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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES OF SMALL BUSINESS ISSUERS
Under Section 12(b) or (g) of the Securities Exchange Act of 1934
Access Health Alternatives, Inc.
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(Name of Small Business Issuer in its charter)
FLORIDA 59-3542362
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(State of other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
2016 S. Orange Avenue, Orlando, Florida 32806
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(Address of principal executive offices) (zip code)
Issuer's telephone number, (407) 872-2440
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Securities to be registered under Section 12(b) of the Act:
Title of each class Name of each exchange on which
to be so registered each class is to be registered
- NONE - - NONE -
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Securities to be registered under Section 12(g) of the Act:
Common Stock, $.001 Par Value
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(Title of class)
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ITEM 1. DESCRIPTION OF BUSINESS.
(a) BUSINESS DEVELOPMENT.
GENERAL CORPORATE HISTORY
Access Health Alternatives, Inc. (the "Company") was incorporated on
October 4, 1988 in Florida as B C Insurance Services, Inc., and changed its
name to PLC Venture Corp. ("PLC") on May 18, 1998. From its inception, PLC had
no assets and did not engage in business. PLC, Access HealthMax, Inc., a then
unaffiliated Florida corporation ("HealthMax"), and the holders of
approximately 94% of the outstanding common stock of HealthMax (the "HealthMax
Principals") entered into a Share Exchange Agreement, dated as of September 2,
1998(the "Agreement"), pursuant to which the HealthMax Principals on September
2, 1998 (the "Exchange Date") were issued 0.8 shares of common stock of PLC for
each share of HealthMax' common stock owned by them (the "Exchange"). In
accordance with the foregoing, the HealthMax Principals received an aggregate
of 565,930 shares of common stock of PLC on the Exchange Date.
HealthMax originally was incorporated under the name "Access
Nutritionals, Inc." in December 1995; in January 1996 it changed its name to
Access HealthMax, Inc." As of the Exchange Date, HealthMax became a
majority-owned subsidiary of PLC. At that time, the HealthMax Principals were
appointed to the Company's Board of Directors, and the previous officers and
directors of the Company resigned in all capacities. As a result of the
Exchange and other contemporaneous private transactions, the HealthMax
Principals owned approximately 56.4% of the Company's outstanding common stock;
the original shareholders of PLC owned approximately 3% of the Company's
outstanding common stock; and other parties owned approximately 40.6% of the
Company's outstanding common stock, which they acquired from prior PLC
shareholders in a private transaction.
In late April 1999, the Company agreed to acquire the minority
interests in HealthMax for restricted stock of the Company, at the rate of one
share of the Company's common stock for each share of HealthMax stock
exchanged. If all of the minority shareholders exchange their HealthMax stock
for the Company's stock, the Company would be required to issue an additional
approximately 430,000 shares of common stock. This transaction is expected to
conclude by the end of June 1999.
Prior to, and in contemplation of the Exchange, the Company's Articles
of Incorporation were amended to change its name to "Access HealthMax Holdings,
Inc.," and to increase its authorized capital stock to 50,000,000 shares of
common stock, par value $0.001, and 10,000,000 shares of preferred stock, par
value $0.01. In March 1999, the Company's Amended and Restated Articles of
Incorporation were again amended to change its name to "Access Health
Alternatives, Inc.," and a 10-for-1 reverse split was declared effective March
15, 1999. All numbers of shares of common stock and preferred stock referenced
in this Registration Statement (including references earlier in this document)
have been adjusted for this reverse split, unless otherwise indicated.
On March 31, 1999, the Board of Directors authorized the acquisition
of Access HealthCare, Inc. ("HealthCare"), an affiliated entity, in exchange
for two million shares of the Company's common stock. This acquisition is
expected to be completed in June 1999.
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The Company currently operates as a holding company. Operations of the
nutritional health care business of the Company are conducted under its
HealthMax subsidiary. It is intended that the clinical aspects of the Company's
complementary and alternative health care program will be conducted under
HealthCare through HealthCare-owned locations, following the conclusion of the
pending acquisition. In May 1999 the Company formed Access Health Assurance
Plans, Inc. ("HAP"), a Florida corporation that will market the Company's
member benefits programs. Unless the context indicates otherwise, references
hereinafter to "the Company" include HealthMax, HealthCare and HAP. The
Company's principal place of business is 2016 S. Orange Avenue, Orlando,
Florida 32806. Its telephone number is (407) 872-2440.
HISTORICAL CAPITALIZATION
Initial funding of HealthMax was provided through approximately $2.2
million in short-term debt financing which was loaned to HealthCare by
individual investors. Most of that indebtedness was assigned by HealthCare to
HealthMax. This indebtedness was $869,637 at December 31, 1998 and presently is
the $845,637.
In October 1997, HealthMax organized Access HealthMax, LLC ("LLC I"),
a Colorado limited liability company, to market the Company's nutritional
program in Florida and Colorado. Utilizing the new marketing strategy, LLC I
established a regional office in Colorado Springs, Colorado, and also commenced
operations out of the offices of the corporate offices in Orlando, Florida.
HealthMax organized Access HealthMax LLC II and LLC III in 1997 and 1998,
respectively, to market the program in additional states. LLC I, LLC II and LLC
III are separate legal entities; the respective investors in each limited
liability company have no rights to participate in the marketing areas,
business, profits or assets of the other entity, or in the capital structure of
HealthMax or the Company. For information about the relationship between the
Company and its LLCs, and the flow of goods, services and payments between the
Company and the LLCs, see "Limited Liability Companies Affiliated with the
Company," below.
During the first half of 1998, HealthMax conducted an offering of
securities, resulting in gross proceeds of approximately $450,000. In September
1998, HealthMax completed a reverse merger with PLC Venture Corp. (which had
been a dormant business from inception). In February 1999, the Company
completed a limited offering of common stock resulting in gross proceeds of
$485,000. In March 1999, the Company began an offering of units consisting of
preferred stock and warrants, for gross proceeds of up to $1,008,000 (the "Unit
Offering"). That offering is pending and only one Unit ($25,000) has been sold
to date. For additional information concerning the pending offering, see "Item
11. Description of Securities," below.
LIMITED LIABILITY COMPANIES AFFILIATED WITH THE COMPANY
General. The capital structure of each of the LLCs is set forth in a
separate Operating Agreement, with HealthMax as the Manager of the LLC and the
investors in each LLC as Economic Members. The Economic Members generally have
specified rights to participate in distributions of cash and assets, and to
vote on certain limited matters, but have no rights to participate in the
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management of the business of HealthMax. HealthMax, as the Manager of each LLC,
has complete authority to manage the business of the LLC.
PAYMENTS OF DISTRIBUTABLE CASH, AND ALLOCATIONS OF PROFIT AND LOSS.
Distributable cash from operations of each LLC will be distributed as follows:
first, to the Economic Members until they have received total cash
disbursements equal to their preference; second, to the Economic Members until
they have received total cash disbursements equal to their initial capital
contributions plus 25% thereof; third to HealthMax (as General Member) until it
has received total cash disbursements equal to its initial capital contribution
($10,000 for each LLC); and thereafter, 25% to the Economic Members and 75% to
HealthMax.
