SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No.____)
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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
I-TRAX, 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)
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I-TRAX, INC.
One Logan Square, Suite 2615
130 N. 18th Street
Philadelphia, PA 19103
April __, 2002
Dear I-trax, Inc. Stockholders:
You are cordially invited to the Annual Meeting of Stockholders to be
held at 10:00 A.M. on May 22, 2002 at 1735 Market Street, 51st Floor,
Philadelphia, Pennsylvania 19103.
Details with respect to the meeting are set forth in the attached
Notice of Annual Meeting and Proxy Statement.
Your vote is important. Whether or not you plan to attend the meeting,
you are urged to complete, date, sign and return your proxy. If you attend the
meeting and would prefer to vote in person, you may still do so.
Very truly yours,
/s/ FRANK A. MARTIN
FRANK A. MARTIN
Chairman and Chief Executive Officer
I-TRAX, INC.
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held May 22, 2002
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To the Stockholders:
The Annual Meeting of Stockholders of I-trax, Inc. will be held at 1735
Market Street, 51st Floor, Philadelphia, Pennsylvania 19103, at 10:00 A.M. on
May 22, 2002 for the following purposes:
(1) To elect eleven directors to serve one-year terms.
(2) To consider and vote upon a proposal to amend the Company's
Certificate of Incorporation to effect a reverse stock split,
as determined by the Board of Directors in its discretion, so
as to comply with the listing requirements of the American
Stock Exchange.
(3) To ratify the selection by the Board of Directors of the firm
of PricewaterhouseCoopers, LLP as independent auditors for
2002.
(4) To transact any other business that may properly come before
the meeting or any adjournment or postponement thereof.
Stockholders of record as of the close of business on April 2, 2002 are
entitled to notice of and to vote at the meeting.
Whether or not you plan to attend the meeting, please complete, date
and sign the enclosed proxy card and return it in the enclosed envelope. Your
proxy may be revoked at any time prior to the time it is voted.
By Order of the Board of Directors,
YURI ROZENFELD
General Counsel and Secretary
Philadelphia, Pennsylvania
April ___, 2002
I-TRAX, INC.
One Logan Square, Suite 2615
130 N. 18th Street
Philadelphia, PA 19103
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PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
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These proxy materials are furnished in connection with the solicitation
of proxies by the Board of Directors of I-trax, Inc., a Delaware corporation
("I-trax" or the "Company"), for the Annual Meeting of Stockholders of I-trax to
be held at 10:00 A.M. on May 22, 2002, at 1735 Market Street, 51st Floor,
Philadelphia, Pennsylvania 19103, and any adjournments or postponements of such
meeting. These proxy materials were first mailed to stockholders on or about
April ___, 2002. The address of the principal executive office of I-trax is One
Logan Square, Suite 2615, 130 N. 18th Street, Philadelphia, Pennsylvania 19103.
Sending a signed proxy will not affect the stockholder's right to attend the
Annual Meeting and vote in person. Every stockholder has the power to revoke his
or her proxy at any time before it is voted. The proxy, before it is exercised
at the meeting, may be revoked by filing with the Secretary of the Company a
notice in writing revoking it, by delivering a duly executed proxy bearing a
later date, or by attending the meeting and voting in person.
Stockholders Entitled to Vote
The close of business of April 2, 2002 was the record date for
stockholders entitled to notice of and to vote at the Annual Meeting. As of the
record date, there were 46,358,856 outstanding shares of the common stock, $.001
par value (the "Common Stock"), of I-trax.
Quorum Required
The presence, in person or by proxy, of stockholders entitled to cast
at least a majority of the votes that all stockholders are entitled to cast on a
particular issue constitutes a quorum for the transaction of business at the
Annual Meeting. Abstentions and broker non-votes will be counted as present for
the purpose of determining the presence of a quorum.
Votes Required
Proposal 1. Directors are elected by a plurality of the affirmative
votes cast by those shares present in person, or represented by proxy, and
entitled to vote at the Annual Meeting. The eleven (11) nominees for director
receiving the highest number of affirmative votes will be elected. Abstentions
and broker non-votes will not be counted toward a nominee's total. Stockholders
may not cumulate votes in the election of directors.
Proposals 2, 3 and 4. Approval of the alternative proposals to amend
the Company's Certificate of Incorporation requires the affirmative vote of
holders of a majority of the shares of Common Stock issued and outstanding and
entitled to vote at the Annual Meeting. Abstentions and broker non-votes are not
affirmative votes and, therefore, will have the same effect as votes against the
proposal.
Proposal 5. Ratification of the appointment of PricewaterhouseCoopers
LLP as the Company's independent auditors for the fiscal year ending December
31, 2002 requires the affirmative vote of a majority of those shares present in
person, or represented by proxy, and cast either affirmatively or negatively at
the Annual Meeting. Abstentions and broker non-votes will not be counted as
having been voted on the proposal.
1
Proxies
A form of proxy is enclosed. All properly executed proxies received by
the Board of Directors, and not revoked, will be voted as indicated in
accordance with the instructions thereon. In the absence of contrary
instructions, shares represented by such proxies will be voted for the election
of the directors as described herein; in favor of each alternate proposal to
amend the Company's Certificate of Incorporation; in favor of the ratification
of the selection of the independent auditors; and in the discretion of the proxy
holders, on such other matters as may properly come before the meeting.
Solicitation of Proxies
The entire cost of soliciting proxies will be borne by I-trax.
Arrangements may be made with brokerage houses and other custodians, nominees
and fiduciaries to send proxies and proxy materials to the beneficial owners of
Common Stock, and the Company may reimburse such persons or institutions for
expenses incurred in connection with any such distribution. Proxies may be
solicited in person or by telephone, facsimile, e-mail, telegraph or other means
by directors, officers or employees of I-trax, none of whom will receive
additional compensation therefore.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The Board of Directors currently consists of eleven directors. All
eleven directors are to be elected at the Annual Meeting to serve until the 2003
Annual Meeting. The Board's nominees for election as directors are John Blazek,
David R. Bock, Philip D. Green, Michael M.E. Johns, M.D., Craig Jones, M.D.,
Hans C. Kastensmith, Arthur N. Leibowitz, M.D., Frank A. Martin, John R.
Palumbo, Carol Rehtmeyer, Ph.D., and William S. Wheeler, each of whom currently
serves on the Board.
The proxy holders intend to vote all proxies received by them in the
accompanying form for such nominees unless otherwise directed. In the event any
nominee is unable or declines to serve as a director at the time of the Annual
Meeting, the proxies will be voted for any nominee who shall be designated by
the present Board of Directors to fill the vacancy, or, in lieu thereof, the
Board of Directors may reduce the number of directors. As of the date of this
Proxy Statement, the Company is not aware of any nominee who is unable or
unwilling to serve as a director.
The following table lists the name and age, as of April 2, 2002, of
each of the eleven nominees to serve as directors of the Company.
Name Age Position
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Frank A. Martin 51 Chairman, Chief Executive Officer, Treasurer and
Director
John Blazek 47 Member of the Office of the President and Director
David R. Bock 58 Director
Philip D. Green 51 Director
Michael M.E. Johns, M.D. 60 Director
Craig Jones, M.D. 43 Director
Hans C. Kastensmith 42 Vice-Chairman and Director
Arthur N. Leibowitz, M.D. 55 Director
John R. Palumbo 51 Director
Carol Rehtmeyer, Ph.D. 52 Member of the Office of the President and Director
William S. Wheeler 45 Director
2
Frank A. Martin has been a director, Chairman and Chief Executive
Officer of I-trax since September 2000. Mr. Martin has been a director of I-trax
Health Management Solutions, Inc. ("Health Management"), one of the Company's
predecessors, since 1996. Mr. Martin founded, and has been a Managing Director
of, The Nantucket Group, LLC ("Nantucket"), a health care venture capital firm
specializing in investing in early stage healthcare service and technology
companies since December 1998. He currently serves on the Board of Directors of
Saddletude, Inc., an Internet-based equestrian sports network. Mr. Martin served
as the Chief Executive Officer and director of EduNeering, Inc., an electronic
knowledge management company, from April 1999 to April 2000. In November 1992,
Mr. Martin founded Physician Dispensing Systems, Inc. ("PDS"), a health care
information technology company that developed pharmaceutical software for
physicians' offices. Mr. Martin assisted in the sale of PDS to Allscripts
Healthcare Solutions, Inc. ("Allscripts"), a provider of point-of-care solutions
to physicians, in December 1996 and joined its Board of Directors on which he
served until 1998.
John Blazek, MBA, RP, has been a director and Member of the Office of
the President of I-trax since February 2002. Mr. Blazek joined I-trax when
I-trax acquired WellComm Group, Inc. ("WellComm"), a disease management company,
in February 2002. From May 2000 to February 2002, Mr. Blazek served as the Chief
Executive Officer of WellComm. From 1998 to 1999, Mr. Blazek served as an
Assistant to Mayor Hal Daub, City of Omaha, in which capacity he oversaw
economic development for the City of Omaha. From 1996 to 1999, Mr. Blazek served
as President of Blazek & Associates, Inc., a consulting firm. Mr. Blazek was
co-owner of a company that was twice named among Omaha's "25 fastest growing
companies" before it was sold to Coram Healthcare in 1992.
David R. Bock has been a director of I-trax since February 2001. Mr.
Bock was a director of Health Management from February 2000 to February 2001.
Mr. Bock has been the Executive Vice President and Chief Financial Officer of
Pedestal, Inc., an Internet-based company providing information on the secondary
mortgage marketplace, since January 2000. Prior to that, Mr. Bock was a managing
partner in Federal City Capital Advisors, LLC, an investment-banking firm
located in Washington, D.C. Mr. Bock is also a Managing Director of Nantucket.
From 1992 to 1995, Mr. Bock was a Managing Director in the London corporate
finance group of Lehman Brothers and was responsible for developing Lehman
Brothers' investment banking business in a wide range of emerging markets,
including India, Russia, Turkey and Central Europe. Mr. Bock also served in a
variety of management positions at the World Bank, including as Chief of Staff
for the Bank's worldwide lending operations. From 1995 to 1997, he was President
of Maitland-Ruick & Company, a predecessor firm to Federal City. Mr. Bock has
extensive experience in economic policy, capital markets and corporate strategy
across a wide range of sectors, including financial services, healthcare, real
estate, energy and natural resources.
Philip D. Green has been a director of I-trax since February 2001. Mr.
Green was a director of Health Management from March 2000 to February 2001.
Since July 2000, Mr. Green has been a partner of Akin, Gump, Strauss, Hauer &
Feld, L.L.P., a leading international law firm. From its formation in 1989 until
its merger with Akin Gump in July 2000, Mr. Green was the founding principal of
the Washington, D.C. based law firm of Green, Stewart, Farber & Anderson, P.C.
From 1978 through 1989, Mr. Green was a partner in the Washington, D.C. based
law firm of Schwalb, Donnenfeld, Bray and Silbert, P.C. Mr. Green practices
healthcare law and assists entities in corporate planning and transactions. Mr.
Green represents a significant number of major teaching hospitals and integrated
health care delivery systems. Mr. Green also represents a number of public and
private for-profit health care companies. Mr. Green is currently a member of the
Board of Directors of Allscripts and Imagyn Medical Technologies, Inc., a
medical device manufacturer.
Michael M.E. Johns, M.D., has been a director of I-trax since February
2001. Dr. Johns was a director of Health Management from October 2000 to
February 2001. Since 1996, Dr. Johns has served as an Executive Vice President
for Health Affairs of Emory University, overseeing Emory University's widespread
academic and clinical programs in health sciences. In this position, Dr. Johns
leads strategic planning initiatives for both patient care and research. In
addition, since 1996, Dr. Johns has served as the Chairman of the Board and
Chief Executive Officer of Emory Healthcare, a comprehensive healthcare system
in metropolitan Atlanta. Emory Healthcare includes two physician practices,
three wholly owned hospitals and a jointly owned fourth hospital, as well as
numerous affiliated hospitals in Atlanta and throughout Georgia. Dr. Johns also
is Chairman of the Board of EHCA, LLC, a company overseen jointly by Emory
Healthcare and HCA Corporation. Through EHCA, Emory is responsible for clinical
performance improvement and quality assurance in six local hospitals and five
surgery centers owned by HCA Corporation. From 1990 to 1996, Dr. Johns served as
3
the Dean of the Johns Hopkins School of Medicine and Vice President of the
Medical Faculty at Johns Hopkins University.
