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:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
EBENX, INC.
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(Name of Registrant as Specified in its Charter)
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(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
_______________________
(2) Aggregate number of securities to which transaction applies:
_______________________
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
_______________________
(4) Proposed maximum aggregate value of transaction: _____________________
(5) Total fee paid: ________________________
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(6) Amount Previously Paid: ________________________
(7) Form, Schedule or Registration Statement No.: _______________________
(8) Filing Party: ________________________
(9) Date Filed: ________________________
EBENX, INC.
NOTICE OF ANNUAL MEETING
OF SHAREHOLDERS
MAY 25, 2000
TO THE SHAREHOLDERS OF EBENX, INC.:
Notice is hereby given that the Annual Meeting of Shareholders of eBenX,
Inc., a Minnesota corporation, will be held at 9:00 A.M. on May 25, 2000, at
The Marquette Hotel, 710 Marquette Avenue, Minneapolis, Minnesota 55402, for
the following purposes:
1. To elect two directors to serve on the Board of Directors;
2. To ratify and approve the August 3, 1999 amendment of the eBenX, Inc.
1993 Stock Option Plan, which increased the number of shares of Common
Stock issuable pursuant to options granted under such plan to its
current number of 3,900,000 shares; and
3. To transact such other business as may properly come before the meeting.
The Board of Directors has fixed the close of business on April 14, 2000 as
the record date for the determination of shareholders entitled to notice of and
to vote at the meeting.
You are cordially invited to attend the meeting. Whether or not you plan to
attend the meeting, please complete, date and sign the enclosed proxy and
return it promptly in the enclosed envelope. Alternatively, you may wish to
submit your proxy via the Internet as indicated on the proxy.
By Order of the Board of Directors,
/s/ Scott P. Halstead
Scott P. Halstead
Chief Financial Officer and Secretary
Dated: April 25, 2000
EBENX, INC.
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
MAY 25, 2000
This Proxy Statement is furnished by eBenX, Inc., a Minnesota corporation
("eBenX"), in connection with the solicitation of proxies by the Board of
Directors of eBenX for use at the annual meeting of shareholders of eBenX to be
held on May 25, 2000, at 9:00 A.M., at The Marquette Hotel, 710 Marquette
Avenue, Minneapolis, Minnesota 55402, and at any adjournment thereof.
Shares represented by a proxy will be voted in the manner directed by the
shareholder. If no direction is made, the proxy will be voted for the election
of the nominees for director named in this Proxy Statement and for the other
proposals set forth in this Proxy Statement. A shareholder that has executed
and delivered the enclosed proxy or submitted a proxy via the Internet may
revoke that proxy at any time before the vote is cast at the annual meeting.
This Proxy Statement and the accompanying form of proxy are being sent or given
to shareholders beginning on or about April 25, 2000 along with the eBenX 1999
Annual Report to Shareholders.
The Board of Directors knows of no matters other than those that are
described in this Proxy Statement that may be brought before the meeting.
However, if any other matters are properly brought before the meeting, persons
named in the enclosed proxy or their substitutes will vote in accordance with
their best judgment on such matters.
All expenses in connection with the solicitation of proxies will be paid by
eBenX. In addition to solicitation by mail, officers, directors and regular
employees of eBenX, who will receive no extra compensation for their services,
may solicit proxies by telephone, facsimile, electronic mail or personal calls.
Until approximately May 1, 2000, eBenX's principal executive offices will be
located at 5500 Wayzata Boulevard, Suite 500, Minneapolis, MN 55416-1241. After
this date, eBenX's principal executive offices will be located at 605 North Hwy
169, Suite LL, Minneapolis, MN 55441-6465.
RECORD DATE AND VOTING
Only shareholders of record at the close of business on April 14, 2000 are
entitled to notice of and to vote at the annual meeting or at any adjournment
thereof. On that date, there were 16,192,687 shares of Common Stock, $.01 par
value of eBenX (the "Common Stock") issued and outstanding, all of which are
entitled to vote at the meeting. Each issued and outstanding share of Common
Stock entitles the record holder to one vote.
Generally, the affirmative vote of a majority of the shares of Common Stock
present and entitled to vote on each matter is required for the election of
each director nominee and the approval of each other matter to be acted upon at
the annual meeting. However, if the shares present and entitled to vote on that
item of business would not constitute a quorum for the transaction of business
at the meeting, then the item must be approved by a majority of the voting
power of the minimum number of shares that would constitute such a quorum.
Cumulative voting is not permitted. Shares voted as abstentions on any matter
(or a "withhold vote for" as to a director) will be counted as shares that are
present and entitled to vote for purposes of determining the presence of a
quorum at the meeting and as unvoted, although present and entitled to vote,
for purposes of determining the approval of each matter as to which the
shareholder has abstained. Consequently, abstentions and withheld votes have
the same effect as a vote against. If a broker submits a proxy that indicates
the broker does not have discretionary authority as to certain shares to vote
on one or more matters, those shares will be counted as shares that are present
and entitled to vote for purposes of determining the presence of a quorum at
the meeting, but will not be considered as present and entitled to vote with
respect to determining the approval of such matters.
PROPOSAL ONE
ELECTION OF DIRECTORS
The Amended and Restated Bylaws of eBenX provide that directors of eBenX
shall be divided into three classes, as nearly equal in number as reasonably
possible. The term of office of the first class of directors will expire at the
annual meeting of shareholders in 2000, the term of the second class of
directors will expire at the annual meeting of shareholders in 2001 and the
term of the third class of directors will expire at the annual meeting of
shareholders in 2002. Directors elected at each annual meeting of shareholders
will be of the same class as the directors whose terms expire at such annual
meeting of shareholders, and shall be elected to hold office for a term
expiring at the third succeeding annual meeting of shareholders and until their
successors are elected and shall qualify or until their earlier death,
resignation, removal or disqualification.
Vacancies in the Board of Directors occurring by reason of death,
resignation, removal or disqualification of a director may be filled for the
unexpired term by a majority of the remaining directors of the Board of
Directors although less than a quorum. Newly created directorships resulting
from an increase in the authorized number of directors by action of the Board
of Directors may be filled by a two-thirds vote of the directors serving at the
time of such increase. Each director so elected to fill a vacancy or a newly
created directorship shall hold office until such director's successor is
elected by the shareholders at the next annual or special meeting of
shareholders or until the earlier death, resignation, removal or
disqualification of each such director.
At the annual meeting of shareholders to be held May 25, 2000, the terms of
office of William J. Geary and John M. Nehra (the "Nominees") will expire. Each
of the Nominees has been nominated to be elected to the Board of Directors for
an additional three-year term, which term will expire at the annual meeting of
shareholders in 2003. The Board of Directors recommends that the shareholders
elect the Nominees as directors of eBenX for the ensuing three-year term. It is
intended that the persons named as proxies in the enclosed form of proxy will
vote the proxies received by them for the election of the Nominees, unless
otherwise directed. The Nominees have indicated a willingness to serve, but in
the unlikely event that either of them is not a candidate at the meeting, the
proxies named in the enclosed form of proxy may vote for a substitute nominee
in their discretion.
