low
prices at which the Common Stock is reported to have traded on the relevant date
in all markets on which trading in the Common Stock is reported or, if there is
no reported sale of the Common Stock on the relevant date, the mean of the
highest reported bid price and lowest reported asked price for the Common Stock
on the relevant date; (ii) if the Common Stock is Publicly Traded but only in
markets in which there is no reporting of actual transactions, the mean of the
highest reported bid price and the lowest reported asked price for the Common
Stock on the relevant date; or (iii) if the Common Stock is not Publicly Traded,
the value of a share of Common Stock as determined by the most recent valuation
prepared by an independent expert at the request of the Committee.
k) "Incentive Stock Option" means any Option which, at the time of the
grant, is an incentive stock option within the meaning of Section 422 of the
Code.
l) "Non-Qualified Option" means any Option that is not an Incentive
Stock Option pursuant to the terms of this Plan..
m) "Option" means any option granted pursuant to this Plan.
n) "Publicly Traded" means that a class of stock is required to be
registered pursuant to Section 12 of the Exchange Act, or that stock of that
class has been sold within the preceding 12 months in an underwritten public
offering, or stock that is regularly traded in a public market.
o) "Retirement" means a Termination of Employment by reason of an
Employee's retirement at a time when the Employee is at least 65 years old,
other than by reason of a termination by resignation, discharge, death or Total
Disability or the resignation, failure to stand for re-election or dismissal
from the Board of Directors.
p) "Termination of Employment" means the time when the
employee-employer relationship between an Employee and the Company ceases to
exist for any reason including, but not limited to, a termination by
resignation, discharge, death, Total Disability or Retirement, or the
resignation, failure to stand for re-election or dismissal from the Board of
Directors.
q) "Total Disability" means the inability of an Employee to perform the
material duties of his or her job by reason of a medically determinable physical
or mental impairment that can be expected to result in death or that has lasted
or can be expected to last for a continuous period of not less than twelve (12)
months. All determinations as to the date and extent of disability of an
Employee will be made in accordance with the written policy pertaining to
Employee disability, if any, of the Company by which the Employee is employed.
In the absence of a written policy pertaining to Employee disability, all
determinations as to the date and extent of disability of an Employee will be
made by the Committee in its sole and absolute discretion. In making its
determination, the Committee may consider the opinion of the personal physician
of the Employee or the opinion of an independent licensed physician of the
Company's choosing.
3. EFFECTIVE DATE OF THE PLAN
The "effective date" of this Plan is July 7, 2000.
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4. ADMINISTRATION OF THE PLAN
Either the Board of Directors or the Committee shall be responsible for the
administration of this Plan, and shall grant Options pursuant to this Plan.
Subject to the express provisions of this Plan, the Committee shall have full
authority to interpret this Plan, to prescribe, amend and rescind rules and
regulations relating to it, and to make all other determinations which it
believes to be necessary or advisable in administering this Plan. The
determinations of the Committee on the matters referred to in this section shall
be conclusive. The Committee may not amend this Plan. No member of the Committee
shall be liable for any act or omission in connection with the administration of
this Plan unless it resulted from the member's willful misconduct.
5. THE COMMITTEE
The Committee shall hold its meeting at such times and places as it may
determine and shall maintain written minutes of its meetings. A majority of the
members of the Committee shall constitute a quorum at any meeting of the
Committee. All determinations of the Committee shall be made by the vote of a
majority of the members who participate in a meeting. The members of the
Committee may participate in a meeting of the Committee in person or by
conference telephone or similar communications equipment by means of which all
members can hear each other. Any decision or determination by written consent of
all of the members of the Committee shall be as effective as if it had been made
by a vote of a majority of the members who participate in a meeting.
6. STOCK SUBJECT TO THE PLAN
The maximum number of shares of Common Stock as to which Options may be granted
pursuant to this Plan is 5,000,000 shares. The maximum number of shares of such
Common Stock shall be reduced each year by the grant of Options as provided
herein. If any Option expires or is canceled without being exercised in full,
the number of shares as to which the Option is not exercised will once again
become shares as to which new Options may be granted. The Common Stock that is
issued on exercise of Options may be authorized but unissued shares or shares
that have been issued and reacquired by the Company.