Preference is defined in each Operating Agreement to be the right of
each Economic Member to receive from distributable cash paid out by the LLC, a
non-guaranteed, cumulative, non-compounding cash payment equal to 10.5% (annual
interest) of the Economic Member's initial capital contribution. Payment of the
preference is not secured by assets of HealthMax, the Company or any affiliate
of the Company, is not an obligation of any affiliate of the Company, and is to
be paid only from operating cash revenues realized by the LLC. Payment of the
preference will continue, in amount equal to 10.5% of the original initial
capital contributions, until the Economic Members, as a class, have received
total cash disbursements equal to their initial capital contributions plus an
additional amount equal to 25% of such original initial capital contributions.
Profits of the LLC generally will be allocated 100% to the Economic
Members until cumulative net profits paid to them equal cumulative cash
preference payments (including amounts equal to 125% multiplied by the amount
of the initial capital contributions); thereafter, profits will be allocated
25% to the Economic Members and 75% to HealthMax.
Pursuant to the Operating Agreement with each LLC, HealthMax has
received from each LLC $65,000 on a one-time basis for each regional office
opened by the LLC in their respective regions, such payment being for the right
to use the computer systems software and clinic marketing data base of
HealthMax, for accounting and other office administration services performed
for the LLC, and for the payroll cost to HealthMax of providing personnel for
training and marketing sessions for healthcare doctors from participating
clinics. In addition, each LLC has reimbursed HealthMax approximately $75,000
for legal, accounting and other costs incurred and paid by HealthMax in
connection with the development of the business plan for each LLC.
Also, pursuant to each LLC Operating Agreement, HealthMax receives
$10,000 per month as a management fee for each regional office of each LLC. The
management fee offsets a portion of HealthMax' ongoing general and
administrative overhead expenses.
RIGHT TO PURCHASE LLC INTERESTS. Pursuant to the Operating Agreement
with each LLC, HealthMax has the option to purchase all of the limited
liability company interests held by the Economic Members, at a price equal to
125% of the original purchase price (initial cash capital contribution)
therefor.
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PLANNED ACQUISITION OF HEALTHCARE
The Company has recently agreed to acquire HealthCare for
approximately two million shares of the Company's common stock. Although the
transaction is subject to the completion of definitive agreements and
additional due diligence, the Company expects it to be completed in June 1999.
The Company's President and Chief Executive Officer is the principal
shareholder of HealthCare, and will receive most of the consideration on the
completion of the acquisition. The Company believes that the acquisition of
HealthCare will serve as the platform for the acquisition of additional
revenue-generating complementary and alternative healthcare practices,
consolidating back-office operations and increasing the consistency and quality
of services, as well as enabling HealthCare to offer the benefits of its
contracts to other complementary and alternative healthcare practices.
HealthCare is currently engaged in the business of providing
complementary and alternative healthcare services under a range of
reimbursement programs, including traditional insurance plans, workers'
compensation, personal injury, private pay, HMOs, PPOs, and contracts, through
its four HealthCare-owned locations in the Central Florida area and over 100
affiliated practices throughout the State of Florida. Through its contracts
with such HMOs as PruCare, Cigna and HealthOptions, HealthCare is believed to
be the largest complementary and alternative healthcare group practice in
Central Florida, with the right to serve over 300,000 insured lives.
HealthCare is the outgrowth of Daniel J. Pavlik, D.C., P.A., which was
organized in the State of Florida in April 1983 by Dr. Pavlik. Dr. Pavlik owned
and operated HealthCare as a sole practitioner for a number of years with a
small support staff. As the practice grew, Dr. Pavlik hired additional
chiropractic physicians to be associate doctors with him. HealthCare focused,
during its initial years, on the treatment of the work-related injury, pursuant
to claims under the Florida Department of Worker's Compensation Law. Dr. Pavlik
and HealthCare have worked diligently in the marketing of and the communication
with the third-party payors and many employers in the Central Florida area.
Due to many requests from both insurance companies and employers for
HealthCare to provide wider geographic access to its clinical protocols,
procedures, staff and expertise, HealthCare started a process of looking at
expansion, and did so from late 1987 through early 1993. During its initial
expansion, HealthCare made a decision to move into the new area of healthcare
called "Managed Care." Because of HealthCare's experience in the area of
workers' compensation and the many contracts and relationships that it had
built, HealthCare set forth in an attempt to penetrate this new market as
quickly as possible to be ahead of its competition, and successfully secured
HMO and PPO contracts.
Some of these Managed Care contracts required that HealthCare provide
additional chiropractic physicians and locations that were outside those owned
by HealthCare. This lead to the development of the "affiliated clinics"
concept. An affiliated clinic is a clinic not owned by HealthCare but whose
doctors and staff are under contract with HealthCare to provide necessary
services under those Managed Care agreements. HealthCare, under its affiliated
clinic agreements, charges the affiliated office a percentage fee for managing
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and processing the claims for any patients that were seen in that affiliated
clinic under the terms of HealthCare's master contracts.
HealthCare, under the Company's umbrella, intends to expand its
marketing and operational plans throughout the United States, both in terms of
acquired clinics and affiliated clinics. As the Company's human and financial
resources allow, a focused market study will be developed to assess regional
market opportunities and a specific acquisition strategy. Although there have
been other attempts at national "roll-ups" of healthcare practices, the Company
believes that it will be able to offer unique advantages to target practices
and otherwise will be well-positioned to make this venture successful.
(b) BUSINESS OF THE ISSUER.
(1) Principal products or services and their markets
OVERVIEW
The Company, through its subsidiaries, is building a diversified
national alternative healthcare network. The Company, through its
majority-owned subsidiary Access HealthMax, Inc., presently offers a
nutritional alternative to traditional healthcare, in a clinical setting
through healthcare providers. HealthMax has developed and is distributing
proprietary blends of nutritional products under the supervision of
HealthMax-trained professionals and through other distribution channels.
Additionally, the Company plans to launch a robust internet gateway providing
information about nutritional health to consumers, along with product sales,
and support for its national group of Access HealthMax Nutritional Centers.
Daniel J. Pavlik organized HealthMax to market to healthcare clinics
and independent distributors a comprehensive "wellness" and "preventive"
healthstyle/lifestyle management program which incorporates the sale of
nutrition supplement products. HealthMax commenced operations in February 1996.
Since that time, the Company has focused on the development of its proprietary
blend of nutritional products, and has tested various methods of distribution.
CURRENT NUTRITIONAL SUPPLEMENT PRODUCTS
HealthMax' proprietary formulations of vitamin, mineral and enzyme
supplements have been formulated by Dr. Barry Bradley, a certified
nutritionist, in consultation with other healthcare professionals. The products
are made from natural, whole food plant sources and are formulated to address
specific nutritional deficiencies through a systems approach to wellness.
Products are manufactured for HealthMax to its specifications by a private
manufacturing company that serves the nutritional supplement industry.
The following are descriptions of the key products being sold as of
May 31, 1999, categorized by the system they are designed to address. In
addition, the Company has formulated a number of other products, which have not
yet been manufactured or sold.
Daily Nutritional System:
Digestyme
VitaDay
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Endocrine System:
ProstateMax
YoungAgain
Circulatory System:
SlimMax
Thin-Ergy
Detoxification System:
LiverPure
ColonPure
Musculo-skeletal System:
M.B.J. (muscle, bone & joint)
Inflammazyme
Digestive System:
Digestyme
FloraPlus
Immune System:
OxyAccess
ImmuneMax
The Company also is developing a series of wellness protocols, such as
its Weight Wellness program, which incorporate certain of its products (e.g.,
VitaDay, SlimMax and Thin-Ergy, in the case of the Weight Wellness program)
with a specific clinical program (such as a low-carbohydrate diet) under the
guidance of HealthMax trained healthcare professionals.