Information regarding the directors of eBenX is set forth below:
Expiration
Director Age Position(s) with eBenX of Term
-------- --- ------------------------------- ----------
William J. Geary*.......... 41 Director 2000
John M. Nehra+*............ 51 Director 2000
Paul V. Barber *........... 38 Director 2001
James P. Bradley+.......... 48 Director 2001
Daniel M. Cain+............ 55 Director 2001
Mark W. Tierney............ 51 Chairman and Director 2002
John J. Davis.............. 41 President and Chief Executive 2002
Officer, Director
Michael C. Bingham......... 37 Senior Vice President, Business 2002
Development and Director
- --------
* Denotes a member of the Audit Committee.
+ Denotes a member of the Compensation Committee.
Mr. Tierney is one of the founders of eBenX. He has been Chairman of eBenX
since September 1993 and a director of eBenX since September 1993. Prior to
founding eBenX, Mr. Tierney founded a joint venture company with UnitedHealth
Group Incorporated which specializes in patient demand management, patient
advocacy and case management services to Fortune 500 companies and served as
its President and Chief Executive Officer from July 1985 to August 1993. From
July 1983 to July 1985, Mr. Tierney served as Senior
2
Vice President of Medical Services for Allina Health System, the largest HMO in
the Minneapolis-St. Paul metropolitan area. Prior to July 1983, he held
management positions with CIGNA Health Plans, Inc. and Kaiser Permanente
Southern California. Mr. Tierney holds a master's degree in Hospital and Health
Care Administration from the University of Minnesota and today serves on their
clinical faculty.
Mr. Davis has been eBenX's President and Chief Executive Officer since April
1999 and a director of eBenX since June 1999. From 1996 to 1999, Mr. Davis
served as President and Chief Executive Officer of MedManagement, L.L.C., a
national and leading provider of pharmacy management and medication use
services to hospitals and health systems. Prior to his work with MedManagement,
L.L.C., Mr. Davis served for ten years in a number of operations and executive
management positions at UnitedHealth Group Incorporated. Most recently, from
1994 to 1996, Mr. Davis served as President of Healthmarc, a UnitedHealth Group
specialty company providing innovative managed care services to employers with
populations who reside outside health plan service areas. Mr. Davis holds a
bachelor's degree from St. John's University, Collegeville, Minnesota.
Mr. Bingham is one of the founders of eBenX. He has been Senior Vice
President, Business Development of eBenX since August 1999 and a director of
eBenX since September 1993. In addition, Mr. Bingham has held leadership roles
in many aspects of eBenX since its inception. Prior to founding eBenX, Mr.
Bingham held various management positions at UnitedHealth Group Incorporated,
McKinsey & Company and Maxicare Health Plans. Mr. Bingham holds an M.B.A.
degree from the Wharton School at the University of Pennsylvania and a
bachelor's degree in Economics from Claremont McKenna College.
Mr. Barber has been a director of eBenX since June 1999. Mr. Barber is a
Managing Member of JMI Associates III, LLC, the general partner of JMI Equity
Fund III, L.P., a venture capital limited partnership. From 1990 to 1998, he
was Managing Director and head of the software investment banking practice of
Deutsche Bank Alex Brown, an investment banking firm. Mr. Barber serves on the
board of directors of several privately held companies. Mr. Barber holds an
M.B.A. from Harvard Business School and a bachelor's degree in Economics from
Stanford University.
Mr. Bradley has been a director of eBenX since 1997. Mr. Bradley has been
Chairman and Chief Executive Officer of Abaton.com, Inc., a Web-based
healthcare information company, since January 1997. From 1989 to October 1995,
Mr. Bradley was Chief Information Officer of UnitedHealth Group Incorporated.
From October 1995 to January 1997, Mr. Bradley was President of Health Systems
Integration, Inc., a healthcare software information company. Mr. Bradley
received his M.B.A. degree from Washington University, and holds an M.S. degree
in Bio Statistics and Data Processing, and a bachelor's degree in Genetics and
Statistics from the University of Illinois.
Mr. Cain has been a director of eBenX since May 1999. Mr. Cain is President
and Chief Executive Officer of Cain Brothers, LLC, a healthcare investment bank
which has served the financial and capital needs of the health and medical
industry since 1982, and a Manager of CB Health Ventures, L.L.C. Mr. Cain is a
director of Nvest Funds, a family of mutual funds, and Universal Health Realty
Income Trust, a healthcare REIT. Mr. Cain is a trustee of the Norman Rockwell
Museum, Sharon Hospital, the National Committee for Quality Health Care, and is
on the Board of Overseers of Columbia Business School. Mr. Cain holds an M.B.A.
degree from Columbia University and a bachelor's degree in American
Civilization from Brown University.
Mr. Geary has been a director of eBenX since June 1998. Mr. Geary has been a
Principal of North Bridge Venture Partners, L.P. since its inception in March
1994 and a General Partner of North Bridge Venture Partners II, L.P., North
Bridge Venture Partners III, L.P. and North Bridge Venture Partners IV, L.P.
since their inceptions in September 1996, August 1998 and October 1999,
respectively. Mr. Geary also is a director of several private technology
companies. Mr. Geary holds a bachelor's degree from Boston College and is a
C.P.A.
Mr. Nehra has been a director of eBenX since 1996. Since 1989, Mr. Nehra has
been the managing general partner of Catalyst Ventures, Limited Partnership, a
venture capital limited partnership. Since December
3
1993, Mr. Nehra has also been a general partner of New Enterprise Associates
VI, VII, VIII, and IX Limited Partnerships, venture capital limited
partnerships. Mr. Nehra has served as Chairman of the Board of Directors of
Celeris Corporation, a biomedical contract research service company since July
1997 and as a director of Celeris since November 1992. Mr. Nehra also has
served as Chairman of the Board of Iridex Corporation, a medical device
company, since 1994, and as a director since 1989. Mr. Nehra is also a
director of several privately held companies. Mr. Nehra holds a bachelor's
degree from the University of Michigan.
The Board of Directors recommends a vote FOR Messrs. Geary and Nehra.
MEETINGS OF THE BOARD OF DIRECTORS AND CERTAIN COMMITTEES
During the fiscal year ended December 31, 1999, the Board of Directors met
five times. All of the directors attended more than 75% of the aggregate of
all meetings of the Board of Directors and meetings of the committees on which
they served, except for Mr. Cain, who attended two of the three Board meetings
held during the period in which he served as Director. The Board of Directors
and its committees also acted from time to time by written consent in lieu of
meetings.
The Board of Directors of eBenX has standing audit and compensation
committees which have a current membership as indicated in the foregoing
section. The Board of Directors has no standing nominating committee.