Craig A. Jones, M.D., has been a director of I-trax since February
2001. Dr. Jones was a director of Health Management from January 2000 to
February 2001. Dr. Jones is currently Director of the Division of Allergy &
Immunology and the Allergy & Immunology Residency Training Program at the Los
Angeles County and University of Southern California Medical Center and an
Assistant Professor of Pediatrics at the University of Southern California
School of Medicine. Since November 1996, Dr. Jones has served as Director of the
Breathmobile Mobile Asthma Clinic Program, a program that he developed. The
Company's AsthmaWatch(R) system is currently installed and in use in the
Breathmobiles. Because of its clinical impact, the program is serving as a model
for community-based preventive healthcare and disease management. From January
1997 to December 1997, Dr. Jones served as President of the Los Angeles Society
of Asthma, Allergy & Immunology. Currently, he is designing and implementing a
program for the Los Angeles County Department of Health Services, which
integrates clinical operations and patient flow in four Breathmobiles serving
more than eighty-five school sites, County Comprehensive Health Centers, and
Pediatric Services at the LAC+USC Medical Center.
Hans C. Kastensmith has been a director of I-trax since February 2001
and Vice-Chairman of I-trax since March 2001. Mr. Kastensmith was a director and
President of Health Management from September 1999 to February 2001. Mr.
Kastensmith founded Member-Link Systems, Inc. ("Member-Link"), a company
acquired by Health Management in 1999. Mr. Kastensmith formed Member-Link in
1992 and served as its Chief Executive Officer until it merged with Health
Management. Mr. Kastensmith is currently leading a business development effort
for Medical Archival Systems at the University of Pittsburgh Medical Center
Health System.
Arthur (Abbie) N. Leibowitz, M.D., FAAP, has been a director of I-trax
since March 2002. Since 2001, Dr. Leibowitz has been the Executive Vice
President for Business Development and Chief Medical Officer of Health Advocate,
a health services company, which he helped form. Health Advocate helps consumers
navigate the healthcare system. In 2000, Dr. Leibowitz served as Executive Vice
President for Digital Health Strategy and Business Development and director of
Medscape, Inc., clinical information company. Dr. Leibowitz's experience
includes his tenure at Aetna U.S. Healthcare from 1987 to 2000 where he served
in several senior positions, including as Aetna's Chief Medical Officer for over
four years. As Aetna's Chief Medical Officer, he was responsible for directing
the company's patient management and clinical activities and relationships with
numerous physicians, hospitals and other heathcare providers. Dr. Leibowitz is a
nationally recognized leader in the healthcare industry and an authority on
managed care, clinical management and medical information systems. He is also a
popular speaker and has appeared frequently on national and regional television
and radio.
John R. Palumbo has been a director of I-trax since February 2001. Mr.
Palumbo was a director of Health Management from March 2000 to February 2001.
Mr. Palumbo has been a Vice President of Siemens Medical Solutions Health
Services, a provider of solutions and services for integrated healthcare, since
July 2001. From 1996 until it was acquired by Siemens, Mr. Palumbo served as
Area Vice President of Shared Medical Systems Corporation, a worldwide leader of
health information solutions serving over 5,000 providers in the United States,
Europe and the Pacific Rim. At Shared Medical Systems, Mr. Palumbo oversaw the
start-up of the National Health Services division, which markets to and services
the for-profit and not-for profit national health systems, such as Tenant, UHS,
and Ascension, and in 1999 assumed additional responsibilities for the Western
Operations division. From 1995 to 1996, Mr. Palumbo served as an Executive Vice
President and Chief Operating Officer of Allscripts. From 1990 to 1995, Mr.
Palumbo was the Executive Vice President of Healthworks Alliance, Inc., a
company he founded specializing in point-of-care technology and reengineering
services allowing physicians to process patients through the healthcare delivery
system.
Carol M. Rehtmeyer, Ph.D., MSN, RN, has been a director and Member of
the Office of the President of I-trax since February 2002. Ms. Rehtmeyer joined
I-trax when I-trax acquired WellComm in February 2002. Ms. Rehtmeyer formed
WellComm in 1997 after determining there was a need in healthcare for clinically
based, customer oriented telehealth information services. Ms. Rehtmeyer served
as the President of WellComm from its formation until February 2002. Ms.
Rehtmeyer has more than twenty-five years of healthcare experience in areas of
practice teaching, administration and leadership in clinical and managed care
settings.
4
William S. Wheeler has been a director of I-trax since February 2001.
Mr. Wheeler was a director of Health Management from September 1999 to February
2001. Mr. Wheeler has been the Chief Operating Officer and Chief Financial
Officer of Net2Voice, a telecommunications company, since March 2001. In May
1999, Mr. Wheeler co-founded an Internet communications business that was
launched in April 2000. Mr. Wheeler was a Vice President at Cable & Wireless USA
from June 1989 until February 1999. During this period, Mr. Wheeler held the
positions of Vice President and Controller, Senior Vice President, Finance and
acting President of the Dial Internet Services division. While leading the Dial
Internet Services division, Mr. Wheeler oversaw aspects of Cable & Wireless'
acquisition of MCI's Internet business. In this capacity, Mr. Wheeler had full
responsibility for marketing, finance, a customer service center and all
operational support systems. He developed a marketing and financial plan to
increase the customer base and improve profitability in a very short time frame
and directed the launch of Cable & Wireless USA's first consumer Internet
service (www.cwix.com). The business was sold to Prodigy Internet in 1999.
Board of Directors Meetings and Committees
The Board of Directors of I-trax held a total of five meetings during
2001. Each director who served in 2001, other than Dr. Jones and Mr. Palumbo,
attended more than 75% of the meetings of the Board and any committee of which
he is a member.
The Board of Directors has a Compensation Committee and an Audit
Committee.
The Compensation Committee is primarily responsible for determining the
compensation payable to the officers and key employees of the Company and to
recommend to the Board additions, deletions and alterations with respect to the
various employee benefit plans and other fringe benefits provided by the
Company, except that no member of the Committee shall take part in any decision
pertaining to his compensation or benefits in his capacity as a director of the
Company. The Committee also is primarily responsible for administering the
Company's stock option plans, awarding stock options to the Company's key
employees and non-employee directors and determining the terms and conditions on
which the options are granted. The Committee, which currently consists of Dr.
Jones and Mr. Bock, held no separate meetings during 2001. Rather, the members
of the Committee participated in all Board meetings concerning compensation
issues and had recommended a course of action with respect to compensation
matters to the Board at those meetings.
The Audit Committee is primarily responsible for approving the services
performed by the Company's independent auditors and reviewing and evaluating the
Company's accounting principles and reporting practices. The Audit Committee is
also responsible for monitoring the Company's system of internal accounting
controls and has the responsibility and authority described in its charter,
attached as Exhibit A hereto. This Committee currently consists of Messrs.
Wheeler, as Chairman, Palumbo and Bock. The Committee held one separate meeting
in 2001 to review the Company's 2000 financial statements and one separate
meeting in 2002 to review the Company's 2001 financial statements. All of the
members of the Audit Committee are independent, as defined by the National
Association of Securities Dealers listing standards.
Compensation of Directors
During 2001, directors of the Company did not receive any cash
payments. Messrs. Green and Palumbo and Dr. Johns each received an option grant
of 100,000 shares and Mr. Wheeler received an option grant of 50,000 shares.
These option grants are exercisable over a period of two years. Each director is
also reimbursed for out-of-pocket expenses incurred in connection with attending
Board meetings.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE NOMINEES LISTED
HEREIN.
5
PROPOSALS NO. 2, 3 AND 4
ALTERNATIVE AMENDMENTS TO THE COMPANY'S CERTIFICATE OF INCORPORATION
TO EFFECT A REVERSE STOCK SPLIT
The Board of Directors has determined that it is in the best interests
of the Company and its stockholders to effect one of the three following
alternative reverse stock split transactions:
o a reverse 1-for-3 stock split;
o a reverse 1-for-4 stock split; and
o a reverse 1-for-5 stock split.
In the discussion that follows, the term "Minimum Number" means: 3, if
the 1-for-3 reverse split is implemented; 4, if the 1-for-4 reverse split is
implemented; and 5, if the 1-for-5 reverse split is implemented.
Each of these three alternative transactions is a reverse stock split
(the "Reverse Split") pursuant to which each Minimum Number of shares of Common
Stock registered in the name of a stockholder at the effective time of the
Reverse Split will be converted into one share of Common Stock. As permitted
under Delaware law, shares of Common Stock that would be converted into less
than one share in the Reverse Split will instead be converted into the right to
receive a cash payment as further described below.
The Company is submitting the separate proposals to approve the three
alternative Reverse Split transactions in connection with the Company's pending
application for listing of its Common Stock for trading on the American Stock
Exchange. The Board believes that one of the alternative Reverse Split
transactions will be required to increase the trading price of the Common Stock
to more than $3 and thus satisfy an important listing requirement of the
American Stock Exchange. The Board is soliciting stockholder approval for each
of three alternative Reverse Split transactions. The availability of three
alternatives will provide the Board with the flexibility to implement the
Reverse Split transaction that may be required to satisfy the American Stock
Exchange's minimum stock price requirement.
The Board of Directors, in its discretion, may elect to effect any one
(but not more than one) of three alternative Reverse Split transactions that are
approved by the requisite vote of the stockholders of I-trax. Prior to
exercising this discretion, the Company will seek reasonable assurances that its
application for listing its Common Stock for trading on the American Stock
Exchange has been approved pending the effectiveness of applicable Reverse Split
transaction and will consult with the American Stock Exchange regarding which of
the three alternative Reverse Split transactions will be appropriate in light of
America Stock Exchange's listing qualifications and the Company's then stock
price. Ultimately, however, the Board will have the discretion to determine if
and when to effect any of these transactions that are approved by the
stockholders and reserves the right to abandon any or all such transactions even
if approved by the stockholders, but only if the Board concludes that the Common
Stock should not be listed on the American Stock Exchange.
We expect that if stockholders approve, and the Board elects to
implement, the Reverse Split, the Reverse Split would be consummated on or about
the date on which the Company's application to the American Stock Exchange is
approved. If the Board determines to implement any of the alternative Reverse
Split transactions approved by the stockholders, I-trax will publicly announce
in a press release and post on its website at http://www.i-trax.com, prior to
the effective date of the Reverse Split, which of the approved alternative
Reverse Split transactions the Board has elected to effect. The Company will
abandon the Reverse Split transaction if the Company's application to the
American Stock Exchange is not approved within nine months of the 2002 Annual
Meeting or if the Board concludes that the Common Stock should not be listed on
the American Stock Exchange.
If approved by the stockholders and implemented by the Board, the
Reverse Split will become effective on such date as may be determined by the
Board upon the filing of the necessary amendments to I-trax's Certificate of
Incorporation with the Secretary of State of the State of Delaware (the
"Effective Date"). The form of proposed amendment to I-trax's Certificate of
Incorporation necessary to effect the Reverse Split is attached to this Proxy
Statement as Exhibit B. The highlights of the Reverse Split are as follows.
6
Effect On Stockholders
If approved by stockholders at the Annual Meeting and implemented by
the Board, the Reverse Split will affect I-trax stockholders as follows:
Stockholder Before Completion of the Reverse Net Effect After Completion of the Reverse Split
Split
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Registered stockholders holding the Minimum Any shares that would result in the registered holder
number or more shares of Common Stock. receiving a fraction of a share after the completion of the
Reverse Stock Split will be converted into the right to receive
cash.
Registered stockholders holding fewer than the Shares will be converted into the right to receive cash.
Minimum Number of shares of Common Stock.
Stockholders holding Common Stock in street name I-trax intends that the holders of Common Stock in nominee
through a nominee (such as a bank or broker). accounts (such as through a bank or a broker) will experience
the same offer of the Reverse Split as the stockholders whose
shares are registered in their names. Nominees will be
instructed to effect the Reverse Split for their beneficial
holders. However, nominees may have different procedures and
stockholders holding shares in street name should contact their
nominees.