(2) Distribution methods of the products or services.
The Company's primary clinical channel for distributing HealthMax
nutritional products and services is the HealthMax Nutritional Center. This
channel is supported by two additional networks: the Independent Health
Assurance Agent Network; and the Health Associate Network. Although the Company
believes that these networks will form the foundation for the distribution of
the Company's products and services, the Company also believes that it is
important to continuously evaluate the efficacy of these networks, and of the
Company's delivery strategies in general. Accordingly, the Company anticipates
modifications in these networks, the elimination of one or more networks, and
the addition of other networks and methods of distribution, from time to time
as performance indicates.
BACKGROUND
There are approximately 550,000 allopathic doctors and approximately
50,000 chiropractors and 50,000 osteopaths who are licensed to practice in the
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United States. A great majority of these practitioners work as solo
practitioners or in small group practices. Most practitioners now are realizing
reduced incomes as a result of the growth of HMOs and other efforts by
employers and government to limit or stop increasing health care costs. As an
alternative to becoming direct employees of HMOs, those doctors and other
practitioners who wish to remain independent or in a small group need to
achieve economies of scale and, where possible, diversify and increase revenue
centers.
HealthMax Nutritional Centers
The principal method for delivering the Company's nutritional products
and services is through the HealthMax Nutritional Center, a clinical facility
licensed to offer HealthMax' products and services. Healthcare providers who
are associated with the Centers are part of the HealthMax Preferred Provider
Network, and will be given access to members of the Nutritional Options Plus
plan, described below. HealthMax has signed with a number of healthcare
providers that operate approximately 100 Centers.
Members of the HealthMax Preferred Provider Network receive training
and educational programs on an ongoing basis; the Company strongly recommends
that members follow a course of HealthMax-designed study leading to HealthMax
certification. This ongoing training, and the ongoing support provided by
regional and national HealthMax staff, is one of the features the Company
believes highlights the Company's emphasis on the clinical component of the
delivery of its nutritional products, and distinguishes HealthMax from other
participants in this industry.
Under its Site License Program, HealthMax licenses each clinic on the
basis of a five year contract, under which the clinic agrees to make an initial
purchase of $7,995 for the licensing rights to operate a HealthMax Nutritional
Center (which includes a specified exclusive territory); access to HealthMax'
educational and support programs, an inventory of sales literature, health
questionnaires, and manuals for patients; and an initial inventory of
nutritional supplements. Each clinic is expected (but not required) to purchase
$4,000 worth of restocking inventory each month starting with the fifth month
after enrollment in the program.
In May 1999, the Company initiated a program intended to accelerate
the marketing of the HealthMax Nutritional Centers. This "Market License
Program" offers, to an individual or a group, the rights to a portion of the
revenue from a specific market area. A market area is defined as a population
base of 2,000,000 that can support a minimum of 40 Nutritional Centers. The
market licensee agrees to purchase the right to install 20 Centers, all of
which will be trained and operated by the Company in accordance with its Center
program. The licensee will receive, for a five year period, certain revenue
from product sales and a portion of the sales from the Nutritional Options Plus
Plan as implemented in that licensee's market area. In addition, the licensee
will have a first right of refusal to fund an additional 20 units within the
market. Providers within the market will be "invited" to participate in the
Preferred Provider Network, and will be subject to the Company's provider
agreement, although they will not be required to purchase the right to
participate in the Network. These providers will be required to purchase a
minimum of 200 bottles per month, or $4,000 per month, after the fifth month
following enrollment, or they will lose the right to be included in the
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Network. The Company believes that this program will allow for quick growth of
Centers because providers will be "invited" to join a network as opposed to
having to purchase the rights to participate, while the capital outlay (and the
right to receive a significant portion of the revenue derived therefrom) will
belong to the market licensee.
Nutritional Options Plan
The Nutritional Options Plan is a member benefits plan open to
individuals and families, at no monthly fee. Discounts on HealthMax products
are provided, as are copies of the Company's WellCare Bulletin and WellCare
Journal.
Nutritional Options Plus Plan
The Nutritional Options Plus plan is an employee membership plan,
designed to primarily be an addition to existing health benefit programs, such
as a vision care or dental care. For a fixed monthly fee per member per month,
employers can provide their employees with discounted fees on services provided
by members of the HealthMax Preferred Provider Network (including a free annual
wellness exam and the lowest retail pricing available on HealthMax Nutritional
Products). Members also will receive free copies of the Company's WellCare
Bulletin and other informational material on an ongoing basis.
Comparison of Nutritional Options Plus Plan and Nutritional Options Plan
Participants in the Nutritional Options Plus Plan receive a greater
range and depth of benefits than those in the Nutritional Options Plan,
including steeper discounts on products and an annual wellness exam. The "Plus"
Plan is designed to provide maximum benefits when members take advantage of the
clinical services of the HealthMax Preferred Provider Network, in contrast with
the basic Plan, which provides more moderate discounts to consumers that either
have no access to the HealthMax Preferred Provider Network or prefer a more
"self-help" form of nutritional healthcare.
The Role of Health Assurance Agents and Health Associates
The Company believes that the successful deployment of its method of
distribution of products and services will be enhanced by the development of a
robust network of independent "Health Assurance Agents" and a broad-based
universe of "Health Associates." Health Assurance Agents identify companies
that appear to be candidates for participating in the Nutritional Options Plus
Plan, based on their geographic location and their numbers of employees. These
agents are expected to be currently involved in offering health-related
voluntary member benefits programs to and through employers, such as
dental-care and vision-care programs, and will add the Nutritional Options Plus
Plan to their menus. Agents will be paid commissions based on the number of
employees enrolled.
Anyone that actively engages in enrolling members of the Nutritional
Options Plan is a Health Associate. Compensation will be paid based on the
volume of products purchased by members enrolled by the Health Associate, and
for referrals to other Health Associates, subject to quotas.
The Company is in the process of developing strategies to recruit
Health Assurance Agents and Health Associates, and anticipates active use of
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the internet and other direct marketing means as integral part of this effort.
Additionally, the Company intends to form alliances with existing benefit
communication and enrollment firms that specialize in worksite marketing and
benefit delivery systems, in order to accelerate the development of Health
Assurance Agents and the deployment of the Nutritional Options Plus Plan.
(3) Status of Any Publicly Announced New Product or Service.
Not applicable.
(4) Competition.
The principal markets in which the Company competes are competitive
and fragmented, with competitors in the nutritional supplements market and the
alternative healthcare markets. Increased competition could have a material
adverse effect on the Company, as competition may have far greater financial
and other resources available to them and possess extensive manufacturing,
distribution and marketing capabilities far greater than those of the Company.
Although there are thousands of health food stores, including some
small chains and several national companies, all of which sell a variety of
herbal and other nutritional items, and one national retail chain (General
Nutrition Centers), the Company is unaware of any other healthcare company
utilizing a systems approach, with a clinical component attached to the
delivery of products.
Although all employees sign confidentiality agreements, there is no
guarantee that trade secrets will not be shared with competitors or that the
Company could enforce these agreements. Such disclosures, if made, could
negatively affect the Company's competitiveness.
(5) Principal Suppliers.