The audit committee makes recommendations as to the selection of auditors
and their compensation, and reviews with the auditors the scope of the annual
audit, matters of internal control and procedure and the adequacy thereof, the
audit results and reports and other general matters relating to eBenX's
accounts, records, controls and financial reporting. During fiscal 1999, the
audit committee held one meeting.
The compensation committee reviews and recommends to the Board of Directors
the compensation guidelines for executive officers and other key personnel and
the composition and levels of participation in incentive compensation plans,
fringe benefits and retirement benefits for all employees. During fiscal 1999,
the compensation committee held one meeting.
EXECUTIVE OFFICERS
Name Age Position
---- --- --------
Mark W. Tierney......... 51 Chairman and Director
John J. Davis........... 41 President and Chief Executive Officer, Director
Michael C. Bingham...... 37 Senior Vice President, Business Development and Director
Scott P. Halstead....... 36 Chief Financial Officer and Secretary
See the biographical information on Messrs. Tierney, Davis and Bingham
under "Election of Directors."
Mr. Halstead has been Chief Financial Officer of eBenX since February 1997.
Prior to joining eBenX, he spent six years with The Dun & Bradstreet
Corporation in various financial management positions in North America, Europe
and Asia. Most recently he was Chief Financial Officer of an operating
division of The Dun & Bradstreet Corporation. Mr. Halstead holds an M.B.A.
degree from the Wharton School at the University of Pennsylvania and a
bachelor's degree in Industrial Engineering from Northwestern University.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires executive
officers and directors and persons who beneficially own more than ten percent
of eBenX's Common Stock to file initial reports of ownership and reports of
changes in ownership with the Securities and Exchange Commission ("SEC").
Executive officers, directors, and greater than ten percent beneficial owners
are required by SEC regulations to furnish eBenX with copies of all Section
16(a) forms they file.
4
Based solely on a review of the copies of such forms furnished to eBenX and
written representations from the executive officers, directors and holders of
ten percent or more of eBenX's Common Stock, eBenX believes that all Section
16(a) filing requirements applicable to its executive officers, directors and
ten percent shareholders were satisfied except for a late Form 3 filing by ten
percent shareholder North Bridge Venture Partners, L.P.
EXECUTIVE COMPENSATION
Summary Compensation Table
Annual Long Term
Compensation Compensation
---------------- ------------
Shares
Fiscal Underlying
Name and Principal Position Year Salary Bonus Options
- --------------------------- ------ -------- ------- ------------
Mark W. Tierney......................... 1999 $177,333 $88,667 150,000
Chairman and Director 1998 $152,000 $45,600 31,200
John J. Davis........................... 1999 $126,650 $87,500 595,308
President, Chief Executive Officer and
Director
Michael C. Bingham...................... 1999 $122,181 $61,091* 30,000
Senior Vice President, Business
Development and Director 1998 $104,000 $31,200 23,400
Scott P. Halstead....................... 1999 $126,667 $63,334 60,000
Chief Financial Officer and Secretary 1998 $120,000 $36,000 11,700
- --------
* Represents commission earned in 1999.
. The aggregate amount of perquisites and other personal benefits, securities
or property received by each named executive officer was less than either
$50,000 or 10% of the total annual salary and bonus reported for each
respective named executive officer.
. John Davis became President and Chief Executive Officer in April 1999.
During the fiscal year ended December 31, 1998, Mark Tierney was Chairman
and Chief Executive Officer. Michael Bingham has been Senior Vice President,
Business Development since August 1999. During the fiscal year ended
December 31, 1998, Mr. Bingham was President.
5
Stock Options
The following table provides information concerning the stock option grants
made to each of the named executive officers of eBenX during the fiscal year
ended December 31, 1999.
Option Grants in Fiscal 1999
Potential
Realizable Value
at Assumed Annual
Rates of Stock
Price
Appreciation for
Individual Grants Option Term(1)
----------------------------------------------------- -----------------
Number of % of Total Market
Securities Options Exercise Price Per
Underlying Granted to Price Share at
Options Employees in Per Date of Expiration
Name Granted Fiscal 1999 Share Grant Date 5% 10%
- ---- ---------- ------------ -------- --------- ---------- -------- --------
Mark W. Tierney......... 150,000 6.43% $.83 $ .75 4/22/2004 $ 58,751 $167,296
John J. Davis........... 595,308 25.50% $.75 $ .75 4/12/2009 $280,790 $711,576
Michael C. Bingham...... 30,000 1.29% $.83 $6.50 8/01/2004 $292,734 $480,880
Scott P. Halstead....... 60,000 2.57% $.75 $ .75 6/01/2009 $ 28,300 $ 71,718
- --------
. The above options have five and ten year terms from the grant date, and vest
and become exercisable as follows: Mr. Tierney: options for 45,000 shares on
4/22/1999 and 4/22/2000, and 60,000 on 4/22/01; Mr. Davis: options for
148,827 shares on 4/12/1999, 89,295 shares on 4/12/00, 4/12/02, and 4/12/04
and 89,298 shares on 4/12/01 and 4/12/03; Mr. Bingham: options for 6,000
shares on 8/01/2000, 8/01/2001, 8/01/2002, 8/01/2003, and 8/01/2004; and Mr.
Halstead: options for 12,000 on 6/01/1999, 6/01/2000, 6/01/2001, 6/01/2002,
and 6/01/2003.
. The data presented in the Percentage of Total Options Granted to Employees
in Fiscal 1999 column is based on an aggregate of 2,334,583 shares of common
stock subject to options granted to employees of eBenX during fiscal 1999.
(1) The 5% and 10% assumed annual compound rates of stock price appreciation
are mandated by the rules of the SEC and do not represent eBenX's estimate
or projection of future Common Stock prices.
The following table provides information concerning the exercise of options
to purchase common stock by our named executive officers during fiscal 1999,
and the number and value of unexercised stock options held by these executive
officers as of December 31, 1999.
Aggregated Option Exercises in Fiscal 1999
and Fiscal Year-End Option Values
Number of Securities
Underlying Unexercised Value of Unexercised
Options at Fiscal Year- In-the-Money Options
Shares end at Fiscal Year-End
Acquired Value ------------------------- -------------------------
Name on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- -------- ----------- ------------- ----------- -------------
Mark W. Tierney......... -- -- 76,200 105,000 $3,390,900 $ 4,672,500
John J. Davis........... -- -- 148,827 446,481 $6,622,802 $19,868,405
Michael C. Bingham...... -- -- 23,400 30,000 $1,041,300 $ 1,335,000
Scott P. Halstead....... 24,750 $14,850 45,450 91,500 $2,025,788 $ 4,078,275
- --------
. The value of unexercised in-the-money options is based on a value of $45.25,
the closing price per share of the Common Stock on the Nasdaq National
Market as of December 31, 1999, less the applicable per share exercise price
multiplied by the number of shares issuable upon exercise of the option.