Structure of the Reverse Stock Split
If one of the three alternative Reverse Split transactions is approved
by stockholders and implemented by the Board, the Reverse Split is expected to
occur at 6:00 p.m. on the Effective Date. Upon consummation of the Reverse
Split, each registered stockholder on the Effective Date will receive one share
of Common Stock for each Minimum Number of shares of Common Stock held in his or
her account at that time. If a registered stockholder holds the Minimum Number
or more shares of Common Stock in his or her account, any fractional share in
such account will be cashed out after the Reverse Split and the total number of
shares held by such holder will be equal to the whole number of shares after the
Reverse Split less any fractional share. Any registered stockholder who holds
fewer than the Minimum Number of shares of Common Stock in his or her account at
the time of the Reverse Split will receive a cash payment instead of a
fractional share. We describe how we will calculate the payment we will make on
account of the fractional shares below. We intend that the holders of Common
Stock in nominee accounts (such as through a bank or a broker) will experience
the same offer of the Reverse Split as the stockholders whose shares are
registered in their names. Nominees will be instructed to effect the Reverse
Split for their beneficial holders. However, nominees may have different
procedures, and stockholders holding shares in street name should contact their
nominees.
In general, the Reverse Split can be illustrated by the following
examples:
Mr. Smith is a registered holder of 2 shares of After the Effective Date, Mr. Smith will receive a cash
Common Stock. payment equal to the cash-out price for his Common Stock. We
explain how we calculate the cash-out price below. Assuming
a cash-out price of $1, Mr. Smith will receive a check for
$2.
7
Ms. Doe is a registered holder of 125 shares of 1-for-3 reverse stock split
Common Stock.
After the Effective Date, Ms. Doe will be a registered holder
of 41 shares of Common Stock because this is the whole number
of shares after her 125 shares are divided by 3. Ms. Doe will
also receive a cash payment equal to the cash-out price for the
2 shares that would have resulted in a fractional share after
the Effective Date. (41x3=123 and 123+2=125) Assuming a
cash-out price of $1, Ms. Doe will receive a check for $2.
1-for-4 reverse stock split
After the Effective Date, Ms. Doe will be a registered holder of
31 shares of Common Stock because this is the whole number of
shares after her 125 shares are divided by 4. Ms. Doe will also
receive a cash payment equal to the cash-out price for the 1
share that would have resulted in a fractional share after the
Effective Date. (31x4=124 and 124+1=125) Assuming a cash-out
price of $1, Ms. Doe will receive a check for $1.
1-for-5 reverse stock split
After the Effective Date, Ms. Doe will be a registered holder of
25 shares of Common Stock because this is the whole number of
shares after her 125 shares are divided by 5. There are no
fractional shares after the Effective Date and Ms. Doe will not
receive any cash payment.
Background and Purpose of the Reverse Split
In March 2002, the Company applied for the listing of its Common Stock
on the American Stock Exchange. The Company believes that other than meeting the
stock price requirement, the Company's application generally meets the listing
requirements of the American Stock Exchange. The Company's stock price at this
time is less than the $3 per share, which is the minimum stock price required by
the American Stock Exchange. As an example, on April 3, 2002 the closing sale
price of the Common Stock on the Over-the-Counter Bulletin Board ("OTC BB") was
$1.04, and since January 1, 2002 and through April 2, 2002 the Common Stock's
closing sales price has ranged from a low of $1.02 to a high of $1.47.
The Board of Directors has concluded that it is in the best interest of
the Company and its stockholders to secure the listing of the Common Stock on
the American Stock Exchange and if necessary in connection with such listing, to
effect one of the alternative Reverse Split transactions. In determining which
of the three alternative Reverse Split transactions to implement, if any,
following stockholder approval, the Board will consider the following factors,
among others: (1) the then prevailing trading price and trading volume of the
Common Stock and the anticipated impact of the Reverse Split on the trading
market for the Common Stock; (2) whether the American Stock Exchange has
approved the listing of the Common Stock subject to the Reverse Split; (3) the
Board's determination as to which of the alternative transactions would best
satisfy the applicable listing requirements of, and conditions set by, the
American Stock Exchange; and (4) prevailing general market and economic
conditions.
8
Effect of the Reverse Split on I-trax Stockholders
Registered Stockholders with Fewer than the Minimum Number of Shares of Common
Stock:
If we complete the Reverse Split and you are a cashed-out stockholder
(i.e., a stockholder with fewer than the Minimum Number of shares of Common
Stock immediately prior to the Reverse Split):
o You will not receive fractional shares of stock as a result of
the Reverse Split.
o Instead of receiving fractional shares, you will receive a
cash payment in lieu of your fractional shares in the manner
described below.
o After the Reverse Split, you will have no further interest in
I-trax with respect to your cashed-out shares. These shares
will no longer entitle you to the right to vote as a
stockholder or share in I-trax's assets, earnings, or profits
or in any dividends paid after the Reverse Split. In other
words, you will no longer hold your cashed-out shares, you
will have only the right to receive cash for these shares. In
addition, you will not be entitled to receive interest with
respect to the period of time between the Effective Date and
the date you receive your payment for the cashed-out shares.
o You will not have to pay any service charges or brokerage
commissions in connection with the Reverse Split.
o As soon as practicable after the time we effect the Reverse
Split, you will receive a payment for the cashed-out shares
you held immediately prior to the Reverse Split in accordance
with the procedures below.
If You Hold Book-Entry Shares:
o Certain I-trax registered stockholders may hold their shares
in book-entry form. These stockholders do not have stock
certificates evidencing their ownership of Common Stock. They
are, however, provided with a statement reflecting the number
of shares registered in their accounts.
o If you are a cashed-out stockholder who holds registered
shares in a book-entry account, you do not need to take any
action to receive your cash payment. A check will be mailed to
you at your registered address as soon as practicable after
the Effective Date. By signing and cashing this check, you
will warrant that you owned the shares for which you received
a cash payment.
If You Hold Certificated Shares:
o If you are a cashed-out stockholder with a stock certificate
representing your cashed-out shares, you will be contacted by
the Company or its transfer agent, StockTrans, Inc., as soon
as practicable after the Effective Date. You will then receive
instructions on how to surrender your certificate(s) for your
cash payment. You will not receive your cash payment until you
surrender your outstanding certificate(s) to StockTrans.
Please do not send your certificates until you receive
separate instructions from the Company or StockTrans.
o All amounts owed to you will be subject to applicable federal
income tax and state abandoned property laws.
o You will not receive any interest on cash payments owed to you
as a result of the Reverse Split.
NOTE: If you want to continue to hold Common Stock after the Reverse
Split, you may do so by purchase a sufficient number of shares of Common Stock
so that you hold at least the Minimum Number of shares of Common Stock in your
account prior to the Reverse Split.
9
Registered Stockholders with the Minimum Number or More Shares of Common Stock:
If we complete the Reverse Split and you would be a holder of more than
the Minimum Number of shares of Common Stock:
o You will not receive fractional shares of stock as a result of
the Reverse Split.
o Instead of receiving fractional shares, you will receive a
cash payment in lieu of your fractional shares in the manner
described below.
o After the Reverse Split, you will have no further interest in
I-trax, including no right to vote or share in I-trax's
assets, earnings, or profits or in any dividends paid after
the Reverse Split with respect to your fractional shares. You
will only have the right to receive cash for your fractional
shares. In addition, you will not be entitled to receive
interest with respect to the period of time between the
Effective Date and the date you receive your payment in lieu
of your fractional shares.
o You will not have to pay any service charges or brokerage
commissions in connection with the Reverse Split.
Street Name Holders of Common Stock:
I-trax intends that the holders of Common Stock in nominee accounts
(such as through a bank or a broker) will experience the same offer of the
Reverse Split as the stockholders whose shares are registered in their names.
Nominees will be instructed to effect the Reverse Split for their beneficial
holders. However, nominees may have different procedures and stockholders
holding shares in street name should contact their nominees.
Determination of Cash-Out Price
In order to avoid the expense and inconvenience of issuing fractional
shares to stockholders who would hold less than one share of Common Stock or
would hold any fraction of one share of Common Stock after the Reverse Split,
under Delaware state law I-trax will pay cash for their fair value. If
stockholders approve any of these proposals at the Annual Meeting and the
Reverse Split is completed, the cash payment with respect to each share that is
cashed out in the Reverse Split will be equal to an amount per share equal to
the average of the closing prices per share of Common Stock on the OTC BB for
the period of ten consecutive trading days ending on (and including) the
Effective Date, without interest.
I-trax will obtain the funds for these payments from its working
capital.
Effect of the Reverse Split On I-trax
The Reverse Split will not affect the registration of the Common Stock
with the Securities and Exchange Commission under the Securities Exchange Act of
1934, as amended.
The number of authorized shares of Common Stock will not change as a
result of the Reverse Split. On April 2, 2002, there were 46,358,856 shares of
Common Stock issued and outstanding. If the Board elects to effect a 1-for-3
reverse stock split, the number of issued and outstanding shares of Common Stock
will be reduced to approximately 15,452,952; if the Board elects to effect a
1-for-4 reverse stock split, the number of issued and outstanding shares of
Common Stock will be reduced to approximately 11,589,714; and if the Board
elects to effect a 1-for-5 reverse stock split, the number of issued and
outstanding shares of Common Stock will be reduced to approximately 9,271,771.
Furthermore, in the case of each of the alternative Reverse Split transactions,
the issued and outstanding number of shares of Common Stock will be further
reduced by a nominal amount on account of the cashed out fractional shares. At
this time, we do not know the total number of shares that will be cashed out and
the total cash to be paid by I-trax. Also at this time, we do not know the
average daily closing price per share of the Common Stock on the OTC BB for the
period of ten trading days ending on the Effective Date. However, by way of an
10
example, if the 1-for-3 Reverse Split had been completed as of April 2, 2002,
when the average daily closing price per share of the Common Stock on the OTC BB
for the ten consecutive trading days then ended was $1.097, the cash payments
that would have been issued on account of all fractional shares, including both
registered and street name holders, would have been approximately $2,500. The
actual amounts will depend on the number of fractional shares cashed out on the
Effective Date and the then applicable cash out price.
The par value of the Common Stock will remain at $.001 per share after
the Reverse Split.
Stock Certificates
The Reverse Split will not affect any certificates representing shares
of Common Stock held by registered stockholders owning the Minimum Number or
more shares of Common Stock immediately prior to the Reverse Split. Old
certificates held by these stockholders will continue to evidence ownership of
the post-Reverse Split shares. Our transfer agent, however, will make an entry
in our stock records indicating the post-Reverse Split number of shares held by
each registered stockholder and of any cash payment to which such stockholder is
entitled on account of any cashed out fractional share. New stock certificates
and cash payments will be delivered and paid to stockholders on an ad hoc basis
as old certificates are surrendered to the transfer agent in connection with
future transactions.
Registered stockholders owning less than the Minimum Number of shares
of Common Stock immediately prior to the Reverse Split will be contacted by the
Company or its transfer agent, StockTrans, Inc., as soon as practicable after
the Effective Date. At that time, these stockholders will receive instructions
on how to surrender their certificates for cash payment. These stockholders will
not receive cash payment until they surrender their outstanding certificate(s)
to StockTrans. Please do not send your certificates until you receive separate
instructions from the Company or StockTrans.
Certain Federal Income Tax Consequences
We summarize below certain federal income tax consequences to I-trax
and its stockholders resulting from the Reverse Split. This summary is based on
U.S. Federal income tax law existing as of the date of this Proxy Statement, and
such tax laws may change, even retroactively. This summary does not discuss all
aspects of Federal income taxation that may be important to you in light of your
individual circumstances. Many stockholders (such as financial institutions,
insurance companies, broker-dealers, tax-exempt organizations, and foreign
persons) may be subject to special tax rules. Other stockholders may also be
subject to special tax rules, including but not limited to: stockholders who
received Common Stock as compensation for services or pursuant to the exercise
of an employee stock option, or stockholders who have held, or will hold, stock
as part of a straddle, hedging, or conversion transaction for Federal income tax
purposes. In addition, this summary does not discuss any state, local, foreign,
or other tax considerations. This summary assumes that you are a U.S. citizen
and have held, and will hold, your shares as capital assets under the Internal
Revenue Code. You should consult your tax advisor as to the particular federal,
state, local, foreign, and other tax consequences, in light of your specific
circumstances.