The Company's proprietary nutritional products are manufactured,
bottled and labeled (under the Company's supervision) by ConSeal International,
Inc., of Longwood, Florida. Although the Company is very particular in choosing
its supplier on the basis of quality of materials, manufacturing practices,
pricing, and other factors, the Company does not believe that ConSeal is the
only manufacturer capable of meeting the Company's specifications.
(6) Dependence on Major Customers.
The Company is not dependent on any major customer for a significant
portion of its business.
(7) Intellectual Property.
The Company has relied on common law copyright, trademark and service
mark rights to protect its intellectual property, and on common law trade
secrecy laws with respect to the formulations of its products. Common law
intellectual property rights do not provide the Company with the same level of
protection as afforded by a United States federal registration of a mark. In
addition, common law rights are limited to the geographic area in which the
mark is actually used, while a United States federal registration of a mark
enables the registrant to stop the unauthorized use of the mark by any third
party anywhere in the United States even if the registrant has never used the
mark in the geographic area wherein the unauthorized use is being made
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(provided, however, that an unauthorized third party user has not, prior to the
registration date, perfected its common law rights in the trademark in that
geographic area). The Company also intends to register its trademarks in
foreign jurisdictions where the Company's products are sold, when such
international sales commence. However, the protection available in such
jurisdictions may not be as extensive as the protection available to the
Company in the United States.
As of May 31, 1999, the Company (through HealthMax) had one federal
trademark and service mark registration pending with the United States Patent
and Trademark Office (the "PTO"). The application (serial number 75/601,162
filed December 7, 1998) covers the phrase "Access HealthMax," for nutritional
supplements (class 5), and for healthcare services (class 42). In addition,
HealthMax has filed for copyright protection of the "Access HealthMax System
Manual," and is awaiting a file number from the PTO. The Company's policy will
be to pursue registrations for all of the trademarks and service marks
associated with its key products and services, as human and financial resources
allow.
(8) Need for Government Approval of Products and Services.
The Company does not believe that any government approval is required
for the delivery of its products and services (subject to the discussion
below). As the Company pursues its plans of delivering clinical alternative
healthcare through proprietary HealthCare centers, such services will only be
rendered by healthcare providers licensed under applicable state law.
(9) Regulation - Product Formulation and Labeling.
The Company's products are subject to regulation by one or more
federal agencies, including the FDA, FTC, Consumer Product Safety Commission,
and various state and local agencies. In particular, the FDA regulates the
labeling and sales of dietary supplements, including vitamins, minerals and
herbs, food additives, food supplements, cosmetics, and over-the-counter and
prescription drugs. The private label companies used to manufacture the
Company's products are subject, among other things, to regulation by the FDA as
food manufacturing facilities in compliance with the Current Good Manufacturing
Practices ("CGMP") rule promulgated by the FDA.
The Dietary Supplement Health and Education Act of 1994 (the "DSA")
amends the United States Food, Drug, and Cosmetic Act by defining dietary
supplements to include vitamins, minerals, nutritional supplements and herbs.
The DSA provides a regulatory framework to ensure safe quality dietary
supplements and the dissemination of accurate information about such products.
Dietary supplements are regulated as foods under the DSA and the FDA is
generally prohibited from regulating the active ingredients in dietary
supplements as food additives or as drugs unless the product claims trigger
drug status.
The DSA provides for specific nutritional labeling requirements for
dietary supplements effective January 1, 1997. The DSA permits substantiated,
truthful and non-misleading statements of nutritional support to be made in
labeling, such as statements describing general well-being from consumption of
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a dietary ingredient or the role of a nutrient or dietary ingredient in
affecting or maintaining structure or function of the body. In addition, the
DSA authorizes the FDA to promulgate CMGPs for dietary supplements modeled
after CMGPs for food manufacturing. The FDA will be proposing various rules and
regulations to implement the DSA; however, HealthMax believes it is in material
compliance with all currently applicable laws.
The dietary supplement industry is subject to regulations by the FDA
and local authorities. However, dietary supplements have now been affirmed by
the DSA as a food and not a drug or food additive. As a result, the regulation
of dietary supplements is significantly less restrictive than the regulatory
framework imposed upon manufacturers or distributors of drugs and food
additives. Unlike food additives, which are more regulated, and new drugs,
which require regulatory approval of formulation and labeling prior to
marketing, dietary supplement companies are authorized to make substantiated
statements of nutritional support and to market new,
manufacturer-substantiated-as-safe dietary supplement products without FDA
preclearances. Since the Company makes no therapeutic claims for its products,
the Company believes it falls within this category. However, the FDA retains
jurisdiction to regulate labeling and printed sales literature insofar as such
materials may invoke the FDA's health claims regulations. The Company cannot
determine what effect new FDA regulations in this area might have on its
business in the future. Such regulations could, among other things, require
expanded or different labeling, the recall or discontinuance of certain
products, additional record keeping and expanded documentation of the
properties and certain products and scientific substantiation.
In the future, the Company may be subject to additional laws or
regulations administered by the FDA or other federal, state or foreign
regulatory authorities, the repeal of laws or regulations that the Company
considers favorable, such as the DSHEA, or more stringent interpretations of
current laws or regulations. The Company is unable to predict the nature of
such future laws, regulations, interpretations or application, nor can it
predict what effect additional governmental regulations or administrative
orders, when and if promulgated, would have on its business in the future. They
could, however, require the reformulation of certain products to meet new
standards, the recall or discontinuance of certain products not able to be
reformulated, imposition of additional record keeping requirements, or expanded
documentation of the properties of certain products, expanded or different
labeling and scientific substantiation. Any or all of such requirements could
have a material adverse effect on the company's results of operations and
financial condition.
(10) Research and Development
Although the Company has chosen to integrate the costs of research and
development in its general overhead, Management is of the view that until 1999,
virtually all of its expenditures were in the nature of research and
development, whether related to product formulation, development and revision
of distribution methods, development and revision of marketing strategies, or
development and revision of training and support protocols and associated
manuals.
Management anticipates spending little, if anything, on product
research and development in 1999, although it may bring to market several
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products already formulated but not presently being produced. To the extent
significant research and development does occur in 1999, the Company believes
that it will be related to adjustments and/or refinements in current product
lines and in testing of new and old methods of distribution, training,
marketing and support.
(11) Compliance with Environmental Laws
The Company believes that it is in full compliance with all relevant
environmental laws. Due to the nature of the Company's operations, to date, the
cost of complying with environmental laws does not have a significant effect on
the Company's operations.
(12) Employees
As of May 31, 1999, Access Health Alternatives, Inc., had 15 full-time
employees and two part-time employees, all of whom were engaged in
administrative capacities and three of whom are considered executives. Access
HealthMax, Inc., employed 6 full-time people, and one part-time employees; two
of HealthMax' employees are involved in distribution and the balance are in
sales. In addition, HealthMax is supported by approximately 7 independent
contractors who are primarily engaged in sales and support within specific
market areas. It is anticipated that this market representative role will grow
as the Company's presence expands into new markets.
None of the Company's employees is represented by labor unions. The
Company believes its relationship with employees is good.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS.
The following discussion and analysis should be read in conjunction
with the financial statements of the Company and the accompanying notes
appearing subsequently under the caption "Financial Statements."
The following discussion and analysis contains forward-looking
statements, which involve risks and uncertainties. The Company's actual results
may differ significantly from the results, expectations and plans discussed in
these forward-looking statements.