7. PERSONS ELIGIBLE TO RECEIVE OPTIONS
Options may be granted only to Employees, as defined in Section 2(h) above.
8. GRANTS OF OPTIONS
a) IN GENERAL. Except as otherwise provided herein, the Committee shall
have complete discretion to determine when and to which Employees Options are to
be granted, the number of shares of Common Stock as to which Options granted to
each Employee will relate, whether Options granted to an Employee will be
Incentive Stock Options or Non-Qualified Options or partly Incentive Stock
Options and partly Non-Qualified Options and, subject to the limitations in
Sections 9 and 10 below, the Exercise Price and the term of Options granted to
an Employee. Any Options that are not designated as Incentive Stock Options when
they are granted shall be Non-Qualified Options. No grant of an Incentive Stock
Option may be conditioned upon a Non-Qualified Option's having yet been
exercised in whole or in part, and no grant of a Non-Qualified Option may be
conditioned upon an Incentive Stock Option's having not been exercised in whole
or in part.
9. OPTION PROVISIONS
a) EXERCISE PRICE. The Exercise Price of each Option shall be as
determined by the Committee; provided, however, that in the case of Incentive
Stock Options, the Exercise Price shall not be less than 100% of the Fair Market
Value of the Common Stock on the Date of Grant of the Option.
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b) TERM. The term of each Option shall be as determined by the
Committee, but in no event shall the term of an Option (whether or not an
Incentive Stock Option) be longer than ten (10) years from the Date of Grant.
c) MANNER OF EXERCISE. An Option that has vested pursuant to the terms
of this Plan may be exercised in whole or in part, in increments of a minimum of
one hundred (100) shares, at any time, or from time to time, during its term. To
exercise an Option, the Employee exercising the Option must deliver to the
Company, at its principal office:
i) a written notice of exercise of the Option, which states
the extent to which the Option is being exercised and which is executed by the
Employee;
ii) a check in an amount, or Common Stock with a Fair Market
Value, equal to the Exercise Price of the Option times the number of shares
being exercised, or a combination of the foregoing; and
iii) a check equal to any withholding taxes the Company is
required to pay as a result of the exercise of the Option by the Employee. If
permitted by the Board of Directors or the Committee, either at the time of the
grant of the Option or the time of exercise, the Employee may elect, at such
time and in such manner as the Board of Directors or the Committee may
prescribe, to satisfy such withholding obligation by (A) delivering to the
Company Common Stock (which in the case of Common Stock acquired from the
Company shall have been owned by the Employee for at least six months prior to
the delivery date) having a fair market value equal to such withholding
obligation, or (B) requesting that the Company withhold from the shares of
Common Stock to be delivered upon the exercise a number of shares of Common
Stock having a fair market value equal to such withholding obligation.
The day on which the Company receives all of the items specified in this
subsection shall be the date on which the Option is exercised to the extent
described in the notice of exercise.
d) DELIVERY OF STOCK CERTIFICATES. As promptly as practicable after an
Option is exercised, the Company shall cause the transfer agent to deliver to
the Employee who exercises the Option certificates, registered in that person's
name, representing the number of shares of Common Stock that were purchased by
the exercise of the Option. Unless the Common Stock was issued in a transaction
that was registered pursuant to the Securities Act of 1933, as amended (the
"Securities Act"), each certificate may bear a legend to indicate that if the
Common Stock represented by the certificate was issued in a transaction that was
not registered pursuant to the Securities Act, and may only be sold or
transferred in a transaction that is registered pursuant to the Securities Act
or is exempt from the registration requirements of the Securities Act.
e) VESTING OF OPTIONS. Except as otherwise provided in this Plan, the
Options granted hereunder to Employees shall be subject to such conditions as to
vesting as shall be determined by the Committee, in its sole and absolute
discretion, at the Date of Grant of the Option, and the terms of such vesting
shall be clearly set forth in the instrument granting the Option; provided,
however, that upon a Change of Control, any Options that have not yet vested in
accordance with the terms of this Plan and the Stock Option Agreement shall vest
upon such Change of Control. An Option shall "vest" at such time as it becomes
exercisable in accordance with this Plan and the Stock Option Agreement. Upon
exercise of an Option and the delivery the stock certificates as provided
herein, the Common Stock acquired upon exercise of the Option shall not be
subject to forfeiture by the Employee for any reason whatsoever.