We believe that the Reverse Split will be treated as a tax-free
"recapitalization" for Federal income tax purposes.
Federal Income Tax Consequences to Stockholders who are not Cashed Out by the
Reverse Split:
If you (1) continue to hold Common Stock immediately after the Reverse
Split, and (2) receive no cash as a result of the Reverse Split, you will not
recognize any gain or loss in the Reverse Split and you will have the same
adjusted tax basis and holding period in your Common Stock as you had in such
stock immediately prior to the Reverse Split.
Federal Income Tax Consequences to Cashed-Out Stockholders:
If you receive cash as a result of the Reverse Split, your tax
consequences will depend on whether, in addition to receiving cash, you or a
person or entity related to you continues to hold Common Stock immediately after
the Reverse Split.
11
Stockholders who Exchange all of their Common Stock for Cash as a
Result of the Reverse Split
If you (1) receive cash in exchange for a fractional share as a result
of the Reverse Split, (2) do not continue to hold any Common Stock immediately
after the Reverse Split, and (3) are not related to any person or entity which
holds Common Stock immediately after the Reverse Split, you will recognize
capital gain or loss. The amount of capital gain or loss you recognize will
equal the difference between the cash you receive for your cashed-out stock and
your aggregate adjusted tax basis in such stock.
If you are related to a person or entity who continues to hold Common
Stock immediately after the Reverse Split, you will recognize gain in the same
manner as set forth in the previous paragraph, provided that your receipt of
cash either (1) is "not essentially equivalent to a dividend," or (2) is a
"substantially disproportionate redemption of stock," as described below.
o "Not Essentially Equivalent to a Dividend." You will satisfy
the "not essentially equivalent to a dividend" test if the
reduction in your proportionate interest in I-trax resulting
from the Reverse Split is considered a "meaningful reduction"
given your particular facts and circumstances. The Internal
Revenue Service has ruled that a small reduction by a minority
shareholder whose relative stock interest is minimal and who
exercises no control over the affairs of the corporation will
meet this test.
o "Substantially Disproportionate Redemption of Stock." The
receipt of cash in the Reverse Split will be a "substantially
disproportionate redemption of stock" for you if the
percentage of the outstanding shares of Common Stock owned by
you immediately after the Reverse Split is less than 80% of
the percentage of shares of Common Stock owned by you
immediately before the Reverse Split.
In applying these tests, you will be treated as owning shares actually
or constructively owned by certain individuals and entities related to you. If
the taxable amount is not treated as capital gain under any of the tests, it
will be treated first as ordinary dividend income to the extent of your ratable
share of I-trax's undistributed earnings and profits, then as a tax-free return
of capital to the extent of your aggregate adjusted tax basis in your shares,
and any remaining gain will be treated as capital gain.
Stockholders who both Receive Cash and Continue to hold Common Stock
Immediately after the Reverse Split
If you both receive cash as a result of the Reverse Split and continue
to hold Common Stock immediately after the Reverse Split, you generally will
recognize gain, but not loss, in an amount equal to the lesser of (1) the excess
of the sum of aggregate fair market value of your shares of Common Stock plus
the cash received over your adjusted tax basis in the shares, and (2) the amount
of cash received in the Reverse Split. In determining whether you continue to
hold Common Stock immediately after the Reverse Split, you will be treated as
owning shares actually or constructively owned by certain individuals and
entities related to you. Your aggregate adjusted tax basis in your shares of
Common Stock held immediately after the Reverse Split will be equal to your
aggregate adjusted tax basis in your shares of Common Stock held immediately
prior to the Reverse Split, increased by any gain recognized in the Reverse
Split, and decreased by the amount of cash received in the Reverse Split.
Any gain recognized in the Reverse Split will be treated, for Federal
income tax purposes, as capital gain, provided that your receipt of cash either
(1) is "not essentially equivalent to a dividend" with respect to you, or (2) is
a "substantially disproportionate redemption of stock" with respect to you. (The
terms in quotation marks in the previous sentence are discussed above.) In
applying these tests, you may possibly take into account sales of shares of
Common Stock that occur substantially contemporaneously with the Reverse Split.
If your gain is not treated as capital gain under any of these tests, the gain
will be treated as ordinary dividend income to you to the extent of your ratable
share of I-trax's undistributed earnings and profits, then as a tax-free return
of capital to the extent of your aggregate adjusted tax basis in your shares,
and any remaining gain will be treated as a capital gain.
12
You should consult your tax advisor as to the particular Federal,
state, local, foreign, and other tax consequences of the Reverse Split, in light
of your specific circumstances.
Appraisal Rights
Stockholders do not have appraisal rights under Delaware state law or
under I-trax's Certificate of Incorporation or By-laws in connection with the
Reverse Split.
Reservation Of Rights
We reserve the right to abandon the Reverse Split without further
action by our stockholders at any time before the filing of the necessary
amendments to I-trax's Certificate of Incorporation with the Delaware Secretary
of State, even if the Reverse Split has been authorized by our stockholders at
the Annual Meeting, and by voting in favor of the Reverse Split you are
expressly also authorizing us to determine not to proceed with the Reverse Split
if we should so decide.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF THE PROPOSALS TO
AMEND THE CERTIFICATE OF INCORPORATION OF I-TRAX, INC. TO EFFECT, ALTERNATIVELY,
AS DETERMINED BY THE BOARD OF DIRECTORS IN ITS DISCRETION, ONE OF THREE
DIFFERENT REVERSE STOCK SPLITS.
PROPOSAL NO. 5
RATIFICATION OF INDEPENDENT AUDITORS
The Company is asking the stockholders to ratify the appointment of
PricewaterhouseCoopers LLP as the Company's independent auditors for the fiscal
year ending December 31, 2002. The affirmative vote of the holders of a majority
of shares present or represented by proxy and voting at the Annual Meeting will
be required to ratify the appointment of PricewaterhouseCoopers LLP.
In the event the stockholders fail to ratify the appointment, the Board
of Directors will reconsider its selection. Even if the appointment is ratified,
the Board, in its discretion, may direct the appointment of a different
independent accounting firm at any time during the year if the Board feels that
such a change would be in the Company's and its stockholders' best interests.
Representatives of PricewaterhouseCoopers LLP are expected to be
present at the Annual Meeting, will have the opportunity to make a statement if
they desire to do so, and will be available to respond to appropriate questions.
The Company engaged PricewaterhouseCoopers LLP on November 2, 2000,
pursuant to the authorization of the Board.
During 2001, PricewaterhouseCoopers LLP provided services in the
following categories and amounts:
1. Audit Fees $37,500
2. Financial Information Systems Design and Implementation --
3. All Other Fees 15,000
13
The Audit Committee has considered the above non-audit services and has
determined that the provision thereof is compatible with maintaining auditor
independence.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE RATIFICATION OF THE
SELECTION OF PRICEWATERHOUSECOOPERS, LLP TO SERVE AS THE COMPANY'S INDEPENDENT
AUDITORS FOR THE FISCAL YEAR ENDING DECEMBER 31, 2002.
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The table below sets forth, as of April 2, 2002, the number of shares
and percentage of Common Stock beneficially owned by:
o our Chief Executive Officer, four other most highly
compensated executive officers based on compensation earned
during 2001 and one former executive officer;
o each director;
o all directors and executive officers as a group; and
o each person who is known by the Company to own beneficially
five percent or more of the outstanding Common Stock.
Beneficial ownership has been determined in accordance with Rule 13d-3
under the Exchange Act. Under this rule, certain shares may be deemed to be
beneficially owned by more than one person (if, for example, persons share the
power to vote or the power to dispose of the shares). In addition, shares are
deemed to be beneficially owned by a person if the person has the right to
acquire the shares (for example, upon exercise of an option or warrant) within
sixty (60) days of April 2, 2002, the date as of which the information is
provided. In computing the percentage ownership of any person, the amount of
shares is deemed to include the amount of shares beneficially owned by such
person (and only such person) by reason of such acquisition rights. As a result,
the percentage of outstanding shares of any person as shown in the following
table does not necessarily reflect the person's actual voting power at any
particular date.
14
To the Company's knowledge, except as indicated in the footnotes to
this table and pursuant to applicable community property laws, the persons named
in the table have sole voting and investment power with respect to all shares of
Common Stock shown as beneficially owned by them.
Shares of Options and
Common Stock Warrants
Beneficially Exercisable
Named Executive Officers and Directors* Owned Within 60 Days Total Percent of Class
---------------------------------------------- ---------------- ----------------- ---------------- -----------------
Frank A. Martin (1) 5,578,050 1,312,808 6,890,858 14.5
John Blazek (2) 4,925,071 -- 4,925,071 10.6
Hans C. Kastensmith 2,921,178 231,615 3,152,793 6.8
David R. Bock (1) 2,833,408 -- 2,833,408 6.1
Gary Reiss 687,308 1,924,203 2,611,511 5.4
Carol Rehtmeyer (3) 1,676,620 280,000 1,956,620 4.2
David C. McCormack 782,680 471,899 1,254,579 2.7
Yuri Rozenfeld (4) 82,902 413,270 496,172 1.1
Anthony Tomaro 30,684 368,671 399,355 **
Philip D. Green (5) 6,000 305,000 311,000 **
John R. Palumbo 25,000 175,000 200,000 **
Michael M.E. Johns, M.D. -- 150,000 150,000 **
William S. Wheeler 50,000 68,750 118,750 **
Craig Jones, M.D. 130,000 -- 130,000 **
Arthur N. Leibowitz, M.D. -- -- -- **
All executive officers and directors as a 17,495,493 5,850,797 23,346,290 44.7
group (16 persons)
Warrants and
Shares of Convertible
Common Stock Securities
Beneficially Exercisable Percent of Class
5% Stockholders Owned Within 60 Days Total
---------------------------------------------- ---------------- ----------------- ---------------- -----------------
Nantucket Healthcare Ventures I, L.P. (1) 2,333,408 -- 2,333,408 5.0
Woodglen Group, L.P. (6) 3,155,540 1,125,000 3,538,461 7.1
Palladin Opportunity Fund, LLC (7) -- 3,538,461 3,538,461 8.5
* Named executive officers and directors can be reached at I-trax, Inc.,
One Logan Square, Suite 2615, 130 N. 18th Street, Philadelphia,
Pennsylvania 19103.
** Less than 1% of the outstanding shares of Common Stock.
(1) The Nantucket Group, LLC is the general partner of Nantucket Healthcare
Ventures I, L.P. ("Ventures"). The Nantucket Group has sole voting and
sole dispositive power with respect to the shares held by Ventures.
Messrs. Martin and Bock are members and Managing Directors of The
Nantucket Group. Therefore, Messrs. Martin and Bock may be deemed to
have beneficial ownership of the shares held by Ventures. Messrs.
Martin and Bock disclaim beneficial ownership of the shares held by
Ventures, except to the extent of their respective pecuniary interest
therein. Messrs. Martin and Bock own directly 3,244,642 and 500,000
shares, respectively. The address for Ventures is c/o The Nantucket
Group, LLC, One Logan Square, Suite 2615, 130 N. 18th Street,
Philadelphia, Pennsylvania 19103.
(2) Includes an aggregate of 661,972 shares of held in escrow for the
benefit of Mr. Blazek.
(3) Includes an aggregate of 225,352 shares of held in escrow for the
benefit of Ms. Rehtmeyer.
(4) Mr. Rozenfeld is a partner of The Spartan Group Limited Partnership
("Spartan") the owner of 30,000 shares. Mr. Rozenfeld has shared voting
and shared dispositive power with respect to the shares held by
Spartan. Mr. Rozenfeld may be deemed to have beneficial ownership of
15
the shares held by Spartan. Mr. Rozenfeld disclaims beneficial
ownership of the shares held by Spartan, except to the extent of his
pecuniary interest therein. Mr. Rozenfeld owns 52,902 directly.