During the past two years, the Company, through its subsidiaries, has
spent considerable time and capital resources on defining, developing and
testing its strategic plan for delivering nutritional education, support and
supplements through a network of healthcare professionals certified in the
Access HealthMax method. The Company has tested a number of methods of tactical
deployment for creating its network of nutritional healthcare providers and
marketing its services and products, all with the primary and overriding
objective of maximizing the number of nutritional products delivered to
consumers and patients. A comparison of the financial statements for the fiscal
years ended December 31, 1998 and 1997 shows the impact of the Company's
continual efforts to determine the best method for delivery of its products and
services, and the resulting change in tactics.
In addition to the historical activities relating to product
formulation, development of the HealthMax instructional manuals, and creation
and refinement of strategies for the delivery and marketing of the Company's
services and products, Management focused a significant portion of its
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<PAGE> 14
resources on capital raising and on preparing for the establishment of a
trading market for the HealthMax' (and, ultimately, the Company's) common
stock. Although these efforts ultimately resulted in the reverse merger into
PLC Venture Corp., attention to financing the Company was a serious diversion
of senior Management time, one consequence of which was a slower than expected
growth in the Company's core business. Although the Company will continue to
seek private debt and/or equity financing in 1999, the Company also will
attempt to grow through operations by hiring additional senior-level Management
and streamlining delivery of the Company's programs and networks.
Additional plans for 1999 include the deployment of the Company's
Health Assurance Plans. The Company believes that these member benefits plans
will increase the likelihood of provider loyalty to the Company's products and
networks, which should translate into ongoing and increasing product sales. The
Company anticipates devoting significant funds (as available) to the creation
of a meaningful presence on the internet, which will serve as an important
vehicle for education, marketing and sales of product. The web site's
e-commerce component is expected to develop, over time, into the primary method
for ordering the Company's nutritional products, and for tracking sales and
fulfillment of those product orders.
YEAR ENDED DECEMBER 31, 1998 COMPARED WITH YEAR ENDED DECEMBER 31, 1997
Management believes that a comparison of the financial performance of
the Company in the fiscal year ended December 31, 1998 and in the fiscal year
ended December 31, 1997 dramatically indicates the impact of the Company's
decision in mid-1998 to terminate sales of labs and sophisticated lab equipment
ancillary to its products and systems. Prior to that decision, this equipment
was sold to members of the Company's provider network, and required a fairly
high level of training and support. The equipment component presently sold to
providers is a much more basic, much less costly component, with a higher
profit margin to the Company. As a result of the decision to alter the
equipment component, revenue from the sales of equipment decreased by 27.1%,
from $411,610 in 1997 to $299,989 in 1998. During that time, the cost of sales
for equipment decreased by 56.7%, from $135,670 in 1997 to $58,799 in 1998.
Sales of the Company's products increased from $240,607 in the fiscal
year ended December 31, 1997 to $439,601 in December 31, 1998, or 82.7%. The
cost of those sales increased by 13.7%, from $109,938 in 1997 to $125,027 in
1998. More importantly, the cost of sales as a function of the sales decreased
substantially from 45.7% in 1997 to 28.4% in 1998. Similarly, gross profit
margins for the sale of products increased from 54.3% in 1997 to 71.6% in 1998.
These changes are largely the result of greater discounts from the products'
manufacturer as a result of increased volume. Management believes that profit
margins on the sale of products can be further increased as volume increases.
Three limited liability companies affiliated with the Company
experienced losses in 1998 and 1997. Under the terms of the operating
agreements between HealthMax and the limited liability companies, 99% of the
losses of the limited liability companies is allocated to HealthMax.
Accordingly, the amounts of $506,255 and $363,341, were reflected as a
reduction of selling, general and administrative expenses of the Company in
1998 and 1997, respectively, and the amount to due the limited liability
companies were reduced by the same amounts.
14
<PAGE> 15
LIQUIDITY AND CAPITAL RESOURCES
Despite non-binding commitments from third-parties to fund the
Company's operations in 1998, the Company continued to experience, and
continues to experience, cash flow shortages that have slowed the Company's
growth. One consequence of those cash flow shortages has been an increase of
$132,788 in accounts payable and an increase of $390,044 in accrued
liabilities, bringing those figures to $284,637 and $452,188, respectively, at
December 31, 1998.
The Company has primarily financed its activities from the sale of
capital stock of HealthMax, and from loans from affiliated parties, including
HealthCare and the limited liability companies. A significant portion of the
funds raised from the sale of capital stock has been used to reduce
indebtedness on commercial paper ($520,664 and $813,596 in 1998 and 1997,
respectively) and to service certain investments in the limited liability
companies made by third parties, as well as to cover working capital deficits.
The Company continues to experience negative cash flow, and
anticipates this continuing through 1999. The Company is currently engaged in a
private offering that, if fully completed, would result in proceeds to the
Company of approximately $1 million, with additional funds in excess of $5
million if warrants that are part of that offering are exercised in full. There
can be no assurances that the offering will be completed, or that any warrants
will be exercised.
In May 1999, the Company received a revolving loan commitment of
$500,000 for the purchase of inventory ($250,000 of which has been funded) and
a $75,000 loan for working capital. The inventory financing is expected to be
repaid from the sale of product during the next two years; the working capital
loan is expected to be repaid from the proceeds of an ongoing private offering.
Management believes that it has sufficient capital resources to enable
it to continue operations for the next six months. In addition to the ongoing
private offering, the Company is investigating other forms of private debt
and/or equity financing, although there can be no assurances that the Company
will be successful in procuring such financing or that it will be available on
terms acceptable to the Company, if at all.
YEAR 2000 IMPACT STATEMENT
The Company is not aware of any potential problems resulting from the
year 2000 with any of its computer systems, major vendors or suppliers.
POTENTIAL SALES AND EARNINGS VOLATILITY
The Company's sales and earnings may be subject to potential
volatility based upon, among other things: (i) the adverse effect of HealthMax
Nutritional Centers' or the Company's failure, or allegations of their failure,
to comply with applicable regulations; (ii) the negative impact of changes in
or interpretations or regulations that may limit or restrict the sale of
certain of the Company's products, the expansion of its operations into new
markets and the introduction of its products into each such market; (iii) the
inability of the Company to introduce new products or the introduction of more
products by the Company's competitors; (iv) general conditions in the
nutritional supplement industry; and (v) consumer perceptions of the Company's
15
<PAGE> 16
products and operations. In particular, because the Company's products are
ingested by consumers, the Company is dependent upon consumers' perception of
the safety and quality of its products. As a result, substantial negative
publicity concerning one or more of the Company's products or other nutritional
supplements similar to the Company's products could adversely affect the
Company results of operations or financial condition.
ITEM 3. DESCRIPTION OF PROPERTY.
The Company's corporate headquarters, including administrative
offices, and research and development facilities are located in downtown
Orlando, Florida, and are leased from an affiliated party. The Company also
maintains a regional sales office in Bloomington, Minnesota, which it rents
from an employee at a minimal monthly rate, and a regional sales office in
Colorado Springs, Colorado, which it rents from an unaffiliated party, also at
a minimal monthly rate. The Company presently utilizes certain distribution
facilities in Norcross, Georgia, under a verbal agreement, for which it pays
$2,000 per month.
The Company believes all leased property is in good and satisfactory
condition, and is suitable for the Company's business needs for the term of the
respective leases.