f) NONTRANSFERABILITY OF OPTIONS. During the lifetime of a person to
whom an Option is granted pursuant to this Plan, the Option may be exercised
only by that person or by his or her guardian or legal representative, except to
the extent the Board of Directors or the Compensation Committee shall otherwise
determine, whether at the time the option is granted or thereafter, and then
only for estate
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planning purposes to a trust wherein the option holder is the trustee, and
except to the extent the Board of Directors or the Committee shall otherwise
determine, whether at the time Option is granted or thereafter. An Option may
not be assigned, transferred, sold, pledged or hypothecated in any way; shall
not be subject to levy or execution or disposition under the Bankruptcy Code of
1978, as amended, or any other state or federal law granting relief to
creditors, whether now or hereafter in effect; and shall not be transferable
otherwise than by will or the laws of descent and distribution. The Company will
not recognize any attempt to assign, transfer, sell, pledge, hypothecate or
otherwise dispose of an Option contrary to the provisions of this Plan, or to
levy any attachment, execution or similar process upon any Option and, except as
expressly stated in this Plan, the Company shall not be required to, and shall
not, issue Common Stock on the exercise of an Option to anyone who claims to
have acquired that Option from the person to whom it was granted in violation of
this subsection.
g) RETIREMENT OF HOLDER OF OPTION. If there is a Termination of
Employment of an Employee to whom an Option has been granted due to Retirement,
each Incentive Stock Option held by the retired Employee, whether or not then
vested, may be exercised until the earlier of: (x) the end of the three (3)
month period immediately following the date of such Termination of Employment;
or (y) the expiration of the term specified in the Option. In the case of a
Non-Qualified Option, there shall be substituted the words, "the end of the
twelve (12) month period" for the words "the end of the three (3) month period"
in the immediately preceding sentence.
h) TOTAL DISABILITY OF HOLDER OF OPTION. If there is a Termination of
Employment of an Employee to whom an Option has been granted by reason of his or
her Total Disability, each Option held by the Employee, whether or not then
vested, may be exercised until the earlier of: (x) the end of the twelve (12)
month period immediately following the date of such Termination of Employment;
or (y) the expiration of the term specified in the Option.
i) DEATH OF HOLDER OF OPTION. If there is a Termination of Employment
of an Employee to whom an Option has been granted by reason of (i) his or her
death, or (ii) the death of a former Employee within three (3) months following
the date of his or her Retirement (or, in the case of a Non-Qualified Option,
within twelve (12) months following the date of his or her Retirement), or (iii)
the death of a former Employee within twelve (12) months following the date of
his or her Termination of Employment by reason of Total Disability, then each
Option held by the person at the time of his or her death, whether or not then
vested, may be exercised by the person or persons to whom the Option shall pass
by will or by the laws of descent and distribution (but by no other persons)
until the earlier of: (x) the end of the twelve (12) month period immediately
following the date of death (or such longer period as is permitted by the
Committee); and (y) the expiration of the term specified in the Option,
provided, however, that in no event is the term of the Option to be deemed to
expire prior to the end of three (3) months from the date of death of the
Employee.
j) TERMINATION OF EMPLOYMENT OTHER THAN FOR RETIREMENT, DEATH OR
DISABILITY. Unless the Committee or the Board of Directors states otherwise with
respect to a specific Option, if there is a Termination of Employment of an
Employee to whom an Option has been granted pursuant to this Plan for any reason
other than the Retirement, death or Total Disability of the Employee, then all
Options held by such Employee which are then vested may be exercised until the
earlier of: (x) the three (3) month period immediately following the date of
such Termination of Employment; or (y) the expiration of the term specified in
the Option.