(5) Mr. Green is an affiliate of Health Industry Investments, LLC, a holder
of 130,000 options exercisable as of June 1, 2002.
(6) Woodglen Associates, LLC is the general partner of Woodglen Group,
L.P., and, as such, has sole voting and sole dispositive power with
respect to the shares it holds. Its address is 101 East Street Road,
Kennett Square, Pennsylvania 19348.
(7) Palladin Asset Management, L.L.C. ("PAM") is the managing member of
Palladin Opportunity Fund, LLC ("POF"). Palladin Capital Management,
LLC ("PCM"), is the sole general partner of The Palladin Group, L.P.
("Palladin"). Palladin is the investment advisor of POF. PAM and PCM
have shared voting and shared dispositive power with respect to the
shares held by POF. Because its beneficial ownership arises solely from
its status as the investment advisor of POF, Palladin expressly
disclaims equitable ownership of and pecuniary interest in any shares.
The business address of POF is c/o The Palladin Group, 195 Maplewood
Avenue, Maplewood, New Jersey 07040.
EXECUTIVE COMPENSATION AND RELATED INFORMATION
The Company's executive officers and their ages as of April 2, 2002 are
as follows:
Name Age Position
-------------------------------------- ----------------- -----------------------------------------------------
Frank A. Martin 51 Chairman, Chief Executive Officer, Treasurer and
Director
John Blazek 47 Member of the Office of the President and Director
Carol Rehtmeyer, Ph.D. 52 Member of the Office of the President and Director
Gary Reiss 51 Member of the Office of the President
Anthony Tomaro, CPA 37 Chief Financial Officer
David C. McCormack 32 Chief Technology Officer
Michael O'Connell, M.D. 42 Chief Medical Officer
Yuri Rozenfeld 33 General Counsel and Secretary
Please see information under Proposal No. 1 above for biographical
information of Ms. Rehtmeyer and Messrs. Martin and Blazek.
Gary Reiss has been a Member of the Office of the President of I-trax
since March 2002. From February 2001 to March 2002, Mr. Reiss was the Chief
Operating Officer of I-trax. Mr. Reiss was the Chief Operating Officer of Health
Management from March 2000 to February 2001. Mr. Reiss has over nine years of
experience as the chief operating officer of health and medical information
management companies. From November 1999 to March 2000, Mr. Reiss served as the
Chief Operating Officer of EduNeering, Inc., an electronic knowledge management
company, where his responsibilities included positioning the company as a web
provider and portal. From 1996 to 1999, Mr. Reiss served as the Chief Operating
Officer of Allscripts. From 1992 to 1995, Mr. Reiss was an Executive Vice
President and Chief Operating Officer of PDS, a company he founded with Mr.
Martin and which was later acquired by Allscripts.
Anthony Tomaro, CPA has been the Chief Financial Officer of I-trax and
Health Management since January 2001. Prior to joining I-trax, Mr. Tomaro was a
partner in the New York certified public accounting firm of Massella, Tomaro &
Co., LLP. He is a member of the American Institute of Certified Public
Accountants and New York State Society of Certified Public Accountants. Since
1994, Mr. Tomaro has served as a partner in accounting firms specializing in
Securities and Exchange Commission accounting and auditing services along with
domestic taxes and consulting services. Prior to 1994, he was a manager with a
large regional accounting firm specializing in the real estate industry.
16
David C. McCormack has been the Chief Technology Officer of I-trax
since February 2001 and of Health Management since January 2000. Mr. McCormack
was the Vice President of Engineering of Member-Link from January 1999 until it
was acquired by Health Management in December 1999. Mr. McCormack oversees all
of I-trax's software development efforts. He has developed and deployed systems
in most major programming languages. From April 1997 until January 1999, Mr.
McCormack served as a partner in a Virginia based consulting firm, where he
oversaw all software developed by the firm: an inventory management system; an
EDI transaction processing system; and an electronic document management system.
From January 1995 until April 1997, Mr. McCormack acted as a consultant to
Lockheed Martin Mission Systems during its development of the Global
Transportation Network (GTN) for the Air Force. Mr. McCormack prior
responsibilities have included the design, development and integration of
mission critical systems for the Army, Navy and Air Force. Mr. McCormack has a
U.S. Government Top Secret clearance.
Michael O'Connell, M.D., has been the Chief Medical Officer of I-trax
since February 2001 and of Health Management since November 1999. In this role,
he oversees the content of numerous I-trax software applications and population
health management programs. He is responsible for intellectual content and
successful compliance with current Center for Disease Control and other national
immunization guidelines. Dr. O'Connell has served as the Assistant Chief of the
Allergy-Immunology Department at Walter Reed Army Medical Center and as a
Co-Consultant to the Army Surgeon General for Allergy & Immunizations since May
1997. Dr. O'Connell has served as a United States Army Medical Officer since
1985.
Yuri Rozenfeld has been the General Counsel and Secretary of I-trax
since March 2002. From July 2000 to March 2002, Mr. Rozenfeld served as the
General Counsel and Assistant Secretary of I-trax and of Health Management. From
April 1997 to July 2000, Mr. Rozenfeld was an associate in the Business and
Finance Group at Ballard Spahr Andrews & Ingersoll, LLP, where he represented
small- and mid-cap public companies and venture capital funds in a broad range
of corporate matters, including stock and asset acquisitions, mergers, venture
capital investments, venture fund formations, partnership and limited liability
company matters and securities law matters. From 1995 to April 1997, Mr.
Rozenfeld was an associate specializing in product liability litigation with
Riker, Danzig, Scherer, Hyland & Perretti LLP.
17
The following Summary Compensation Table sets forth the compensation
earned by the following individuals: (i) the Company's Chief Executive Officer,
(ii) four other most highly compensated executive officers who were serving as
such as of December 31, 2001, and (iii) one former highly compensated executive
officer. Compensation for fiscal years 2001 and 2000 was received by the named
executive officers from Health Management and for fiscal year 1999 from
Member-Link.
Summary Compensation Table
Annual Compensation Long-Term
Compensation
Name and Position Year Salary Other (6) Number of Options
---------------------------------- ------------- --------------- ------ ----------------- --- ----------------------
Frank A. Martin 2001 $ 175,000 (1)(2) $ 6,000 350,000
Chairman, Chief Executive 2000 146,063 (1) 4,500 350,000
Officer and Treasurer 1999 25,000 (3) -- --
Hans C. Kastensmith 2001 $ 105,671 (1)(2) -- --
Vice-Chairman and former 2000 149,910 (1) -- --
President 1999 202,250 (4) -- --
Gary Reiss 2001 $ 175,000 (1)(2) $ 6,000 700,000
Member of the Office of the 2000 134,965 (1) 4,500 700,000
President 1999 -- -- --
David C. McCormack 2001 $ 125,000 (1)(2) -- --
Chief Technology Officer 2000 119,750 (1) -- --
1999 142,234 (5) -- --
Anthony Tomaro 2001 $ 150,000 (1)(2) -- 200,000
Chief Financial Officer 2000 -- -- 200,000 (7)
1999 -- -- --
Yuri Rozenfeld 2001 $ 124,375 (1)(2) -- 200,000
General Counsel and Secretary 2000 49,271 (1) -- 200,000
1999 -- -- --
----------------------------------
(1) Salary includes amounts deferred under the Company's 401(k) Plan.
Salary also includes amounts deferred pursuant to the Company's salary
deferment program in effect from November 2000 to December 31, 2001.
Pursuant to the salary deferment program, Mr. Martin deferred $29,166
in 2000 and $135,357 in 2001; Mr. Kastensmith deferred $25,000 in 2000
and $70,005 in 2001; Mr. Reiss deferred $29,166 in 2000 and $135,357 in
2001; Mr. McCormack deferred $20,834 in 2000 and $112,844 in 2001; Mr.
Tomaro deferred $70,665 in 2001; and Mr. Rozenfeld deferred $8,958 in
2000 and $65,132 in 2001. Further, effective as of December 31, 2001,
all of the named executive officers, excluding Mr. Kastensmith,
surrendered the deferred salary in exchange for warrants to acquire
Common Stock. These officers received a warrant to acquire one share of
Common Stock exercisable at $.15 per share for each $.35 of deferred
salary. Accordingly, if an officer elected to exchange accrued salary
for warrants and later exercised these warrants, the effective per
share price for each share of Common Stock that such officer would
receive would be $.50. The price of $.50 per share was intended to
equal the price per share paid by third-party investors purchasing
Common Stock from the Company in 2001 private placements. Accordingly,
Messrs. Martin and Reiss each received 470,066 warrants, Mr. McCormack
received 381,937 warrants, Mr. Tomaro received 201,900 warrants, and
Mr. Rozenfeld received 211,686 warrants.
(2) Effective as of December 31, 2001 and pursuant to the salary deferment
program described above, the executive officers were granted a total of
404,164 warrants to acquire Common Stock at an exercise price of $.50
per share and a total of 99,080 warrants to acquire Common Stock at an
exercise price of $1.00 per share. The warrants exercisable at $.50
were allocated as follows: Mr. Martin, 98,435; Mr. Kastensmith, 73,896;
Mr. Reiss, 98,435; Mr. McCormack, 68,919; Mr. Tomaro, 31,250; and Mr.
Rozenfeld, 33,229. The warrants exercisable at $1.00 were allocated as
follows: Mr. Martin, 21,876; Mr. Kastensmith, 7,719; Mr. Reiss, 21,876;
18
Mr. McCormack, 21,043; Mr. Tomaro, 13,023; and Mr. Rozenfeld, 13,543.
These extra warrants were issued to all employees that participated in
the salary deferment program because similar warrants were issued by
the Company to third-party investors in connection with the several
private placement completed by the Company in 2001. As a condition to
deferring pay in the salary deferment program, the employees were
promised by the Company that they would be treated in the same manner
as third-party investors in the Company.
(3) Salary includes 250,000 shares of Common Stock, valued at $0.10 per
share, issued as payment for services.
(4) Salary includes 1,000,000 shares of Common Stock, valued at $0.125 per
share, issued as payment for services.
(5) Salary includes 330,000 shares of Common Stock, valued at $0.125 per
share, issued as payment for services.
(6) Automobile and parking allowance.
(7) Grant approved by the Board of Directors on December 29, 2000,
effective as of January 1, 2001.
The following table contains information concerning the stock option
grants made to each of the identified executive officers during the fiscal year
ended December 31, 2001. No stock appreciation rights were granted in 2001.
Option Grants in Last Fiscal Year
Number of
Securities Percent of Total
Underlying Options Granted to
Options Granted Employees in Exercise Price
Name Fiscal Year (1) (Dollars per Share) Expiration Date
------------------------------------ ---------------- -------------------- -------------------- ---------------------
Frank A. Martin 350,000 15.2% $ .55 4/9/2011
Hans C. Kastensmith -- -- N/A N/A
Gary Reiss 700,000 30.4% .55 4/9/2011
David C. McCormack -- -- N/A N/A
Anthony Tomaro 200,000 8.7% .55 4/9/2011
Yuri Rozenfeld 200,000 8.7% .55 4/9/2011
------------------------------------
(1) Based on an aggregate of 2,302,500 options granted in the fiscal year.
19
The following table contains information about each of the identified
executive officers option exercises in fiscal year 2001 and option holdings as
of December 31, 2001. No stock appreciation rights were outstanding at the end
of that year.
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values
Number of Securities
Shares Underlying Unexercised Value of Unexercised
Acquired on Value Realized Options at Year End In-the-Money Options
Name Exercise Exercisable/Unexercisable at Year End (1)
----------------------------- --------------- ----------------- ----------------------------- -----------------------
Frank A. Martin -- -- 216,666 / 483,334 $315,000
Hans C. Kastensmith -- -- -- --
Gary Reiss -- -- 499,998 / 900,002 787,500
David C. McCormack -- -- -- --
Anthony Tomaro -- -- 116,666 / 283,334 180,000
Yuri Rozenfeld -- -- 166,666 / 233,334 180,000
-----------------------------
(1) Based on the closing price of the Common Stock on December 31, 2001 of
$1.45 per share, less the exercise price payable for such shares.