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REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The Compensation Committee (the "Committee") of the Board of Directors has
furnished the following report on executive compensation.
eBenX's executive compensation program is administered by the Committee. The
Committee, which is composed of three independent directors, establishes and
administers eBenX's executive compensation policies and plans and administers
eBenX's stock option and other equity-related employee compensation plans. The
Committee considers internal and external information in determining officers'
compensation, including outside survey data.
Compensation Philosophy
eBenX's compensation policies for executive officers are based on the belief
that the interests of executives should be closely aligned with those of
eBenX's shareholders. The compensation policies are designed to achieve the
following objectives:
. Offer compensation opportunities that attract highly qualified
executives, reward outstanding initiative and achievement, and retain
the leadership and skills necessary to build long-term shareholder
value.
. Maintain a significant portion of executives' total compensation at
risk, tied to both the annual and long-term financial performance of
eBenX and the creation of shareholder value.
. Further eBenX's short and long-term strategic goals and values by
aligning compensation with business objectives and individual
performance.
Compensation Program
eBenX's executive compensation program has three major integrated
components, base salary, annual bonus awards, and long term incentives.
Base Salary. Base salary levels for executive officers are determined
annually by reviewing the competitive pay practices of e-commerce companies of
similar size and market capitalization, the skills, performance level, and
contribution to the business of individual executives, and the needs of eBenX.
Overall, eBenX believes that base salaries for its executive officers are
approximately competitive with median base salary levels for similar positions
in these e-commerce companies.
Annual Bonus. Executive officers of eBenX are eligible to receive annual
cash bonus awards designed to motivate executives to attain short-term and
longer-term corporate and individual management goals. The Committee
establishes the annual incentive opportunity for each executive officer in
relation to his or her base salary. Awards under this program are based on the
attainment of specific Company performance measures established by the
Committee early in the fiscal year, and by the achievement of specified
individual objectives and the degree to which each executive officer
contributes to the overall success of eBenX and the management team.
Long-Term Incentives. The Committee believes that stock options are an
excellent vehicle for compensating its officers and employees. eBenX provides
long-term incentives through its 1993 Stock Option Plan and 1999 Stock
Incentive Plan, the purpose of each of which is to create a direct link between
executive compensation and increases in shareholder value. Stock options
granted under the 1993 Stock Option Plan and 1999 Stock Incentive Plan are
granted with exercise prices equal to or greater than fair market value and
vest in installments, generally over four to five years. When determining
option awards for an executive officer, the Committee considers the executive's
current contribution to Company performance, the anticipated contribution to
meeting eBenX's long-term strategic performance goals, and industry practices
and norms. Long-term incentives granted in prior years and existing levels of
stock ownership are also taken into consideration. Because the receipt of value
by an executive officer under a stock option is dependent upon an increase in
the price of eBenX's Common Stock, this portion of the executive's compensation
is directly aligned with an increase in shareholder value.
7
Chief Executive Officer Compensation
Mr. Davis' base salary, annual bonus award and long-term incentive
compensation are determined by the Committee based upon the same factors as
those employed by the Committee for executive officers generally. Mr. Davis'
1999 annual base salary was $175,000 subject to annual review and increase by
the Board of Directors of eBenX. Mr. Davis was paid a cash bonus of $87,500 for
the fiscal year ending December 31, 1999. Mr. Davis' incentive compensation
considers eBenX's 1999 financial performance against company objectives and the
successful completion of eBenX's initial public offering. Mr. Davis' options
are subject to a 5-year accelerated vesting schedule. Mr. Davis' employment
agreement provides for a payment of one year's base salary and an immediate
vesting of 50% of any remaining unvested stock options in the event of
termination of employment other than for cause. If, however, the termination of
employment occurs within two years of a change in control, the employment
agreement provides for severance pay of one year's base salary and an immediate
vesting of 100% of any remaining unvested stock options.
Section 162(m) Limitation
Section 162(m) of the Internal Revenue Code limits the tax deduction to $1
million for compensation paid to certain executives of public companies. Having
considered the requirements of Section 162(m), the Committee believes that
grants made pursuant to eBenX's 1993 Stock Option Plan and 1999 Stock Incentive
Plan meet the requirement that such grants be "performance based" and are,
therefore, exempt from the limitations on deductibility. Historically, the
combined salary and bonus of each executive officer has been well below the $1
million limit. The Committee's present intention is to comply with Section
162(m) unless the Committee feels that required changes would not be in the
best interest of eBenX or its shareholders.
THE COMPENSATION COMMITTEE
John M. Nehra
James P. Bradley
Daniel M. Cain
8
COMPENSATION OF DIRECTORS
eBenX currently does not pay any compensation to directors for serving in
that capacity. eBenX reimburses directors for out-of-pocket expenses incurred
in attending Board meetings. The Board of Directors has the discretion to grant
options to non-employee directors pursuant to the eBenX, Inc. 1999 Stock
Incentive Plan. On December 10, 1999, eBenX granted options for an aggregate of
65,000 shares to its non-employee directors at an exercise price equal to
$20.00, the fair market value of the Common Stock on that day.
Directors who are also employees of eBenX do not receive any additional
compensation for serving on the Board of Directors.
Employment Agreements
eBenX entered into employment agreements with Mark Tierney, John Davis and
Scott Halstead in April 1999 that govern their employment with eBenX. The
agreements set forth their compensation levels and eligibility for salary
increases, bonuses, benefits and option grants under eBenX's stock option
plans. The initial employment term is five years. During the term of each of
their employment agreements, either party may terminate the agreement by
providing at least 30 days' written notice to the other party.
Mr. Tierney's employment agreement provides for payment of base salary for
one year and an immediate vesting of 100% of any remaining unvested stock
options in the event of termination of employment by mutual agreement or due to
Mr. Tierney's death or disability. Also, if eBenX terminates his employment
other than for cause, other than as set forth in the preceding sentence, or Mr.
Tierney terminates his employment agreement because of a material reduction in
his duties or compensation or because eBenX requires him to relocate, then the
agreement provides for payment of base salary for two years and an immediate
vesting of 100% of any remaining unvested stock options. If a change in control
occurs prior to April 22, 2001, his employment agreement provides for an
immediate vesting of 100% of any remaining unvested stock options.
Mr. Davis' employment agreement provides for payment of base salary for one
year and an immediate vesting of 50% of any remaining unvested stock options in
the event of termination of employment by eBenX other than for cause, and
payment of base salary for two years and an immediate vesting of 50% of any
remaining unvested stock options in the event that Mr. Davis terminates his
employment because of a material reduction in his duties or compensation or
because eBenX requires him to relocate. If, however, any such termination
occurs within two years after a change of control of the company, his
employment agreement provides for payment of base salary for one year and an
immediate vesting of 100% of any remaining unvested stock options.