k) STOCK OPTION AGREEMENT. As promptly as practicable after an Employee
is granted an Option pursuant to this Plan, the Committee shall send the
Employee a document setting forth the terms and conditions of the grant. The
form of grant document shall be substantially as set forth in Exhibit "A"
attached hereto. Each Option granted pursuant to this Plan must be clearly
identified as to whether it is or is
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not an Incentive Stock Option and shall set forth all other terms and conditions
relating to the exercise thereof. In the case of an Incentive Stock Option, the
document shall include all terms and provisions that the Committee determines to
be necessary or desirable in order to qualify the Option as an Incentive Stock
Option within the meaning of Section 422 of the Code. If an Employee is granted
an Incentive Stock Option and a Non-Qualified Option at the same time, the
Committee shall send the Employee a separate document relating to each of the
Incentive Stock Option and the Non-Qualified Option.
l) REGISTRATION OF PLAN. Upon a Change of Control, the Company agrees
to use its best efforts to cause the Plan to be registered under the Securities
Act at the earliest possible time. The Company shall have no other obligations
to register the Plan unless directed to do so by the Board of the Company based
on the Company's best interests.
10. SPECIAL PROVISIONS RELATING TO INCENTIVE STOCK OPTIONS
No Incentive Stock Option may be granted pursuant to this Plan after ten (10)
years from the first to occur of: (i) the date this Plan is adopted by the Board
of Directors; or (ii) the date this Plan is approved by the stockholders of the
Company. No Incentive Stock Option may be exercised after the expiration of ten
(10) years from the Date of Grant or such shorter period as is provided herein.
Notwithstanding Section 8(b) hereof, Incentive Stock Options may not be granted
to an Employee who, at the time the Option is granted, owns more than ten
percent (10%) of the total combined voting power of the stock of the Company,
unless: (i) the purchase price of the Common Stock pursuant to the Incentive
Stock Option is at least one hundred ten percent (110%) of the Fair Market Value
of the Common Stock on the Date of Grant; and (ii) the Incentive Stock Option by
its terms is not exercisable after the expiration of five (5) years from the
Date of Grant. The Committee is authorized, pursuant to the last sentence of
Section 422(b) of the Code, to provide at the time an Option is granted,
pursuant to the terms of such Option, that such Option shall not be treated as
an Incentive Stock Option even though it would otherwise qualify as an Incentive
Stock Option. The terms of any Incentive Stock Option granted hereunder shall,
in the hands of any individual grantee thereof, be subject to the dollar
limitations set forth in Section 422(d) of the Code (pertaining to the $100,000
per year limitation).
11. RECAPITALIZATION
a) IN GENERAL. If the Company increases the number of outstanding
shares of Common Stock through a stock dividend or a stock split, or reduces the
number of outstanding shares of Common Stock through a combination of shares or
similar recapitalization then, immediately after the record date for the change:
(i) the number of shares of Common Stock issuable on the exercise of each
outstanding Option granted pursuant to this Plan (whether or not then vested)
shall be increased in the case of a stock dividend or a stock split, or
decreased in the case of a combination or similar recapitalization that reduces
the number of outstanding shares, by a percentage equal to the percentage change
in the number of outstanding shares of Common Stock as a result of the stock
dividend, stock split, combination or similar recapitalization; (ii) the
Exercise Price of each outstanding Option granted pursuant to this Plan (whether
or not then vested) shall be adjusted so that the total amount to be paid upon
exercise of the Option in full will not change; and (iii) the number of shares
of Common Stock that may be issued on exercise of Options granted pursuant to
this Plan (whether or not then vested) and that are outstanding or remain
available for grant shall be increased or decreased by a percentage equal to the
percentage change in the number of outstanding shares of Common Stock. Any
fractional shares will be rounded up to whole shares.
b) CORPORATE TRANSACTIONS. If, as a result of a Corporate Transaction
while an Option granted pursuant to this Plan is outstanding (whether or not
then vested), and the holders of the Common Stock become entitled to receive,
with respect to their Common Stock, securities or assets other than, or in
addition to, their Common Stock, then upon exercise of that Option the holder
shall receive what the holder would have received if the holder had exercised
the Option immediately before the first Corporate
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Transaction that occurred while the Option was outstanding and as if the Company
had not disposed of anything the holder would have received as a result of that
and all subsequent Corporate Transactions. the Company shall not agree to any
Corporate Transaction unless the other party to the Corporate Transaction agrees
to make available on exercise of the Options granted pursuant to this Plan that
are outstanding at the time of the Corporate Transaction, the securities or
other assets the holders of those Options are entitled pursuant to this
subsection to receive.