EMPLOYMENT CONTRACTS AND CHANGE IN CONTROL ARRANGEMENTS
Employment Contracts
Health Management is party to an employment agreement with each of
Frank A. Martin, Gary Reiss, Hans C. Kastensmith and David C. McCormack.
Frank A. Martin and Gary Reiss
On December 29, 2000, Health Management entered into an employment
agreement with each of Frank A. Martin, the Chief Executive Officer of I-trax
and of Health Management and Gary Reiss, the Chief Operating Officer of I-trax
and of Health Management. Each agreement is for an initial term of three years
ending on December 28, 2003. Thereafter, each employment agreement extends
automatically for successive periods of one year, unless the applicable
executive officer elects not to renew the agreement. Each agreement provides for
an annual base salary during the initial term of $175,000 and such bonuses and
option grants as may be approved by the Board of Directors or its Compensation
Committee from time to time.
The Company may terminate Mr. Martin or Mr. Reiss's employment with or
without cause at any time. In addition, Mr. Martin or Mr. Reiss may terminate
his employment upon 90 days notice or upon shorter notice for good reason. Good
reason includes the failure by the Company to continue the executive officer in
his executive position, material diminution of the executive officer's
responsibilities, duties or authority, assignment to the executive officer of
duties inconsistent with his position or requiring the executive officer to be
permanently based anywhere other than within 25 miles of Philadelphia,
Pennsylvania.
In the event either employment agreement is terminated without cause or
for good reason the Company will pay the applicable executive officer severance,
equal to one year's salary, payable over one year. In addition, in the event
either employment agreement is terminated without cause or for good reason, the
executive officer will remain subject to the non-competition restrictions
described below only so long as he is receiving severance payments. Finally, one
hundred percent (100%) of options granted to such executive officers shall
accelerate and vest immediately.
20
With the exception of the circumstances described in the immediately
preceding paragraph, each executive officer agreed not to compete against the
Company for a period of one year following the expiration of the initial term or
any renewal term, even if the actual employment is terminated prior to such
expiration. Each executive officer also agreed not to use or disclose any
confidential information of the Company for at least five years after the
expiration of the original term or any additional term, even if the actual
employment is terminated prior to such expiration. Finally, each executive
officer also agreed that any invention he develops during his employment
relating to the business of the Company will belong to the Company.
Hans C. Kastensmith
On June 1, 1999, Member-Link, a company acquired by Health Management
in 1999, entered into an employment agreement with Hans C. Kastensmith, the
Vice-Chairman and director of I-trax. The term of the agreement is three years
ending on May 31, 2002. Health Management is bound by the agreement as a
successor-in-interest to Member-Link. The agreement provides for an annual base
salary of $175,000 and cash bonuses from time to time as the Company's Board of
Directors may deem appropriate.
The agreement prohibits Mr. Kastensmith from using or disclosing any of
the Company's confidential information at any time in the future and he has
agreed that any inventions he develops during his employment relating to the
Company's business will become the Company's property. He is also prohibited
from competing with the Company for a period of one year following the
termination of the agreement, unless the resulting termination is due to the
Company's breaching the agreement.
Mr. Kastensmith and the Company agreed to terminate Mr. Kastensmith's
full-time employment in August 2001 without a formal amendment of his employment
agreement. Mr. Katensmith, in his capacity as the Vice-Chairman and director of
the Company, continues to assist the Company on an as needed basis.
David C. McCormack
On September 28, 2000 and effective as of January 1, 2000, Health
Management entered into an employment agreement with David C. McCormack, the
Chief Technology Officer of I-trax and of Health Management, for an initial term
of three years ending on December 31, 2002. Thereafter, the employment agreement
renews automatically for successive periods of one year, unless either party
elects not to renew. The agreement provides for an annual base salary during the
initial term of $125,000 and bonuses and option grants that may be approved by
the Company's Board of Directors or its Compensation Committee from time to
time.
In the event the Company terminates Mr. McCormack's employment without
cause at any time during his employment, the Company will pay Mr. McCormack
severance, equal to one year's salary, payable over one year. In the event the
employment agreement is terminated without cause, the executive officer will
remain subject to the non-competition restrictions described below only so long
as he is receiving severance payments.
With the exception of the circumstance described above, Mr. McCormack
agreed not to compete against the Company for a period of one year following the
expiration of the original term or any renewal term, even if the actual
employment is terminated prior to such expiration. Mr. McCormack also agreed not
to use or disclose any confidential information of the Company for at least five
years after the expiration of the original term or any additional term, even if
the actual employment is terminated prior to such expiration. Mr. McCormack also
agreed that any invention he develops during his employment relating to the
business of the Company will be its sole and absolute property.
Mr. McCormack may terminate the agreement at any time upon at least 60
days written notice.
Change of Control Arrangements
The Compensation Committee, as administrator of the Company's 2000
Equity Compensation Plan and 2001 Equity Compensation Plan, can provide for
accelerated vesting of the shares of Common Stock subject to outstanding options
in connection with certain changes in control of the Company.
21
SECTION 16(a) OF THE EXCHANGE ACT BENEFICIAL OWNERSHIP COMPLIANCE
The members of the Board of Directors, the executive officers of the
Company and persons who hold more than ten percent (10%) of the Company's
outstanding Common Stock are subject to the reporting requirements of Section
16(a) of the Exchange Act which require them to file reports with respect to
their ownership of Common Stock and their transactions in Common Stock. Based
upon (i) the copies of Section 16(a) reports that the Company received from such
persons for their 2001 fiscal year transactions in the Common Stock and their
Common Stock holdings and (ii) the written representations received from one or
more of such persons that no annual Form 5 reports were required to be filed by
them for the 2001 fiscal year, the Company believes that all reporting
requirements under Section 16(a) for such fiscal year were met in a timely
manner by its executive officers, Board members and greater than ten-percent
stockholders, except Frank A. Martin, an executive officer and a ten percent
(10%) beneficial owner, filed a delinquent Form 4, reporting: a conversion of a
loan into Common Stock; the receipt of warrants in exchange for accrued salary
and participation in a salary deferment program; and receipt of Common Stock
upon the exercise of a warrant.
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Dr. Craig A. Jones, a director of I-trax, is the Director of the
Division of Allergy & Immunology at the Los Angeles County and University of
Southern California Medical Center, which is operated by the Los Angeles County
Department of Health Services (DHS). The Los Angeles County DHS purchased an
information system from the Company to support implementation of a clinical
disease management program for which it paid the Company approximately $100,000
in 2000 and $61,000 in 2001. Dr. Jones is the director of that clinical program.
In September 2000, the Company also entered into a verbal consulting agreement
with Dr. Jones. Pursuant to the agreement, in addition to attending Board
meeting, Dr. Jones agreed to assist the Company with product development
efforts, attend trade shows on its behalf and originate business leads. Under
the agreement, Dr. Jones was to be compensated at a rate of $3,000 per month.
The payments were suspended in November 2000.
In May 2000, Health Management entered into a consulting agreement with
Health Industry Investments, LLC, an affiliate of Philip D. Green, a director of
the Company. Pursuant to the consulting agreement, Health Industry agreed to
perform certain services for Health Management, which include arranging
introductions with potential customers. In turn, Health Industry received the
right to purchase 20,000 shares of common stock of Health Management at a
purchase price of $2 per share. The beneficial owners of Health Industry
exercised this right and purchased these shares in September 2000 pursuant to a
private placement conducted by Health Management. In addition, Health Industry
received options to acquire up to 80,000 shares of common stock of Health
Management at an exercise price of $0.625 as compensation for performing
services under the consulting agreement. The options were to vest in equal
monthly installments over the one-year term of the consulting agreement. All
options were accelerated in October 2000. In April 2001, Health Industry
received options to acquire an additional 200,000 shares of Common Stock at an
exercise price of $0.55 as compensation for continuing to perform services under
the consulting agreement. These options vest over two years.
Effective as of December 29, 2000, Health Management issued to each of
Messrs. Martin and Reiss 250,000 shares of common stock of Health Management at
a per share purchase price of $2. The aggregate purchase price was payable
pursuant to a Promissory Note and Pledge Agreement in the principal amount of
$499,750. The principal amount of each Promissory Note and Pledge Agreement
accrues interest at a rate of 5.87% per annum. The principal and interest on
each Promissory Note and Pledge Agreement was payable in five annual
installments of principal and interest beginning on December 29, 2001.
Furthermore, in the event these officers were performing their duties adequately
and were accomplishing the Company's goals, the Company's Compensation Committee
had the option of waiving and forgiving any of the annual payments of principal
and interest in lieu of granting such officers a cash bonus. This transaction
was rescinded in 2001.
From November 2000 through May 2001, the Company completed an offering
of convertible promissory notes and stock purchase warrants. The Company raised
$2,000,000 in this offering. Of such total, $700,000 was loaned to the Company
by Woodglen Group, L.P., a five percent stockholder of the Company, $250,000 was
loaned to the Company by Frank A. Martin, its Chief Executive Officer, and
$250,000 was loaned to the Company by Gary Reiss, a Member of the Company's
22
Office of the President. The convertible promissory notes had a maturity date of
one year from the date of issue and accrue interest at 8% per annum with a
default rate of 12% per annum. The principal amount of, and accrued and unpaid
interest under, the convertible promissory notes were convertible into Common
Stock. The stock purchase warrants grant the holders a right to purchase two
shares of Common Stock for each $1 in original principal amount of convertible
promissory notes. The initial conversion price of the convertible promissory
notes and the exercise price of the stock purchase warrants were $2 per share,
subject, in each case, to full-ratchet anti-dilution adjustment in the event of
a subsequent offering with an effective per share price of less than $2.
On June 25, 2001 and pursuant to an Exchange Agreement dated May 14,
2001, the holders of the convertible promissory notes, including Woodglen Group,
L.P., a five percent stockholder of the Company, Mr. Martin, our Chief Executive
Officer, and Mr. Reiss, a Member of the Company's Office of the President,
agreed to exchange the principal amount of such promissory notes and interest
accrued thereon through May 15, 2001 in the aggregate amount of $2,280,157 for
Common Stock at the exchange price of $.50 per share. As consideration for the
exchange, the Company reset the exercise price of the warrants to acquire
2,200,000 shares of its Common Stock, originally issued together with the
convertible promissory notes, to $.50 per share. Accordingly, in the
transaction, Woodglen Group, L.P. received 1,455,540 shares of Common Stock and
warrants to acquire 700,000 shares of Common Stock, Mr. Martin received 523,452
shares of Common Stock and warrants to acquire 250,000 shares of Common Stock
and Mr. Reiss received 521,808 shares of Common Stock and warrants to acquire
250,000 shares of Common Stock.
Effective as of June 25, 2001, the Company completed a private
placement of 2,200,000 shares of Common Stock at $.50, yielding to the Company a
total of $1,100,000. Woodglen Group, L.P., a five percent stockholder of the
Company, invested $850,000 in this private placement. As consideration for
completing the private placement, the Company issued to the participating
investors stock purchase warrants to purchase one share of Common Stock for each
$2 invested in this private placement at an exercise price of $1.00 per share.
The Company, therefore, issued warrants to acquire a total of 550,000 shares of
Common Stock, of which warrant to acquire 425,000 shares of Common Stock was
issued to Woodglen Group, L.P.
During the first and second quarters of 2001, Mr. Martin, the Company's
Chief Executive Officer, loaned the Company $515,000 to fund the Company's
working capital deficiency. Of such amount, the Company repaid $240,000 in June
2001. On June 25, 2001, Mr. Martin exchanged the outstanding portion of the loan
in the amount of $275,000, and interest thereon in the amount of $9,163, into
Common Stock at the exchange price of $.50 per share. The Company issued an
aggregate of 568,324 shares of its Common Stock in this exchange. In addition,
the Company issued Mr. Martin a stock purchase warrants to acquire 515,000
shares of Common Stock at an exercise price of $.50 per share as consideration
for this bridge financing. The terms of this exchange transaction and warrant
issuance, including the exchange price and the calculation of the number of
warrants granted, were intended to be identical to those applicable to the debt
exchange transaction closed by the Company on June 25, 2001 and described above.