Mr. Halstead's employment agreement provides for a payment of base salary
for six months and an immediate vesting of 50% of any remaining unvested stock
options in the event of termination of employment by eBenX other than for cause
or in the event that Mr. Halstead terminates his employment because of a
material reduction in his duties or compensation or because eBenX requires him
to relocate. If, however, any such termination occurs within one year after a
change of control of the company, his employment agreement provides for payment
of base salary for six months and an immediate vesting of 100% of any remaining
unvested stock options.
9
Comparative Stock Performance
The graph below compares the cumulative total shareholder return on eBenX
Common Stock since trading in the Common Stock began on the Nasdaq Stock Market
on December 10, 1999, with the cumulative total return on the Total Return
Index for the Nasdaq Stock Market (U.S. Companies) and the Chase H&Q Technology
Index over the same period (assuming the investment of $100 in each on December
10, 1999 and the reinvestment of all dividends).
[LINE GRAPH APPEARS HERE]
Cumulative Total Return
-------------------------
12/10/99 12/31/99
EBENX, INC. 100.00 226.25
NASDAQ STOCK MARKET (U.S.) 100.00 112.98
CHASE H & Q TECHNOLOGY 100.00 113.66
10
CERTAIN TRANSACTIONS
On May 3, 1999, eBenX sold a total of 563,525 shares of Series C Preferred
Stock at a purchase price of $9.76 per share, including:
. 307,377 shares to CB Healthcare Fund, L.P.;
. 102,459 shares to North Bridge Venture Partners, L.P.; and
. 102,459 shares to New Enterprise Associates VI, Limited Partnership.
On June 9, 1999, eBenX sold a total of 512,295 shares of Series C Preferred
Stock at a purchase price of $9.76 per shares as follows:
. 102,459 shares to CB Healthcare Fund, L.P.;
. 364,754 shares to JMI Equity Fund III, L.P.; and
. 45,082 shares to JMI Equity Side Fund, L.P.
The share issuances discussed above do not reflect the three-for-one stock
split effective immediately prior to eBenX's initial public offering.
William J. Geary, who is a director of eBenX, is a principal of North Bridge
Venture Management, L.P. North Bridge Venture Management is a general partner
of North Bridge Venture Partners, L.P.
John M. Nehra, who is a director of eBenX, is a general partner of NEA
Partners VI, Limited Partnership. NEA Partners VI, Limited Partnership is the
general partner of New Enterprise Associates VI, Limited Partnership.
Daniel M. Cain, who is a director of eBenX, is a manager of CB Health
Ventures, L.L.C. CB Health Ventures, L.L.C. is the general partner of CB
Healthcare Fund, L.P.
Paul V. Barber, who is a director of eBenX, is a managing member of JMI
Associates III, LLC. JMI Associates III, LLC, is the general partner of JMI
Equity Fund III, L.P. JMI Equity Side Fund, L.P. is affiliated with JMI Equity
Fund III, L.P. Mr. Barber has no beneficial ownership interest in JMI Equity
Side Fund, L.P.
eBenX believes that the shares issued in the transactions described above
were sold at the then fair market value of the shares and that the terms of
these transactions were no less favorable than eBenX could have obtained from
unaffiliated third parties.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Bradley, Cain and Nehra currently serve on the Compensation
Committee. None of these individuals has at any time been an officer or
employee of eBenX. Prior to formation of the Compensation Committee, all
decisions regarding executive compensation were made by the full Board of
Directors. No interlocking relationship exists between the Board of Directors
or the Compensation Committee and the Board of Directors or Compensation
Committee of any other company, nor has any interlocking relationship existed
in the past.
On May 3, 1999, eBenX sold a total of 563,525 shares of Series C Preferred
Stock at a purchase price of $9.76 per share, including 307,377 shares to CB
Healthcare Fund, L.P. and 102,459 shares to New Enterprise Associates VI,
Limited Partnership. On June 9, 1999, eBenX sold a total of 512,295 shares of
Series C Preferred Stock at a purchase price of $9.76 per share, including
102,459 shares to CB Healthcare Fund, L.P. These share issuances do not reflect
the three-for-one stock split effective immediately prior to eBenX's initial
public offering.
Mr. Nehra is a general partner of NEA Partners VI, Limited Partnership,
which is the general partner of New Enterprise Associates VI, Limited
Partnership. Mr. Cain is a Manager of CB Health Ventures, L.L.C. which is the
general partner of CB Healthcare Fund, L.P. eBenX believes that the shares
issued in the transactions described above were sold at the then fair market
value of the shares and that the terms of these transactions were no less
favorable than eBenX could have obtained from unaffiliated third parties.
11
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information with respect to
beneficial ownership of eBenX Common Stock as of March 1, 2000 by: (i) each
director of eBenX, (ii) each executive officer of eBenX named in the Summary
Compensation Table, (iii) all directors and executive officers of eBenX as a
group, and (iv) each person or entity known by eBenX to own beneficially more
than five percent of the outstanding eBenX Common Stock as of March 1, 2000.
The business address each of Messrs. Tierney, Davis, Bingham and Halstead is
the address of the principal executive offices of eBenX.
Beneficial Ownership(1)
-------------------------------------------------------------------------
Name Shares Percent
---- --------- -------
North Bridge Venture Partners, L.P. ................... 2,054,949 12.8%
950 Winter Street, Suite 4600
Waltham, MA 02451
New Enterprise Associates VI, Limited Partnership...... 1,581,267 9.8%
1119 St. Paul Street
Baltimore, MD 21202
Entities associated with JMI Equity Fund III, L.P.
(2)................................................... 1,229,508 7.6%
12680 High Bluff Drive
San Diego, CA 92130
CB Healthcare Fund, L.P. .............................. 1,229,508 7.6%
452 Fifth Avenue, 25th Floor
New York, NY
Mark W. Tierney (3).................................... 1,965,630 12.1%
John J. Davis (4)...................................... 238,123 1.5%
Michael C. Bingham (5)................................. 1,227,105 7.6%
Scott P. Halstead (6).................................. 89,950 *
Paul V. Barber (7)..................................... 1,094,262 6.8%
12680 High Bluff Drive
San Diego, CA 92130
James P. Bradley (8)................................... 31,356 *
8009 34th Ave S, Suite 600
Bloomington, MN 55425
Daniel M. Cain (9)..................................... 1,229,508 7.6%
452 Fifth Ave, 25th Floor
New York, NY
William J. Geary (10).................................. 2,054,949 12.8%
950 Winter Street, Suite 4600
Waltham, MA 02451
John M. Nehra (11)..................................... 1,581,267 9.8%
1119 St. Paul Street
Baltimore, MD 21202
All directors and executive officers as a group (9
persons) (12)......................................... 9,512,150 57.2%
- --------
* Represents beneficial ownership of less than 1% of the outstanding shares of
the common stock.
(1) Beneficial ownership is determined in accordance with rules of the SEC,
and generally includes voting power and/or investment power with respect
to securities. Shares of Common Stock subject to options or warrants
currently exercisable or exercisable within 60 days of March 1, 2000 are
deemed outstanding for computing the beneficial ownership percentage of
the person holding such options but are not deemed
12
outstanding for computing the beneficial ownership percentage of any other
person. Except as indicated by footnote, the persons named in the table
above have the sole voting and investment power with respect to all shares
of Common Stock shown as beneficially owned by them.