Addresses for the Company's locations are as follows:
Colorado: 101 N. Cascade Avenue, #3, Colorado Springs, CO 80903
Florida: 2016 S. Orange Avenue, Orlando, FL 32806
Georgia: 6665-B Corners Industrial Court, Norcross, GA 30082
Minnesota: 2850 Metro Drive, Suite 223, Bloomington, MN 55425
16
<PAGE> 17
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
(a) SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS.
As of April 26, 1999, the Company had issued and outstanding 1,587,687
shares of its Common Stock. The following table sets forth, as of that date,
certain information regarding beneficial ownership of the Common Stock by those
persons known by the Company to be beneficially holding more than five percent
of the Company's common stock.
NAME AND ADDRESS(1) # OF SHARES % OF TOTAL
- ------------------- ----------- ----------
The Daniel J. Pavlik Revocable Trust(2) 218,618 13.80
1602 Patton Avenue
Apopka, FL 32703
The Rebecca Pavlik Revocable Trust(3) 218,618 13.80
1602 Patton Avenue
Apopka, FL 32703
Patricia Cohen 150,000 9.47
203 Waymouth Harbor Cove
Longwood, FL 32792
Donald Metchick(4) 145,265 9.17
106 Wisteria Drive
Longwood, FL 32792
Mia Metchick(5) 81,000 5.11
2242 Stonington Avenue
Orlando, FL 32817
Jennifer Trammel(5) 81,000 5.11
836 Marque Drive
Clermont, FL 34711
- -----------------
(1) For purposes of the table, a person is considered to "beneficially
own" any shares with respect to which he/she directly or indirectly
has or shares voting or investment power or of which he or she has the
right to acquire the beneficial ownership within 60 days. Unless
otherwise indicated and subject to applicable community property law,
voting power and investment power are exercised solely by the person
named above or shared with members of his or her household.
(2) Does not include 715,000 shares issuable upon closing of the
acquisition of HealthCare.
(3) Does not include 715,000 shares issuable upon closing of the
acquisition of HealthCare.
(4) Does not include 476,000 shares issuable upon closing of the
acquisition of HealthCare.
(5) Held in name only; will revert to certain former shareholders of PLC
Venture Corp. or their assigns in near future.
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<PAGE> 18
(b) SECURITY OWNERSHIP OF MANAGEMENT.
As of April 26, 1999, the Company had issued and outstanding 1,587,687
shares of its Common Stock. An additional 600,000 shares were to have been
issued as of January 1, 1999, pursuant to certain executive employment
agreements, and will be issued in the next 30 days. Of the shares to be issued,
200,000 shares will be released to the shareholders, 200,000 will be held in
escrow until January 1, 2000, and 200,000 will be held in escrow until January
2, 2001.
The following table sets forth, as of April 26, 1999, certain
information regarding beneficial ownership of the Common Stock by members of
Management, giving effect to the issuance of the 600,000 shares described
above.
NAME AND ADDRESS(1) # OF SHARES % OF TOTAL
- ------------------- ----------- ----------
Daniel J. Pavlik(2) 218,618 10.00
1602 Patton Avenue
Apopka, FL 32703
Donald Metchick(3) 245,265 11.21
106 Wisteria Drive
Longwood, FL 32792
Steven Miracle(4) 100,000 4.57
3000 Old Alabama, Suite 119250
Alpharetta, Georgia 30022
- --------------------
(1) Based on 2,187,687 shares outstanding.
(2) Represents shares owned of record by The Daniel J. Pavlik Revocable
Trust. Does not include 218,618 shares owned of record by The Rebecca
Pavlik Revocable Trust, as to which Dr. Pavlik disclaims beneficial
ownership. Does not include 715,000 shares issuable to The Daniel J.
Pavlik Revocable Trust upon closing of the acquisition of HealthCare.
(3) Does not include 476,000 shares issuable upon closing of the
acquisition of HealthCare. Does not include 100,000 shares issued in
Mr. Metchick's name but held in escrow until January 1, 2000, and
100,000 shares issued in Mr. Metchick's name but held in escrow until
January 1, 2001, which shares cannot be voted or disposed of by Mr.
Metchick until released from escrow.
(4) Does not include 100,000 shares issued in Mr. Miracle's name but held
in escrow until January 1, 2000, and 100,000 shares issued in Mr.
Miracle's name but held in escrow until January 1, 2001, which shares
cannot be voted or disposed of by Mr. Miracle until released from
escrow.
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<PAGE> 19
(c) CHANGES IN CONTROL.
Not Applicable
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS.
(a) DIRECTORS AND EXECUTIVE OFFICERS.
Directors are elected annually and serve until the next annual
shareholders' meeting, unless they resign or are removed earlier in accordance
with the Company's Amended and Restated Articles of Incorporation.
Executive Officers are appointed by the Board of Directors.
DANIEL J. PAVLIK, 48, PRESIDENT, CHIEF EXECUTIVE OFFICER AND CHAIRMAN OF THE
BOARD.
Dr. Pavlik has been active in the healthcare industry for the last 20
years. He obtained his undergraduate degree from Indiana University of
Pennsylvania in 1973. In February 1997 he received his master of science degree
from Rollins College, Orlando, Florida. His postgraduate doctoral studies were
completed by June of 1980, when he received his Doctorate of Chiropractic
Degree from Palmer College of Chiropractic located in Davenport, Iowa. Dr.
Pavlik has founded and developed three healthcare companies during his
professional career. As President of NMS Rehabilitation, Inc. from 1985 through
1992 he successfully implemented nine full service physical rehabilitation
facilities in a multi-state forum. From 1987 through 1993 he founded and
developed one of the largest chiropractic preferred provider organizations in
the nation, consisting in excess of 1,200 members. As well, Dr. Pavlik has been
active since 1980 in the management and development of the largest chiropractic
group practice in Central Florida. The need for constant improvement within the
healthcare delivery system has lead to his innovative and visionary programs.
STEVEN MIRACLE, 44, CHIEF OPERATING OFFICER.
Mr. Miracle joined the Company as of January 1, 1999, after over 20
years of senior-level healthcare administrative experience, which included
developing and implementing growth strategies for companies prepared to move to
a new level of productivity and orchestrating turn-around situations, as well
as establishing and carrying out business plans from start-up through
profitable operations. Mr. Miracle began his career in healthcare
administration after receiving his M.B.A. from Vanderbilt University in 1977.
As part of its early management group, Mr. Miracle was instrumental in
developing and implementing operating procedures for Humana's primary care
business, assisting in the migration from a hospital-based business and
creating templates for the financial analysis of Humana's acquisition targets.
After serving as the principal operations officer for several start-up
ventures, Mr. Miracle more recently served as the President of AmHealth, Inc.,
an occupational health provider, taking it from near bankruptcy, through a
creditor work-out, consolidation, and successful sale.
DONALD METCHICK, 56, VICE PRESIDENT AND DIRECTOR.
Mr. Metchick has been in the financial services and estate planning
areas for 22 years. From 1973 until 1993, he was a general insurance agent for
19
<PAGE> 20
John Hancock Insurance Co. Mr. Metchick filed for and was discharged from
personal bankruptcy in the United States Bankruptcy Court in early 1994. Mr.
Metchick is the President of the Company's newly-formed subsidiary, Access
Health Assurance Plans, Inc., and has been and will continue to be instrumental
in the development and deployment of the Company's Nutritional Options plans.
RICHARD D. EKSTROM, 55, DIRECTOR.