12. RIGHTS OF OPTION HOLDER
a) STOCKHOLDER. The holder of an Option (whether or not then vested)
shall not have any rights as a stockholder by reason of holding that Option.
Upon exercise of an Option granted pursuant to this Plan, the holder shall be
deemed to acquire the rights of a stockholder when, but not before, the issuance
of Common Stock as a result of the exercise is recorded in the stock transfer
records of the Company.
b) EMPLOYMENT. Nothing in this Plan or in the grant of an Option shall
confer upon any Employee the right to continue in the employ of the Company or
shall interfere with or restrict in any way the rights of the Company to
discharge any Employee at any time for any reason whatsoever, with or without
cause.
13. LAWS AND REGULATIONS
The obligation of the Company to sell and deliver shares of Common Stock on
vesting and exercise of Options granted pursuant to this Plan shall be subject
to the condition that counsel for the Company be satisfied that the sale and
delivery thereof will not violate the Securities Act or any other applicable
laws, rules or regulations. In addition, the Company may, as a condition to such
sale and delivery, require the Employee to represent and warrant at the time of
any such exercise that the shares are being purchased only for investment and
without any present intention to sell or distribute such shares if, in the
opinion of counsel for the Company, such a representation is required pursuant
to such securities laws.
14. WITHHOLDING OF TAXES
a) IN GENERAL. In addition to the requirement set forth in Section 9(c)
above that, in order to exercise an Option granted pursuant to this Plan a
person must make a payment to the Company or authorize withholding in order to
enable the Company to pay any withholding taxes due as a result of the exercise
of that Option, if an Employee who exercised an Incentive Stock Option disposes
of shares of Common Stock acquired through exercise of that Incentive Stock
Option either (x) within two years after the Date of Grant of the Incentive
Stock Option or (y) within one year after the issuance of the shares on exercise
of the Incentive Stock Option then, promptly thereafter, the Employee shall
notify the Company of the occurrence of the event and the amount realized upon
the disposition of such Common Stock by the Employee, and pay any federal, state
and other taxes due as a result thereof.
b) WITHHOLDING OF TAXES. If, whether because of a disposition of Common
Stock acquired on exercise of an Incentive Stock Option, the exercise of a
Non-Qualified Option or otherwise, the Company becomes required to pay
withholding taxes to any federal, state or other taxing authority and the
Employee fails to provide the Company with the funds with which to pay that
withholding tax, then the Company may withhold, subject to applicable state law,
up to 50% of each payment of salary or bonus to the Employee (which will be in
addition to any other required or permitted withholding), until the Company has
been reimbursed for the entire withholding tax it was required to pay.
15. RESERVATION OF SHARES
The Company shall at all times keep reserved for issuance on exercise of Options
granted pursuant to this Plan a number of authorized but unissued or reacquired
shares of Common Stock equal to the maximum
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number of shares the Company may be required to issue on exercise of outstanding
Options (whether or not then vested) granted pursuant to this Plan.
16. AMENDMENT OF THE PLAN
The Board of Directors may, at any time and from time to time, modify or amend
this Plan in any respect effective at any date the Board of Directors
determines; provided, however, that, without the approval of the stockholders of
the Company the Board of Directors may not increase the maximum number of
Incentive Stock Options that may be granted under the Plan. No modification or
amendment of this Plan shall, without the consent of the holder of an
outstanding Option (whether nor not then vested), adversely affect the holder's
rights pursuant to that Option.
17. TERMINATION OF THE PLAN
The Board of Directors may suspend or terminate this Plan at any time or from
time to time, but no such action shall adversely affect the rights of a person
holding an outstanding Option, whether or not then vested, granted pursuant to
this Plan prior to that date.
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EXHIBIT "A"
STOCK OPTION AGREEMENT
This Agreement is made as of ___________, 20__, by and between
PROXYMED, INC. (the "Company") and _____________, who is an employee, officer or
director of the Company or one of its subsidiaries (the "Employee").