(2) Includes 1,094,262 shares held by JMI Equity fund III, L.P. and 135,246
shares held by JMI Equity Side Fund, L.P. JMI Equity Side Fund, L.P. is
affiliated with JMI Equity Fund III, L.P.
(3) Includes 121,200 shares issuable upon exercise of stock options
exercisable within 60 days of March 1, 2000 and 44,430 shares issuable
upon exercise of immediately exercisable warrants.
(4) Includes 238,123 shares issuable upon exercise of stock options
exercisable within 60 days of March 1, 2000.
(5) Includes 23,400 shares issuable upon exercise of stock options
exercisable within 60 days of March 1, 2000 and 3,705 shares issuable
upon exercise of immediately exercisable warrants.
(6) Includes 64,200 shares issuable upon exercise of stock options
exercisable within 60 days of March 1, 2000.
(7) Includes 1,094,262 shares held by JMI Equity Fund III, L.P. Mr. Barber, a
director of eBenX, is a Managing Member of JMI Associates III, LLC, which
is the general partner of JMI Equity Fund III, L.P. JMI Equity Side Fund,
L.P. is affiliated with JMI Equity Fund III, L.P. Mr. Barber disclaims
beneficial ownership of shares held by JMI Equity Fund III, L.P. Mr.
Barber has no beneficial ownership interest in JMI Equity Side Fund, L.P.
(8) Includes 31,356 shares issuable upon exercise of stock options
exercisable within 60 days of March 1, 2000.
(9) Includes 1,229,508 shares held by CB Heathcare Fund, L.P. Mr. Cain, a
director of eBenX, is a Manager of CB Health Ventures, L.L.C., which is
the general partner of CB Healthcare Fund, L.P. Mr. Cain disclaims
beneficial ownership of shares held by CB Healthcare Fund, L.P.
(10) Includes 2,054,949 shares held by North Bridge Venture Partners, L.P.
Mr. Geary, a director of eBenX, is a principal of North Bridge Venture
Management, L.P., which is a general partner of North Bridge Venture
Partners, L.P. Mr. Geary disclaims beneficial ownership of shares held
by North Bridge Venture Partners, L.P.
(11) Includes 1,581,267 shares held by New Enterprise Associates VI, Limited
Partnership. Mr. Nehra, a director of eBenX, is a general partner of NEA
Partners VI, Limited Partnership, which is the general partner of New
Enterprise Associates VI, Limited Partnership. Mr. Nehra disclaims
beneficial ownership of shares held by New Enterprise Associates VI.
(12) Includes 478,279 shares issuable upon exercise of stock options
exercisable within 60 days of March 1, 2000 and 48,135 shares issuable
upon exercise of immediately exercisable warrants. Includes 1,094,262
shares held by JMI Equity Fund III, L.P., 1,229,508 shares held by CB
Healthcare Fund, L.P., 2,054,949 shares held by North Bridge Venture
Partners, L.P. and 1,581,267 shares held by New Enterprise Associates
VI, Limited Partnership.
13
PROPOSAL TWO
TO RATIFY AND APPROVE THE AUGUST 3, 1999 AMENDMENT OF THE
EBENX, INC. 1993 STOCK OPTION PLAN, WHICH INCREASED THE NUMBER OF SHARES OF
COMMON STOCK ISSUABLE PURSUANT TO OPTIONS GRANTED UNDER SUCH PLAN
TO ITS CURRENT NUMBER OF 3,900,000
On August 3, 1999, the Board of Directors approved an amendment to the
eBenX, Inc. 1993 Stock Option Plan (the "Plan") increasing the number of shares
of eBenX Common Stock which may be issued under options granted pursuant to the
Plan from 1,050,000 shares of Common Stock of eBenX to 1,300,000 shares of
Common Stock of eBenX (or 3,900,000 shares after accounting for eBenX's 3-for-1
stock split effected on December 8, 1999). As of December 31, 1999, only 35,862
of the 3,900,000 shares of Common Stock remained available for additional
grants of options under the Plan.
The Plan permits the grant of stock options, including options intended to
qualify as incentive stock options under Section 422 of the Internal Revenue
Code (the "Code"). In order to qualify as incentive stock options under Section
422 of the Code, options must be granted pursuant to a plan which specifies the
aggregate number of shares that may be issued pursuant to options granted under
the plan, and the shareholders must approve that plan. In order to ensure
incentive stock option treatment, the shareholders must also approve any
amendment to a plan increasing the number of shares which may be issued
pursuant to exercise of options.
If the shareholders of eBenX do not approve and ratify the amendment of the
Plan to increase the number of shares that may be issued under the Plan, these
additional options will not qualify for treatment as incentive stock options.
Generally, an employee who receives an option which qualifies as an
incentive stock option and who satisfies the holding period and other
requirements set forth in Section 422 of the Code would be taxable at capital
gains rates upon disposition of the stock acquired by exercise of the option on
the difference between the exercise price and the amount realized upon
disposition. In that case, eBenX would not be allowed a deduction for federal
income tax purposes in connection with the grant or exercise of the option.
However, if the option does not qualify for treatment as an incentive stock
option, this special tax treatment is not available. In that case, the employee
would generally be taxed at ordinary income rates at the time of exercise on
the difference between the exercise price and the value of the stock received.
eBenX would receive a corresponding tax deduction at that time.
eBenX believes that the incentives provided by the Plan, including the
special tax treatment available to employees for incentive stock options, are
an important element in attracting and retaining highly skilled and qualified
employees in a competitive employment market. Shareholder approval and
ratification of the amendment to the Plan increasing the number of shares
available under the Plan to its present level is necessary to ensure the
availability of incentive stock option treatment for these additional options.
A description of the Plan is set forth below.
The 1993 Stock Option Plan
The Plan was approved by the Board of Directors and the shareholders of
eBenX in 1994. The purposes of the Plan are to aid eBenX in attracting and
retaining the best available personnel for positions of substantial
responsibility, to provide employees and consultants additional incentive and
to promote the success of eBenX.
Any employee or consultant, including employee officers and directors, of
eBenX or any parent or subsidiary is eligible to receive options under the
Plan, and there are approximately 300 employees and consultants, including
employee officers and directors, eligible. The term of each option granted
under the Plan shall be the term as stated in the applicable option agreement,
provided that all options shall have a term of no
14
more than ten years from the date of grant (or, in the case of an incentive
stock option, no more than five years if the option holder owns stock
representing more than 10% of the voting power of all classes of stock of eBenX
or of any parent or subsidiary at the date of grant). If any granted options
expire or become unexercisable for any reason, the shares of Common Stock will
become available for future options under the Plan.