During the first and second quarters of 2001, Mr. Reiss, a Member of
the Company's Office of the President, loaned the Company $240,000 to fund the
Company's working capital deficiency. The Company repaid this amount in June
2001. On June 25, 2001, as consideration for the loan, the Company issued Mr.
Reiss stock purchase warrants to acquire 240,000 shares of Common Stock at an
exercise price of $.50 per share. The terms of the warrant issuance, including
the calculation of the number of warrants granted, were intended to be identical
to those applicable to the debt exchange transaction closed by the Company on
June 25, 2001 and described above.
On March 2, 2001, the Company entered into an Amended and Restated
Promissory Note and Warrant Purchase Agreement with a group of investors led by
Psilos Group Partners, L.P. (collectively, the "Psilos Group") pursuant to which
the Psilos Group agreed, among other things, to loan the Company up to
$1,000,000. The Psilos Group included Nantucket Healthcare Ventures I, L.P., a
five percent stockholder of the Company and a venture fund managed by Mr.
Martin, the Company's Chief Executive Officer. As consideration, the Company
granted the Psilos Group warrants to acquire 2.632 shares of its Common Stock at
$.10 per share for each $1 of the face amount of the loan. The loan bears
interest at 8% per annum, with a default rate of 12% per annum, and is due five
years from original date of issuance. The Psilos Group funded $692,809 of the
$1,000,000 and received warrants to purchase 1,823,474 shares of Common Stock.
Of such total amounts, Nantucket Healthcare Ventures funded $75,000 and received
23
warrants to purchase 197,400 shares of Common Stock. Effective as of January 4,
2002, all Psilos Group investors exercised their warrants using a cashless
exercise feature and received an aggregate of 1,701,584 shares of Common Stock.
Beginning in November 2000, in an effort to conserve cash, the Company
established a salary deferment program whereby certain executive officers,
including Messrs. Martin, Reiss, Tomaro, McCormack and Rozenfeld and Dr.
O'Connell, and other employees agreed to defer all or a portion of their
salaries. To induce employees to participate in the salary deferment program the
Company agreed to pay interest at the rate of 8% per annum on the deferred
salary. In addition, the Company promised participating employees that they
would receive (i) an option to convert deferred salary into equity on the same
basis as third-party investors in the Company and (ii) "coverage warrants" to
the extent such were granted to third-party investors while participating
employees were deferring pay. The Company ended the salary deferment program on
December 31, 2001. As of December 31, 2001, the Company accrued $1,038,876 on
account of deferred salaries and interest thereon. Certain participating
employees, including Messrs. Martin, Reiss, Tomaro, McCormack and Rozenfeld,
agreed to exchange a total of $814,595 of accrued salary, together with interest
thereon, for warrants to acquire 2,327,415 shares of Common Stock with an
exercise price of $0.15 per share. The number of warrants issued to each
employee electing to surrender accrued salary was calculated by dividing such
employee's total accrued salary and interest thereon by $0.35. Accordingly, if
an employee elected to exchange accrued salary for warrants and later exercised
these warrants, the effective per share price for the shares of Common Stock
that such employee would receive would be $.50. The price of $.50 per share was
intended to equal the price per share paid by third-party investors purchasing
Common Stock in several private placements completed by I-trax in 2001. The
Company also granted the participating employees warrants to acquire an
aggregate of 710,983 shares of Common Stock at an exercise price of $.50 per
share and warrants to acquire an aggregate of 102,073 shares of Common Stock at
an aggregate of $1.00 per share. These extra warrants were issued to all
employees that participated in the salary deferment program because similar
warrants were issued by the Company to third-party investors in connection with
the several private placement completed by the Company in 2001.
Effective as of December 31, 2001, Mr. Martin, the Company's Chief
Executive Officer, exercised 470,066 warrants by surrendering to the Company for
cancellation a portion of a loan in the amount of $70,510 payable by the Company
to Mr. Martin. The exercised warrants were issued to Mr. Martin pursuant to the
salary deferment program described above. The Company issued the warrants to Mr.
Martin as part of the Company's salary deferment program described above.
During the third and fourth quarters of 2001, Mr. Reiss, the Company's
Chief Operating Officer, loaned the Company $296,000, Mr. Martin, the Company's
Chief Executive Officer, loaned the Company $280,000 and Alan Sakal, the
Company's Senior Vice President, loaned the Company $100,000, in each case, to
fund the Company's working capital deficiency. The Company repaid Mr. Sakal's
loan in January 2002. The outstanding loans accrue interest at 8% per annum. On
December 20, 2001, as consideration for the loans, the Company issued Messrs.
Reiss, Martin and Sakal stock purchase warrants to acquire 148,000 shares,
140,000 shares and 50,000 shares of Common Stock, respectively, at an exercise
price of $1.00 per share. The terms of the warrant issuance, including the
calculation of the number of warrants granted, were intended to be identical to
those applicable to the warrants issued in connection with the Company's private
placement of $1,100,000 of Common Stock and warrants on June 25, 2001 and
described above.
In addition to advances to the Company made by Messrs. Martin and Reiss
described elsewhere in this section, Messrs. Martin and Reiss also advanced to
the Company an aggregate of $380,000 during the course of 2001. These advances
accrue interest at the rate of 8% per annul. The Company and Messrs. Martin and
Reiss have not yet agreed on repayment terms.
Lauren Reiss-Pollard is employed by the Company as a Vice President.
Mrs. Reiss-Pollard received cash compensation of $78,000 in 2001. Ms. Reiss is
the daughter of Mr. Reiss, a Member of the Company's Office of the President.
The Certificate of Incorporation limits the liability of the Company's
directors for monetary damages arising from a breach of their fiduciary duty as
directors, except for any breach of the director's duty of loyalty to the
Company or its stockholders, for acts or omissions not in good faith or which
24
involve intentional misconduct or a knowing violation of law, for any
transaction from which the director derived an improper personal benefit and as
otherwise required by Delaware General Corporation Law. Such limitation of
liability does not affect the availability of equitable remedies such as
injunctive relief or rescission.
The Company's bylaws provide that the Company shall indemnify its
directors and officers to the fullest extent permitted by Delaware law,
including in circumstances in which indemnification is otherwise discretionary
under Delaware law.
COMPENSATION COMMITTEE REPORT
The Compensation Committee of the Board of Directors consists entirely
of non-employee directors, and its primary function is to make recommendations
to the Board of Directors concerning executive compensation, option grants
pursuant to the Company's 2000 Equity Compensation Plan and 2001 Equity
Compensation Plan and other benefit policies for the Company.
The Committee believes that the most effective compensation program is
one that provides executives competitive base salaries and incentives to achieve
both current and long-term strategic business goals of the Company.
The Company's executive compensation programs are designed to:
o Align the interests of executive officers with the long-term
interests of the Company's stockholders.
o Motivate and challenge executive officers to achieve both annual
and long-term strategic business goals.
o Support an environment that rewards executive officers based
upon corporate and individual performance and results.
o Attract and retain executive officers critical to the long-term
success of the Company.
In 2001, the basic components of executive officer compensation
consisted of base salary and long-term incentives in the form of stock options.
Although the Compensation Committee believes that cash bonuses are typically
appropriate to meet the goals discussed above, the Committee believed that the
Company's performance in 2001 did not merit such cash bonuses. The executive
officers also participate in employee benefit plans available generally to the
Company's employees.
Base Salary. Technology companies face intense competition for qualified
employees, and the Committee believes it is important that the Company's
executive officer compensation levels be competitive with other technology
companies. The Committee reviewed the compensation of its executives in
comparison with other publicly traded technology companies and targeted base
salary levels to be consistent with comparable positions at these companies.
Salary Deferment Program. Beginning in November 2000, in an effort to
conserve cash, the Company established a salary deferment program whereby
certain executive officers, including Messrs. Martin, Reiss, Tomaro, McCormack
and Rozenfeld and Dr. O'Connell, and other employees agreed to defer all or a
portion of their salaries. To induce employees to participate in the salary
deferment program the Company agreed to pay interest at the rate of 8% per annum
on the deferred salary. In addition, the Company promised participating
employees that they would receive (i) an option to convert deferred salary into
equity on the same basis as third-party investors in the Company and (ii)
"coverage warrants" to the extent such were granted to third-party investors
while participating employees were deferring pay. The Company ended the salary
deferment program on December 31, 2001. As of December 31, 2001, the Company
accrued $1,038,876 on account of deferred salaries and interest thereon. Certain
participating employees, including Messrs. Martin, Reiss, Tomaro, McCormack and
Rozenfeld, agreed to exchange a total of $814,595 of accrued salary, together
with interest thereon, for warrants to acquire 2,327,415 shares of Common Stock
with an exercise price of $0.15 per share. The number of warrants issued to each
employee electing to surrender accrued salary was calculated by dividing such
25
employee's total accrued salary and interest thereon by $0.35. Accordingly, if
an employee elected to exchange accrued salary for warrants and later exercised
these warrants, the effective per share price for the shares of Common Stock
that such employee would receive would be $.50. The price of $.50 per share was
intended to equal the price per share paid by third-party investors purchasing
Common Stock in several private placements completed by I-trax in 2001. The
Company also granted the participating employees warrants to acquire an
aggregate of 710,983 shares of Common Stock at an exercise price of $.50 per
share and warrants to acquire an aggregate of 102,073 shares of Common Stock at
an aggregate of $1.00 per share. These extra warrants were issued to all
employees that participated in the salary deferment program because similar
warrants were issued by the Company to third-party investors in connection with
the several private placement completed by the Company in 2001.
Long-Term Incentives in Form of Stock Options. The Committee believes
that significant management ownership of the Company's stock effectively
motivates the building of stockholder wealth and aligns the interests of
management with those of the Company's stockholders. During calendar year 2001,
the Company's executive officers received option grants totaling 1,100,000
shares under the terms of the Company's 2001 Equity Compensation Plan and
350,000 outside of any plan. All such options were granted at per share exercise
prices equal to the fair market value of the underlying Common Stock on the date
of grant.
Chief Executive Officer Compensation. The compensation plan for Mr.
Martin for 2001 contained the same elements and operated in the same manner as
the compensation plan described above for the other executive officers. The
Committee believes that Mr. Martin's total 2001 compensation was appropriate in
light of his importance to the achievement of the Company's goals.
During 2001, Mr. Martin was granted options to acquire 350,000 shares of
Common Stock at $.55 per share, the fair market value of such stock on the date
of grant. Mr. Martin is a significant stockholder of the Company and has
advanced to the Company a significant sum for working capital requirements. The
Committee believes that Mr. Martin's interests align directly with the Company's
stockholders. To the extent his performance translates into an increased value
of Common Stock, all stockholders will benefit.
Compliance with Internal Revenue Code Section 162(m). Section 162(m) of
the Internal Revenue Code disallows a tax deduction to publicly held companies
for compensation paid to certain of their executive officers, to the extent that
compensation exceeds $1,000,000 per covered officer in any fiscal year. The
limitation applies only to compensation that is not considered to be
performance-based. Non-performance-based compensation paid to the Company's
executive officers for 2001 did not exceed the $1,000,000 limit per officer, and
the Committee does not anticipate that the non-performance-based compensation to
be paid to the Company's executive officers in the foreseeable future will
exceed that limit.
Members of the Compensation Committee
David R. Bock
Craig Jones, M.D.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee was formed in February 2000, and the members
of the Compensation Committee are Dr. Jones and Mr. Bock. Neither of these
individuals was at any time during fiscal 2001, or at any other time, an officer
or employee of the Company. No executive officer of the Company serves as a
member of the board of directors or compensation committee of any entity that
has one or more executive officers serving as a member of the Company's Board of
Directors or Compensation Committee.
26
AUDIT COMMITTEE REPORT
The Audit Committee of the Board of Directors developed an updated
charter for the Committee in 2000, which was approved by the full Board. The
complete text of the new charter is reproduced in Exhibit A to this Proxy
Statement.
The Audit Committee of the Board of Directors recommends to the Board
the accounting firm to be retained to audit the Company's financial statements
and, once retained, consults with and reviews recommendations made by the
accounting firm with respect to financial statements, financial records, and
financial controls of the Company.