WHEREAS, the Employee is a valuable and trusted employee, officer or
director of the Company, and the Company considers it desirable and in its best
interests that the Employee be given an inducement to acquire a further
proprietary interest in the Company, and an added incentive to advance the
interests of the Company by possessing a right (the "Option Right") to purchase
shares of the Company's common stock, $.001 par value (the "Option Stock"), in
accordance with the PROXYMED, INC. 2000 1/2 Stock Option Plan (the "Plan").
NOW, THEREFORE, in consideration of the premises, it is agreed by and
between the parties as follows:
1. DEFINITIONS. All terms not defined herein and defined in the Plan shall be
given the meaning expressed in the Plan.
2. GRANT OF OPTION. The Company hereby grants to the Employee the right,
privilege and option to purchase the number of shares of Option Stock, at the
purchase price as shown on Schedule I attached hereto (the "Option Price"), in
the manner and subject to the conditions hereinafter provided in this Agreement
and as provided in the Plan. The Option Right granted hereunder is either an
Incentive Stock Option or Non-Qualified Option, as specified on Schedule I.
3. TIME OF EXERCISE OF OPTION. The aforesaid Option Right may be exercised at
any time, subject to Section 4, below, and from time to time, until the
termination thereof as provided in Paragraph 6, below, or as otherwise provided
in the Plan; provided, however, that the Option Right granted herein may not be
exercised after the termination date as shown on Schedule I, unless provided
otherwise in the Plan.
4. VESTING OF OPTION RIGHT. The Option Right shall vest as provided in Schedule
I.
5. METHOD OF EXERCISE. The Option Right shall be exercised in whole or in part,
in increments of a minimum of one hundred (100) shares, at any time, or from
time to time, during its term. To exercise an option, the Employee shall deliver
written notice in the form attached hereto as Schedule II to the Company at its
principal place of business, accompanied by payment of the Option Price per
share and compliance with such other conditions and requirements as set forth in
the Plan. Payment shall be made by a check, plus a check equal to any
withholding taxes that the Company is required to pay as a result of the
exercise of the Option by the Employee.
1
Subject to the terms and conditions set forth in the Plan, as promptly as
practicable after an Option is exercised, the Company shall deliver such shares
issuable upon exercise of the Option.
6. TERMINATION OF EMPLOYMENT. The rights and obligations of the Employee upon
Termination of Employment shall be as set forth in the Plan.
7. RESTRICTIONS ON CERTAIN RESALES. The shares issuable upon exercise of this
Option have not been registered under the Securities Act of 1933, as amended
(the "Securities Act") or under any state securities laws, and are being offered
and sold in reliance upon federal and state exemptions for transactions not
involving any public offering. The holder may not resell the shares purchased
hereunder except pursuant to registration under the Securities Act or an
exemption therefrom.
Resales of shares issuable hereunder may be subject to other state and
federal securities laws. The Employee is advised to consult with legal counsel
as to compliance with the Securities Act, the Securities Exchange Act of 1934,
as amended (the "Exchange Act") and such other laws prior to resale of such
shares.
The Company, as a condition to the exercise of an Option to acquire shares
not registered under the Securities Act, may require the Employee to represent
and warrant at the time of any exercise that the shares are being purchased only
for investment and without any present intention to sell or distribute such
shares if, in the opinion of counsel for the Company, such a representation is
required by the Securities Act.
8. RECLASSIFICATION, MERGER, ETC. The rights and obligations of the Company and
the Employee as a result of the transactions specified in Section 11 of the Plan
shall be as provided therein.
9. RIGHTS PRIOR TO EXERCISE OF OPTION. This Option Right is nonassignable and
nontransferable by the Employee except as provided in the Plan and, during his
lifetime, is exercisable only by him. The Employee shall have no rights as a
stockholder with respect to the Option Stock until payment of the Option Price
and delivery to him of such shares as herein provided. Nothing in this Agreement
shall confer any right in an employee to continue in the employment of the
Company or interfere in any way with the right of the Company to terminate such
employment at any time.
10. BINDING EFFECT. This Agreement shall inure to the benefit of and be binding
upon the parties hereto and their respective heirs, executors, administrators,
successors and assigns.