With respect to option grants to employee officers or directors, the Plan
may be administered by either the Board or a committee designated by the Board
in compliance with Rule 16b-3 of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). If permitted by Rule 16b-3, the Plan may be
administered by different bodies with respect to directors, non-director
officers and employees who are neither directors nor officers. With respect to
option grants to employees or consultants who are neither directors nor
officers of eBenX, the Plan may be administered by either the Board or a
committee designated by the Board (which shall be constituted in such a manner
as to satisfy the legal requirements relating to the administration of
incentive stock option plans). The members of the committee are appointed from
time to time by the Board, serve for an indefinite period, and may be removed
by the Board at any time. The administrator has, subject to the Plan and, with
respect to the committee, the specific duties delegated to the committee by the
Board, the authority to determine the fair market value of the Common Stock in
accordance with Section 2(k) of the Plan; select the individuals to whom
options are granted; determine whether and to what extent options are granted;
determine the number of shares of Common Stock to be covered by each option;
approve forms of agreement for use under the Plan; determine the terms and
conditions of any options; determine under what circumstances cash may be
offered instead of Common Stock to settle an option; and reduce the exercise
price of an option to the current fair market value of the Common Stock (if its
fair market value has declined since the date of the grant of the option). All
decisions, determinations and interpretations of the administrator will be
final and binding on all option holders.
The committee appointed by the Board to act as an administrator under the
Plan is currently the Compensation Committee which is comprised of John M.
Nehra, Daniel M. Cain and James P. Bradley. Mr. Nehra is a general partner of
NEA Partners VI, Limited Partnership which is the general partner of New
Enterprise Associates VI, Limited Partnership. New Enterprise Associates VI,
Limited Partnership is a holder of greater than five percent of the outstanding
Common Stock of eBenX. Mr. Cain is a manager of CB Health Ventures, L.L.C.
which is the general partner of CB Healthcare Fund, L.P. CB Healthcare Fund,
L.P. is a holder of greater than five percent of the outstanding Common Stock
of eBenX.
The Plan permits the grant of stock options, including options intended to
qualify as incentive stock options under Section 422 of the Code and stock
options that do not meet the requirements of Section 422 of the Code (a
"nonstatutory stock option"). However, only employees are eligible to receive
incentive stock options.
The option exercise price is determined by the Board. However, in the case
of an incentive stock option, the option exercise price must be not less than
the fair market value of the stock on the date of grant (or 110% of the fair
market value of the stock subject to the option in the case of options granted
to employees who own more than 10% of the voting power of all classes of stock
of eBenX). In the case of a nonstatutory stock option, the exercise price shall
be determined by the administrator.
The fair market value of Common Stock shall be determined as follows:
(1) If the Common Stock is listed on any established stock exchange or a
national market system (including the national market system of the
National Association of Securities Dealers, Inc. Automated Quotation
("Nasdaq") System), its fair market value shall be the closing sales
price for the stock (or the closing bid, if no sales were reported) as
reported in The Wall Street Journal or such other source as the
administrator deems reliable;
15
(2) If the Common Stock is quoted on the Nasdaq System (but not on the
national market system thereof) or regularly quoted by a recognized
securities dealer but selling prices are not reported, its fair market
value shall be the mean between the high bid and low asked prices for
the Common Stock; or
(3) In the absence of an established market for the Common Stock, the fair
market value shall be determined in good faith by the administrator.
Options granted under the Plan shall be exercisable at such times and under
such conditions as determined by the Board and in accordance with the Plan. An
option is deemed exercised when written notice of such exercise has been given
to eBenX in accordance with the terms of the option and when full payment for
the shares has been received by eBenX. There shall be no right to vote or
receive dividends until the stock certificate evidencing exercised shares is
issued. Except as otherwise provided by the Board with respect to incentive
stock options, the Plan provides that option holders may exercise the option by
tendering cash, check, promissory note, other Common Stock (which shares, when
acquired upon exercise of an option, have been owned for more than six months
and have a fair market value on the date of surrender equal to the exercise
price of the option being exercised), retention by eBenX of a portion of the
Common Stock subject to the option (provided that the fair market value of that
portion equals the exercise price and the Board authorizes the exchange),
delivery of a properly executed notice together with other documentation as the
committee and the broker, if applicable, shall require to effect an exercise of
the option along with delivery to eBenX of the sale or loan proceeds equal to
the exercise price, any combination of the previous items in this list or other
consideration to the extent permitted under the law.
In the event of termination of an option holder's employment or consulting
relationship, the option holder shall have thirty days (or a different period
as determined by the Board, but not longer than three months for an incentive
stock option) to exercise options. If the termination is as a result of a total
and permanent disability, the option holder shall have twelve months to
exercise the option (but in no event later than the expiration date of the
option as set forth in the option agreement). In the event of death of an
option holder, the option may be exercised at any time within twelve months
following the date of death by the optionholder's estate or by a person who
acquired the right to exercise the option by bequest or inheritance (but in no
event later than the expiration date of the option as set forth in the option
agreement). Options granted to persons that are subject to Section 16(b) of the
Exchange Act must comply with Rule 16b-3 and contain additional conditions or
restrictions to qualify the options for the maximum exemption from Section 16.
Recipients of options granted under the Plan may not sell, pledge, assign,
hypothecate, transfer or dispose the option in any manner otherwise than by
will or by the laws of descent and distribution. While the holder of the option
is alive, only he or she can exercise the option.
Each option shall be designated in a written option agreement as either an
incentive stock option or a nonstatutory stock option. Notwithstanding such
designation, to the extent that the aggregate fair market value of the shares
designated as incentive stock options are exercisable for the first time by any
holder during any calendar year (under all plans of eBenX, parent of eBenX or
subsidiary of eBenX) exceeds $100,000, such excess options shall be treated as
nonstatutory stock options.
Subject to any required action by shareholders, the number of shares of
Common Stock covered by each outstanding option and the number of shares of
Common Stock which have been authorized for issuance under the Plan shall be
proportionately adjusted for any increase or decrease in the number of issued
shares of Common Stock resulting from a stock split, a reverse stock split, a
stock dividend, a combination or reclassification of the Common Stock or any
other increase or decrease in the number of issued shares of Common Stock that
is unaccompanied with the receipt of consideration by eBenX (provided that
conversion of convertible securities shall not be considered issued shares
without receipt of consideration). These adjustments shall be made by the Board
whose determination shall be final, binding and conclusive.
16
In the event of either a proposed dissolution or liquidation of eBenX, the
option holder shall be notified fifteen days in advance of the dissolution or
liquidation. The option will terminate immediately prior to the proposed
dissolution or liquidation of eBenX. In the event of a merger of eBenX or the
sale of all or substantially all of eBenX's assets, the option shall be assumed
by the successor company or substituted with an equivalent option in the
successor company as provided in the Plan. In lieu of such assumption or
substitution, the Board shall provide, with a fifteen day notice, the right for
the option holder to exercise all options (including options which would not
otherwise be exercisable).