Mr. Ekstrom was appointed to the Company's Board of Directors in May
1999. He is the Chairman of the Board of Directors and President of Demegen,
Inc., a publicly-held company, and has served in those capacities since January
1996. Mr. Ekstrom was Demegen's Chief Financial officer from December 1994
until August 1998. Mr. Ekstrom holds a B.A. from Cornell University and an
M.B.A. from Boston University. From 1990 through 1991, Mr. Ekstrom was
President of Cost Containment Corporation and from 1993 through 1994, he was
Chief Operating Officer of Preferred Solutions Inc., both of which were
start-up pharmacy benefit management companies. Mr. Ekstrom is the founder of
Prescription Price Watch, a buying guide for pharmacy benefit programs. From
1968 to 1990, he was employed by Westinghouse Electric Corporation where he
served in a variety of management positions, including controller,
manufacturing manager and corporate staff positions.
The Board of Directors intends to establish Compensation and Audit
Committees; as the only "outside director" at this time, Mr. Ekstrom is
expected to serve on those committees. The Compensation Committee will
establish salaries, incentives and other forms of compensation for directors,
officers and other employees for the Company, will administer the Company's
incentive compensation and benefit plans and recommend policies relating to
such incentive compensation and benefit plans. The Audit Committee will review
the need for internal auditing procedures and the adequacy of internal controls
and meets periodically with management and independent auditors.
(b) OTHER SIGNIFICANT EMPLOYEES.
Dr. Barry Bradley has served as the Executive Vice President of
Education and Product Development for HealthMax since HealthMax' inception. He
is board certified in clinical nutrition through both the American College of
Nutrition and the Clinical Nutrition Certification Board, and is HealthMax
principal clinical nutritionist, responsible for HealthMax' product
formulations. A practicing chiropractor and clinical nutritionist for over 21
years, Dr. Bradley was in private practice with the Bradley Chiropractic Center
in West Monroe, Louisiana from 1979 to 1991, and with the Darrow Family
Chiropractic Clinic in Longwood, Florida, from 1992 to 1995. Dr. Bradley
received his Doctor of Chiropractic in 1978 from the Cleveland College of
Chiropractic, and is certified in several areas of nutritional healthcare and
chiropractic. He is a member of the International and American Association of
Clinical Nutritionists, the American Chiropractic Association Council on
Nutrition, the American Chiropractic Board of Nutrition, and the Clinical
Nutrition Certification Board. In June 1995, Dr. Bradley sought protection
under the federal bankruptcy laws, both personally and professionally, in
connection with an unsuccessful business venture (Dr. Barry J. Bradley DBA
Cornerstone Chiropractic Clinic); these cases were discharged in October 1995.
20
<PAGE> 21
(c) FAMILY RELATIONSHIPS.
None of the members of Management and/or other key employees is
related to another.
(d) INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS.
Not applicable.
ITEM 6. EXECUTIVE COMPENSATION.
(a) GENERAL.
During the past three fiscal years, the Company has operated without
formal employment agreements with respect to its executive officers. During
that time, the only person whose compensation, including salary and bonuses,
exceeded $100,000, was Dr. Daniel J. Pavlik (President and Chief Executive
Officer). Effective January 1, 1999, the Company entered into written
agreements with Donald Metchick and Steven Miracle, the principal terms of
which agreements are described below.
The Company presently does not have any form of stock option or stock
grant plan, although it anticipates reserving up to two million shares for such
a plan in the near future.
(b) SUMMARY COMPENSATION TABLE.
The following table shows all the cash compensation paid by the
Company, during the fiscal years indicated, to the President and CEO; no other
person earned or was paid at least $100,000 in all forms of compensation. There
was no long-term compensation earned or paid to any party, nor was any other
form of reportable compensation earned or paid.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
--------------------------------------------
(a) (b) (c) (d) (e)
Total
Annual
Compen-
sation
Name and Principal Position Year Salary ($) Bonus ($) ($)
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Daniel J. Pavlik, CEO 1998 174,999 -- 174,999
1997 153,845 -- 153,845
1996 -- -- --
</TABLE>
The foregoing includes $100,961 earned in 1998 by Dr. Pavlik but not
paid in 1998, which amount has not been paid to date. These amounts do not
include amounts paid by HealthCare, which was not a subsidiary during the
reported years and is not presently a subsidiary.
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<PAGE> 22
(c) OPTION/SAR GRANTS TABLE.
Not applicable.
(d) AGGREGATED OPTION/SAR EXERCISE AND FISCAL YEAR-END OPTION/SAR VALUE
TABLE.
Not applicable.
(e) LONG-TERM INCENTIVE PLAN ("LTIP") AWARDS TABLE.
Not applicable.
(f) COMPENSATION OF DIRECTORS.
The Company does not separately compensate its employee directors for
their service as directors. Non-employee directors are expected to receive
annual fees of $2,500, with no additional compensation for meetings attended.
Non-employee directors also will be reimbursed any reasonable out-of-pocket
expenses incurred in connection with their attendance at meetings. No
additional compensation is anticipated for service on committees of the Board
of Directors.
Prior to April 1999, all of the Company's directors (and nominees for
directors) also were employees. Accordingly, no compensation reportable under
this item was paid.
(g) EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-
CONTROL ARRANGEMENTS.
Effective January 1, 1999, the Company has entered into an executive
employment agreement with Steven Miracle, pursuant to which Mr. Miracle serves
as the Chief Operating Officer of Access Health Alternatives, Inc. Mr. Miracle
also serves in that capacity with respect to HealthMax. The term of the
agreement is three years, with consecutive one-year terms if not terminated by
written notice prior to the expiration of an ongoing term. Mr. Miracle will
receive a base salary of $125,000 in each year of the term, and will be
entitled to a cash bonus equal to two percent (2%) of the Company's annual net
profits after taxes, subject to maximums as follows: $100,000 in 1999; $150,000
22
<PAGE> 23
in 2000; and $200,000 in 2001. Mr. Miracle also is to receive a common stock
bonus as follows: 100,000 shares upon commencement of his employment
relationship (which has not been issued to date but will be shortly); 100,000
shares on January 1, 2000; and 100,000 shares on January 1, 2001. In the event
of a change of control of the Company, as defined in the agreement, additional
compensation would be payable to Mr. Miracle.
Effective January 1, 1999, the Company has entered into an executive
employment agreement with Donald Metchick, pursuant to which Mr. Metchick
serves as the Executive Vice President in charge of Health Assurance Plans of
Access Health Alternatives, Inc., and as the President of HAP. The term of the
agreement is three years, with consecutive one-year terms if not terminated by
written notice prior to the expiration of an ongoing term. Mr. Metchick will
receive a base salary of $100,000 in each year of the term, and will be
entitled to a cash bonus equal to two percent (2%) of the Company's annual net
profits after taxes, subject to maximums as follows: $100,000 in 1999; $150,000
in 2000; and $200,000 in 2001. Mr. Metchick also is to receive a common stock
bonus as follows: 100,000 shares upon commencement of his employment
relationship (which has not been issued to date but will be shortly); 100,000
shares on January 1, 2000; and 100,000 shares on January 1, 2001. In the event
of a change of control of the Company, as defined in the agreement, additional
compensation would be payable to Mr. Metchick.
The Company has no employment contracts with any other employees,
although it anticipates entering into agreements with Dr. Daniel J. Pavlik and
Dr. Barry Bradley, the terms of which agreements have not been finalized.
(h) REPORT ON REPRICING OF OPTIONS/SARS.