11. DISCREPANCIES. If there appears to be any discrepancies between this
Agreement and the Plan, they shall be interpreted and determined by the terms
and conditions of the Plan.
2
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed on the day and year first above written.
PROXYMED, INC.
By: __________________________________ By: __________________________________
Frank M. Puthoff, Secretary John B. Okkerse, Jr., Ph.D.
Chief Executive Officer
I hereby accept the stock option right offered to me by the Company, as
set forth in this Stock Option Agreement dated as of ________, 20__, and
Schedule I which is attached thereto.
Accepted by:
Employee:
__________________________________
EMPLOYEE SIGNATURE
__________________________________
DATE
3
SCHEDULE I
The information set forth in this Schedule I is subject to all of the
terms of the PROXYMED, INC. Stock Option Agreement to which this Schedule is
attached.
1. Name of Employee, Officer or Director:
__________________________________
2. Address:
__________________________________
__________________________________
3. Social Security Number: __________________________________
4. Number of Shares: __________________________________
5. Exercise Price: $____ per share [closing price at close of
business on _____].
6. Type of Option (check one):
[ ] Incentive Stock Option
[ ] Qualified Stock Option
7. NUMBER OF SHARES DATE VESTED TERMINATION DATE
---------------- ----------- ----------------
REFERENCE IS MADE TO THE 2000 1/2 STOCK OPTION PLAN FOR CERTAIN EVENTS SUCH AS
DEATH, DISABILITY, CHANGE OF CONTROL AND TERMINATION OF EMPLOYMENT THAT CAUSE
THESE OPTIONS TO EXPIRE PRIOR TO THE TERMINATION DATE SET FORTH ABOVE.
SCHEDULE II
NOTICE OF EXERCISE
I, the undersigned Employee, hereby give notice of the exercise of the
Option described below, to the extent and in the manner specified herein,
subject to the all of the terms and conditions of the PROXYMED, INC. STOCK
OPTION AGREEMENT granting this Option and the PROXYMED, INC. 2000 1/2 STOCK
OPTION PLAN. If the shares to be acquired pursuant to this exercise of the
Option are not registered under the Securities Act of 1933, as amended, the
undersigned represents and warrants that the shares are being purchased only for
investment and without any present intention to sell or distribute such shares.
1. Name of Employee, Officer or Director:
__________________________________
2. Address:
__________________________________
__________________________________
__________________________________
3. Social Security Number: __________________________________
4. Number of Shares Being Exercised on This Date: __________________
5. Exercise Price: $____ per share
6. Manner of Payment:
______ Check (amount enclosed: $ _________________)
__________________________________
EMPLOYEE SIGNATURE
__________________________________
DATE:
SIGNATURE GUARANTEE:
______________________________
PROXY FOR ANNUAL MEETING OF PROXYMED, INC.
2555 DAVIE ROAD, SUITE 110
FT. LAUDERDALE, FLORIDA 33317
(954) 473-1001
SOLICITATION ON BEHALF OF THE BOARD OF DIRECTORS OF
PROXYMED, INC.
The undersigned hereby appoints John B. Okkerse, Jr., Ph.D. and Frank M.
Puthoff with the power to vote, either one of them, at the Annual Meeting of
Shareholders of ProxyMed, Inc. (the "Company") to be held on Friday, July 7,
2000, at 9:00 a.m., Eastern Daylight Time, at the Sheraton Fort Lauderdale
Airport, 1825 Griffin Road, Dania, Florida 33004, or any adjournment thereof,
all shares of the Common Stock which the undersigned possesses and with the same
effect as if the undersigned was personally present, upon all subjects that may
properly come before the meeting, including the matters described in the proxy
statement furnished herewith, subject to any directions indicated on this card.