The Board may at any time amend, alter, suspend or discontinue the Plan
provided that no such amendment, alteration, suspension or discontinuance shall
impair the rights of an option holder without his or her consent. In addition,
eBenX shall obtain the approval of the shareholders to amendments of the Plan
to the extent necessary to comply with Rule 16b-3 or Section 422 of the Code or
any other applicable law or regulation (including the rules and regulations of
the Nasdaq National Market (or other applicable exchange)).
The issuance and delivery of shares shall comply with all relevant
provisions of law and the requirements of any stock exchange upon which the
shares may then be listed, and shall be further subject to the approval of
counsel for eBenX with respect to such compliance.
The Board of Directors adopted the amendment to the Plan in order to allow
eBenX to continue to provide a convenient and advantageous way for all
employees of eBenX to make systematic purchases of eBenX's Common Stock and
therefore to develop a stronger incentive to work for the continued success of
eBenX. The amendment to the Plan is being submitted to the shareholders for
ratification and approval in order to provide advantageous tax benefit to
employees of eBenX who have or will receive options under the Plan.
The Board of Directors recommends a vote FOR the proposal to ratify and
approve the August 3, 1999 amendment of the eBenX, Inc. 1993 Stock Option Plan,
which increased the number of shares of Common Stock issuable pursuant to
options granted under such plan to its current number of 3,900,000.
17
INFORMATION REGARDING EBENX'S INDEPENDENT PUBLIC ACCOUNTANTS
Ernst & Young LLP ("Ernst & Young") has been appointed as eBenX's
independent auditors for the year ending December 31, 2000. Ernst & Young has
no relationship with eBenX other than that arising from its employment as
independent auditors. Representatives of Ernst & Young will be present at the
Annual Meeting. They will have an opportunity to make a statement if they
desire to do so and will be available to respond to appropriate questions from
shareholders.
PROPOSALS FOR THE NEXT ANNUAL MEETING
Pursuant to eBenX's Bylaws, in order for business to be properly brought
before the next annual meeting by a shareholder, the shareholder must be a
shareholder of record at the time of giving of notice, be entitled to vote at
the meeting and give written notice of the matter, which must otherwise be a
proper matter for shareholder action, in the manner provided for in the Bylaws.
The shareholder must give written notice to the Secretary of the corporation so
as to be received at eBenX's principal executive offices at 605 North Hwy 169,
Suite LL, Minneapolis, MN 55441-6465 at least 120 days before the date that is
one year after the date of eBenX's proxy statement for the prior year's regular
meeting. The notice must set forth the name and record address of the
shareholder and of the beneficial owner, if any, on whose behalf the proposal
will be made, the class and number of shares of the corporation owned by the
shareholder and beneficially owned by the beneficial owner, if any, on whose
behalf the proposal will be made, a brief description of the business desired
to be brought before the regular meeting and the reasons for conducting the
business and any material interest in the business of the shareholder and the
beneficial owner, if any, on whose behalf the proposal is being made. The
chairman of the meeting may refuse to acknowledge any proposed business not
made in compliance with the foregoing procedure. Each such notice should be
sent to the Secretary and any such proposal will be subject to the requirements
of the proxy rules adopted under the Securities Exchange Act of 1934.
ADDITIONAL MATTERS
The Board of Directors of eBenX does not presently know of any matters to be
presented for consideration at the annual meeting of shareholders other than
the matters described in the Notice of Annual Meeting of Shareholders mailed
together with this Proxy Statement, but if other matters are presented, it is
the intention of the persons named in the accompanying proxy to vote on such
matters in accordance with their best judgement. The proxy confers
discretionary authority to vote only with respect to matters that the Board of
Directors of eBenX did not know, prior to April 25, 2000, were to be presented
at the Annual Meeting of Shareholders.
By Order of the Board of Directors,
/s/ Scott P. Halstead
Scott P. Halstead
Chief Financial Officer and Secretary
Dated: April 25, 2000
18
eBenX, Inc.
PROXY
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD MAY 25, 2000
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby constitutes and appoints Scott P. Halstead and Susan
Busch and each and any of them, proxies of the undersigned, with full power of
substitution, to vote all of the shares of eBenX, Inc. ("eBenX") that the
undersigned may be entitled to vote at the Annual Meeting of Stockholders of
eBenX to be held at The Marquette Hotel, 710 Marquette Avenue, Minneapolis,
Minnesota 55402, on Thursday, May 25, 2000, at 9:00 a.m., prevailing time, and
at any adjournment or postponement thereof as follows:
THIS PROXY MUST BE DATED, SIGNED BY THE STOCKHOLDER AND RETURNED PROMPTLY TO
EBENX IN THE ENCLOSED ENVELOPE. WHEN SIGNING AS ATTORNEY, EXECUTOR,
ADMINISTRATOR, TRUSTEE OR GUARDIAN, PLEASE GIVE FULL TITLE. IF MORE THAN ONE
TRUSTEE, ALL SHOULD SIGN. IF STOCK IS HELD JOINTLY, EACH OWNER MUST SIGN.
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
Please mark your votes as [X]
indicated in this example
THIS PROXY, WHEN PROPERLY SIGNED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED STOCKHOLDER.
IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR ALL NOMINEES AND
PROPOSALS LISTED.
1. Election of Directors:
Nominees: 01 William J. Geary and 02 John M. Nehra
WITHHOLD
FOR FOR ALL
[_] [_]
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE WRITE
THAT NOMINEE'S NAME ON THE SPACE PROVIDED BELOW.)
- --------------------------------------------------------------------------------
2. Approval of an amendment which increased the number of shares of Common
Stock authorized for issuance pursuant to the eBenX, Inc. 1993 Stock Option
Plan.
FOR AGAINST ABSTAIN
[_] [_] [_]
3. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the annual meeting of shareholders.
IF YOU WANT TO VOTE ELECTRONICALLY PLEASE READ THE INSTRUCTIONS BELOW
COMPANY NUMBER:
PROXY NUMBER:
ACCOUNT NUMBER:
Signature ___________________ Signature _____________________ Date:_____________
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
VOTE BY INTERNET
QUICK * * * EASY * * * IMMEDIATE
eBenX, Inc.
* You can now vote your shares electronically through the Internet.
* This eliminates the need to return the proxy card.
* Your electronic vote authorizes the named proxies to vote your shares in
the same manner as if you marked, signed, dated and returned the proxy
card.
TO VOTE YOUR PROXY BY INTERNET
- ------------------------------
www.continentalstock.com
Have your proxy card in hand when you access the above website. You will be
prompted to enter the company number, proxy number and account number to create
an electronic ballot. Follow the prompts to vote your shares.
TO VOTE YOUR PROXY BY MAIL
- --------------------------
Mark, sign and date your proxy card above, detach it and return it in the
postage-paid envelope provided.
PLEASE DO NOT RETURN THE ABOVE CARD IF VOTED ELECTRONICALLY
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