Accordingly, the Audit Committee has (a) reviewed and discussed the
audited financial statements with management; (b) discussed with
PricewaterhouseCoopers, LLP, the Company's independent auditors, the matters
required to be discussed by Statement on Auditing Standards No. 61
(Communications with Audit Committees); (c) received the written disclosures and
the letter from PricewaterhouseCoopers, LLP required by Independence Standards
Board Standard No. 1 (Independence Discussions with Audit Committees); and (d)
discussed with PricewaterhouseCoopers, LLP its independence from management and
the Company, including the matters in the written disclosures required by the
Independence Standards Board. The Audit Committee also discussed with
PricewaterhouseCoopers, LLP the overall scope and plans for its audit. The Audit
Committee met with management and PricewaterhouseCoopers, LLP to discuss the
results of the auditors' examinations, their evaluations of the Company's
internal controls, and the overall quality of the Company's financial reporting.
In reliance on the review and discussions referred to above, the Audit
Committee recommended to the Board of Directors that the audited financial
statements be included in the Company's Annual Report on Form 10-KSB for the
year ended December 31, 2001.
This report of the Audit Committee does not constitute soliciting
material and should not be deemed filed or incorporated by reference into any
other I-trax or Health Management filing under the Securities Act of 1933, as
amended, or the Securities Exchange Act of 1934, as amended, except to the
extent that I-trax specifically incorporates this report by reference therein.
Members of the Audit Committee
William S. Wheeler, Chairman
David R. Bock
John R. Palumbo
FORM 10-KSB
The Company will mail without charge, upon written request, a copy of
the Company's Form 10-KSB Report for fiscal year ended December 31, 2001,
including its financial statements. Requests should be sent to I-trax, Inc., One
Logan Square, Suite 2615, 130 N. 18th Street, Philadelphia, Pennsylvania 19103,
Attn: Corporate Secretary.
STOCKHOLDER PROPOSALS FOR 2003 ANNUAL MEETING
Stockholders who intend to have a proposal considered for inclusion in
the Company's proxy materials for presentation at the Company's 2003 annual
meeting of stockholders pursuant to Rule 14a-8 under the Exchange Act must
submit the proposal to the Company at its offices at One Logan Square, Suite
2615, 130 N. 18th Street, Philadelphia, Pennsylvania 19103, Attn: Yuri
Rozenfeld, not later than January 21, 2003. Stockholders who intend to present a
proposal at such meeting without inclusion of such proposal in the Company's
proxy materials pursuant to Rule 14a-8 under the Exchange Act are required to
provide advance notice of such proposal to the Company at the aforementioned
address not later than January 21, 2003. The Company reserves the right to
reject, rule out of order, or take other appropriate action with respect to any
proposal that does not comply with these and other applicable requirements,
including conditions established by the Securities and Exchange Commission.
27
OTHER MATTERS
The Board of Directors knows of no other matters to be presented for
stockholder action at the Annual Meeting. However, if other matters do properly
come before the Annual Meeting or any adjournments or postponements thereof, the
Board of Directors intends that the persons named in the proxies will vote upon
such matters in accordance with their best judgment.
28
EXHIBIT A
I-TRAX, INC.
Audit Committee Charter
Role
The Audit Committee of the Board of Directors shall be responsible to
the Board of Directors for oversight of the quality and integrity of the
accounting, auditing, and reporting practices of the Company and shall perform
such other duties as may be directed by the Board. The Committee shall maintain
free and open communication with the Company's independent auditors and
management of the Company and shall meet in executive session at least annually.
In discharging this oversight role, the Committee is empowered to investigate
any matter brought to its attention, with full power to retain outside counsel
or other experts for this purpose.
Membership and Independence
The membership of the Committee shall consist of at least three
directors who are generally knowledgeable in financial and auditing matters,
including at least one member with accounting or related financial management
expertise. Each member shall be free of any relationship that, in the opinion of
the Board, would interfere with his or her individual exercise of independent
judgment, and shall meet the director independence requirements for serving on
audit committees as set forth in the American Stock Exchange's listing standards
applicable to companies with securities traded on The American Stock Exchange.
The Chairperson of the Audit Committee, who shall be appointed by the Board of
Directors, shall be responsible for leadership of the Committee, including
preparing agendas for and presiding over meetings, making Committee assignments
and reporting to the Board of Directors. The chairperson will also maintain
regular liaison with the Chief Executive Officer and Chief Financial Officer of
the Company and the lead independent audit partner.
Responsibilities
Internal Control
o Discuss with management and the independent auditors the quality
and adequacy of the Company's computer systems (and their
security), internal accounting controls and personnel.
o Review with the independent auditors and management any
management letter issued by the independent auditors and
management's responses thereto.
Financial Reporting
o Keep informed of important new pronouncements from the
accounting profession and other regulatory bodies, as well as
other significant accounting and reporting issues, that may have
an impact on the Company's accounting policies and/or financial
statements.
o Review the audited financial statements and management's
discussion and analysis of financial condition and results of
operations ("MD&A") and discuss them with management and the
independent auditors. These discussions shall include
consideration of the quality of the Company's accounting
policies and principles as applied in its financial reporting,
including review of estimates, reserves and accruals, review of
judgment areas, review of audit adjustments, whether or not
recorded, and such other inquiries as may be appropriate. Based
on the review, the Committee shall make a recommendation to the
Board as to the inclusion of the Company's audited financial
statements in the Company's annual report on Form 10-KSB.
A-1
External Audit
o Review the performance of the independent auditors and recommend
to the Board the independent auditors to be engaged to audit the
financial statements of the Company and, if appropriate, the
termination of that relationship. In doing so, the Committee
will request from the auditors a written affirmation that the
auditors are independent, discuss with the auditors any
relationships that may impact the auditors' independence
(including non-audit services), and recommend to the Board any
actions necessary to oversee the auditors' independence.
o Oversee the independent auditors relationship by discussing with
the independent auditors the nature, scope and rigor of the
audit process, receiving and reviewing audit reports, and
providing the auditors full access to the Committee (and the
Board) to report on appropriate matters.
Reporting to Board of Directors
o Report Audit Committee activities to the full Board and issue
annually a report (including appropriate oversight conclusions)
to be included in the Company's proxy statement for its annual
meeting of shareholders.
o Review the Audit Committee Charter with the Board of Directors
annually.
A-2
EXHIBIT B
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
I-TRAX, INC.
I-trax, Inc., a corporation organized and existing under and by virtue
of the Section 242 of the General Corporation Law of the State of Delaware (the
"Corporation"),
DOES HEREBY CERTIFY:
FIRST: That the Board of Directors adopted a resolution setting forth a
proposed amendment to the Amended Certificate of Corporation of said Corporation
and declaring said amendment advisable and directing that said amendment be
submitted to the stockholders of said Corporation entitled to vote in respect
thereof for their approval. The resolution setting forth said amendment is as
follows:
RESOLVED, that the FOURTH Article shall be amended to read in
full as follows:
"FOURTH: The total number of shares of stock which
the Corporation shall have authority to issue is 102,000,000 shares, of
which (i) 100,000,000 shares are designated as Common Stock, $0.001 par
value per share, and (ii) 2,000,000 shares are designated as Preferred
Stock, $0.001 par value per share.
The Board of Directors of the Corporation is
authorized, by resolution or resolutions and subject to limitations
prescribed by law and the provisions of this Article FOURTH, to provide
for the issuance of shares of Preferred Stock, in one or more series or
class, and, by filing a statement pursuant to the General Corporation
Law of Delaware, to establish from time to time the number of shares to
be included in each such series or class and to fix the designations,
powers, preferences and rights of the shares of each such series or
class and the qualifications, limitations or restrictions thereof..
Effective as of 5:00 p.m., Eastern time, on
____________, 2002 ("Effective Time"), each one (1) share of Common
Stock issued and outstanding prior to the Effective Time shall be and
is hereby automatically reclassified and changed (without any further
act) into [one-third (1/3rd)] [one-fourth (1/4th)] [one-fifth (1/5th)]
of a fully-paid and nonassessable share of Common Stock without
increasing or decreasing the amount of stated capital or paid in
surplus of the Corporation, provided that no fractional shares shall be
issued and instead of issuing such fractional shares, the Corporation
shall pay in cash the fair value of such fractions of a share as of the
Effective Time.
SECOND: That thereafter said amendment was duly adopted in accordance
with the provisions of Sections 242 of the General Corporation Law of the State
of Delaware.
IN WITNESS WHEREOF, the Corporation has caused this certificate to be
signed by its Chief Executive Officer this ___ day of _____________ 2002.
I-TRAX, INC.
By: ________________________
Frank A. Martin
Chief Executive Officer
B-1
PROXY I-TRAX, INC. PROXY
One Logan Square, Suite 2615, 130 N. 18th Street, Philadelphia, PA 19103
This Proxy is Solicited on Behalf of the Board of Directors of I-trax, Inc.
for the Annual Meeting of Stockholders to be held May 22, 2002
The undersigned holder of Common Stock, par value $.001, of I-trax,
Inc. (the "Company") hereby appoints Frank A. Martin and Gary Reiss, or either
of them, proxies for the undersigned, each with full power of substitution, to
represent and to vote as specified in this Proxy all Common Stock of the Company
that the undersigned stockholder would be entitled to vote if personally present
at the Annual Meeting of Stockholders (the "Annual Meeting") to be held on
Wednesday, May 22, 2002 at 10:00 a.m. local time, at 1735 Market Street, 51st
Floor, Philadelphia, Pennsylvania, and at any adjournments or postponements of
the Annual Meeting. The undersigned stockholder hereby revokes any proxy or
proxies heretofore executed for such matters.
This proxy, when properly executed, will be voted in the manner as
directed herein by the undersigned stockholder. IF NO DIRECTION IS MADE, THIS
PROXY WILL BE VOTED FOR THE ELECTION OF THE DIRECTORS, FOR PROPOSALS 2, 3, 4 AND
5, AND, IN THE DISCRETION OF THE DESIGNATED PROXIES, AS TO ANY OTHER MATTERS
THAT MAY PROPERLY COME BEFORE THE MEETING. The undersigned stockholder may
revoke this proxy at any time before it is voted by delivering to the Secretary
of the Company either a written revocation of the proxy or a duly executed proxy
bearing a later date, or by appearing at the Annual Meeting and voting in
person.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF THE
DIRECTORS AND "FOR" PROPOSALS 2, 3, 4 AND 5.
PLEASE MARK, SIGN, DATE AND RETURN THIS CARD PROMPTLY USING THE
ENCLOSED RETURN ENVELOPE. If you receive more than one proxy card, please sign
and return ALL cards in the enclosed envelope.
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE)
================================================================================
(Reverse)
I-TRAX, INC.
1. To elect the following directors Nominees: John Blazek, David R. FOR AGAINST / / For all nominees, except
to serve for a term ending upon Bock, Philip D. Green, Michael / / / / for nominees written below.
the 2003 Annual Meeting of M.E. Johns, M.D., Craig Jones, Nominee exception(s).
Stockholders or until their M.D., Hans C. Kastensmith, Arthur
successors are elected and N. Leibowitz, M.D., Frank A.
qualified: Martin, John R. Palumbo, Carol
Rehtmeyer, and William S. Wheeler
2. Directors' Proposal - Approval of an amendment to the Certificate of FOR AGAINST ABSTAIN
Incorporation to authorize a reverse 1-for-3 stock split, as set forth / / / / / /
in the accompanying Proxy Statement
3 Directors' Proposal - Approval of an amendment to the Certificate of FOR AGAINST ABSTAIN
Incorporation to authorize a reverse 1-for-4 stock split, as set forth / / / / / /
in the accompanying Proxy Statement
4 Directors' Proposal - Approval of an amendment to the Certificate of FOR AGAINST ABSTAIN
Incorporation to authorize a reverse 1-for-5 stock split, as set forth / / / / / /
in the accompanying Proxy Statement
5. To ratify the appointment of PricewaterhouseCoopers LLP as the Company's FOR AGAINST ABSTAIN
independent auditors for the fiscal year ending December 31, 2002 / / / / / /
In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the Annual Meeting.
The undersigned acknowledges receipt of the accompanying Notice of
Annual Meeting of Stockholders and Proxy Statement.
_________________________________________
Signature:
_________________________________________
Signature (if held jointly):
Date: ____________, 2002