IF NO DIRECTIONS ARE GIVEN, THE PROXIES WILL VOTE FOR THE ELECTION OF ALL LISTED
NOMINEES; IN FAVOR OF THE RATIFICATION AND APPROVAL OF THE ISSUANCE AND SALE OF
THE SERIES B PREFERRED AND THE RELATED WARRANTS, THE ISSUANCE OF COMMON STOCK
UPON THE CONVERSION OF THE SERIES B PREFERRED, THE EXERCISE OF THE RELATED
WARRANTS AND THE PAYMENT OF DIVIDENDS ON THE SERIES B PREFERRED, THE ISSUANCE OF
WARRANTS IN CONNECTION WITH THE REDEMPTION OF CERTAIN SHARES OF SERIES B
PREFERRED, AND THE ISSUANCE OF COMMON STOCK UPON THE EXERCISE OF THE WARRANTS
ISSUED IN CONNECTION WITH THE REDEMPTION OF CERTAIN SHARES OF SERIES B
PREFERRED; IN FAVOR OF THE RATIFICATION AND APPROVAL OF THE ISSUANCE AND SALE OF
SHARES OF A NEW SERIES OF CONVERTIBLE PREFERRED STOCK, WARRANTS, NOTES AND
COMMON STOCK IN CONNECTION WITH AN AGREEMENT WITH AN INVESTMENT BANKING FIRM AND
A PROPOSED FINANCING TRANSACTION; IN FAVOR OF AMENDING THE COMPANY'S RESTATED
ARTICLES OF INCORPORATION TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON
STOCK TO 100,000,000; IN FAVOR OF THE ADOPTION OF THE 2000 STOCK OPTION PLAN; IN
FAVOR OF THE ADOPTION OF THE 2000 1/2 STOCK OPTION PLAN; AND AT THEIR DISCRETION
ON ANY OTHER MATTER THAT MAY PROPERLY COME BEFORE THE MEETING. THE BOARD OF
DIRECTORS RECOMMENDS A VOTE IN FAVOR OF ALL ITEMS.
(l) ELECTION OF DIRECTORS: (Nominees are Harold S. Blue, John B. Okkerse,
Jr., Ph.D., Kevin E. Moley, Bertram J. Polan, Peter A. A. Saunders and
Eugene R. Terry)*
[ ] FOR [ ] WITHHOLD AUTHORITY
* To vote your shares for all director nominees, mark the "For" box . To
withhold voting for all nominees, mark the "Withhold Authority" box. If
you do not wish your shares voted "For" a particular nominee(s), enter
the name(s) of that nominee(s) in the following space: _______________.
(2) RATIFICATION AND APPROVAL OF THE ISSUANCE AND SALE OF THE SERIES B
PREFERRED AND THE RELATED WARRANTS, THE ISSUANCE OF COMMON STOCK UPON
THE CONVERSION OF THE SERIES B PREFERRED, THE EXERCISE OF THE RELATED
WARRANTS AND THE PAYMENT OF DIVIDENDS ON THE SERIES B PREFERRED, THE
ISSUANCE OF WARRANTS IN CONNECTION WITH THE REDEMPTION OF CERTAIN
SHARES OF SERIES B PREFERRED, AND THE ISSUANCE OF COMMON STOCK UPON THE
EXERCISE OF WARRANTS ISSUED IN CONNECTION WITH THE REDEMPTION OF
CERTAIN SHARES OF SERIES B PREFERRED.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(3) RATIFICATION AND APPROVAL OF THE ISSUANCE AND SALE OF SHARES OF A NEW
SERIES OF CONVERTIBLE PREFERRED STOCK, WARRANTS, NOTES, AND COMMON
STOCK IN CONNECTION WITH AN AGREEMENT WITH AN INVESTMENT BANKING FIRM
AND A PROPOSED FINANCING TRANSACTION.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(4) AMEND THE COMPANY'S RESTATED ARTICLES OF INCORPORATION TO INCREASE THE
NUMBER OF AUTHORIZED SHARES OF COMMON STOCK, PAR VALUE $.001, FROM
50,000,000 TO 100,000,000.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(5) 2000 STOCK OPTION PLAN.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(6) 2000 1/2 STOCK OPTION PLAN.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
Dated:_______________________________
_____________________________________
Signature
(Please sign exactly as name appears
hereon. If the stock is registered in the
names of two or more persons, each should
sign. Executors, administrators,
trustees, guardians, attorneys and
corporate officers should include their
titles.)
PLEASE SIGN, DATE AND PROMPTLY RETURN THIS PROXY IN THE ENCLOSED ENVELOPE.