Not applicable.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The Company leases its corporate headquarters in Orlando, Florida from
PSC Realty, a partnership in which Dr. Pavlik, the Company's President and
Chief Executive Officer, is a partner.
The Company's distribution facilities in Norcross, Georgia, are
provided at a rate of $2,000 per month under a verbal arrangement with Paideia
Health, Inc. ("Paideia"), a company controlled by Steven Miracle, the Company's
Chief Operating Officer. Paideia leases the premises from an unaffiliated third
party. It is anticipated that Access Health Alternatives, Inc., will enter into
a formal agreement with the owner of the premises in the next 60 days, at which
time Paideia's lease will be terminated.
Pavlik Chiropractic Group, P.A. ("PCG"), a professional association
owned and controlled by Dr. Pavlik, employs the doctors who provide services
through Access HealthCare, Inc. HealthCare reimburses PCG for the costs
associated with the employment of the doctors, and PCG does not receive any
premium or other compensation for its role.
In addition to the foregoing, the Company has arrangements with
certain limited liability companies that may be considered related-party
transactions. Details of those arrangements are described elsewhere herein.
ITEM 8. LEGAL PROCEEDINGS.
The Company is not presently a party to any material litigation not in
the regular course of its business, nor to the Company's knowledge is such
litigation threatened, except as follows: one of the Company's unsecured
creditors has threatened to file suit against the Company in connection with a
debt of $64,583 claimed to be owed to him by the Company. The Company, through
counsel, is attempting to resolve this matter.
ITEM 9. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
(a) MARKET INFORMATION.
Bid and ask quotations for the Company's Common Stock, $.001 par
value, are posted on the over-the-counter bulletin board of the National
Association of Securities Dealers, Inc. From the commencement of trading in
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<PAGE> 24
October 1998 until the Reverse Stock Split in March 1999, the stock traded
under the symbol, "AHMX." Following the Reverse Stock Split, the stock has
traded under the symbol, "AHMXD."
The Company is aware that there is a possibility that it will become
ineligible for quotation on the Bulletin Board if the Securities and Exchange
Commission has not completed its comments with respect to this Registration
Statement on Form 10SB by August 1, 1999. In that case, the Company believes
that a reasonably comparable quotation medium will be available in the form of
the "Electronic Pink Sheets" of the National Quotation Bureau, until such time
as this Registration Statement has been cleared of all comments by the
Commission.
The following table sets forth the range of high ask and low bid
prices for the Company's Common Stock on a quarterly basis since the
commencement of trading in October 1998 (giving retroactive effect to the
1-for-10 reverse stock split declared in March 1999), as reported by the
National Quotation Bureau (which reflect inter-dealer prices, without retail
mark-up, mark-down, or commission and may not necessarily represent actual
transactions). The foregoing and following information should not be taken as
an indication of the existence of an established public trading market for the
Company's Common Stock.
COMMON STOCK
High Ask Low Bid
-------- -------
Quarter ended December 31, 1998 $90.0000 $ 0.6250
Quarter ended March 31, 1999 $ 3.3750 $ 0.1563
(b) HOLDERS.
As of April 26, 1999, the approximate number of record holders of the
Company's common stock was 46. This includes brokerage firms and/or clearing
firm holding the Company's stock for their clientele (with each such brokerage
house and/or clearing house being considered as one holder). The Company
believes that the number of beneficial owners exceeds 200, however there can be
no assurance that this is accurate.
(c) DIVIDENDS.
Holders of Common Stock are entitled to receive dividends when, as and
if declared by the Board of Directors out of funds available therefor, subject
to any restrictions imposed by any loan or other agreements, including the
rights of investors in affiliated limited liability companies, who are entitled
to certain distributions based on revenue, and holders of Series A Redeemable
Convertible Preferred Stock, who will have a dividend preference described
elsewhere herein.
The Company has not paid or declared any dividends on its Common Stock
since its inception and, by reason of its present financial status and its
contemplated financial requirements, does not contemplate or anticipate paying
any dividends upon its Common Stock in the foreseeable future.
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<PAGE> 25
ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES.
The following shares of unregistered common stock of the Company have
been issued in the period from September 2, 1998 (the Exchange Date) through
May 31, 1999 (with adjustments shown to reflect the Reverse Stock Split
declared in March 1999):
In October 1998, the Company issued 20,000 restricted shares of common
stock to LNB Investment Corporation, under an assignment from Capital FCG
Unlimited, Inc. ("FCG"), in consideration for consulting services rendered by
FCG. These shares were issued under Section 4(2) of the Securities Act of 1933,
as amended (the "Act") and were due to have been issued in September 1998,
following the Share Exchange. The parties have valued the shares at $1.00 per
share, as there was no trading market for the shares at the time they were
earned, and the services were valued at $20,000.
In February 1999, the Company sold a total of 323,334 shares of Common
Stock, for an aggregate of $485,000, pursuant to Rule 504, to the following
persons and in the following amounts:
Alan K. Avra 10,000 Shares
Lonnie E. Avra 10,000 Shares
Joseph Camillo 10,000 Shares
Cheverlton Fund Ltd. 60,000 Shares
Richard W. Coffman 10,000 Shares
Thomas S. Danford 10,000 Shares
Derrick Dental Care, P.A. 10,000 Shares
Money Purchase Plan
Anthony C. & Rosemary E. Derrick 10,000 Shares
Sean R. Derrick 10,000 Shares
Hi-Tel Group, Inc. 30,000 Shares
George R. Kinney 40,000 Shares
Angie G. Langley 14,334 Shares
Lyle G. Meyers 20,000 Shares
Sheila O'Derrick 10,000 Shares
Progressive Media Group, Inc. 39,000 Shares
Greig A. Rank 10,000 Shares
David Tuscan 10,000 Shares
Doug Ward 10,000 Shares
In March 1999, the Company issued a total of 16,000 restricted shares
to certain employees, independent contractors and consultants, as a bonus for
services rendered. The shares were issued under Section 4(2) of the Act, as
follows:
Barry Bradley 10,000 Shares
Ron Broman 500 Shares
Roger Cameron 500 Shares
Kirk Johnson 500 Shares
Mark Leutem 1,500 Shares
Brent Phillips 2,500 Shares
Mary Jo Sabata 500 Shares
25
<PAGE> 26
In April 1999, the Company issued 150,000 shares of Common Stock to
Patricia Cohen, in consideration for her assistance in facilitating revisions
in January and February 1999 to the original Share Exchange and related
transactions. These shares were valued by the parties at $150,000, and were
issued under Rule 504.
In April 1999, the Company issued 75,000 shares of Common Stock to Amy
Lewis, in consideration for consulting services; the shares were issued under
Section 4(2), and were due to have been issued immediately following the Share
Exchange in September 1998. The parties have valued the shares at $1.00 per
share, as there was no trading market for them at the time they were earned,
and the services were valued at $75,000.
In May 1999 the Company sold one Unit of its securities pursuant to
Rule 506 promulgated under the Act, for $25,000. The securities have not yet
been issued. The Unit consisted of one shares of Series A Redeemable
Convertible Preferred Stock, one Class A Warrant and one Class B Warrant.
ITEM 11. DESCRIPTION OF SECURITIES.
COMMON STOCK
The Company is authorized to issue 50,000,000 shares of Common Stock,
$.001 par value per share, of which approximately 1.6 million of which are
currently outstanding, and an additional 2.0 million (approximately) of which
have been reserved in connection with the acquisition of HealthCare. An
additional 4.2 million shares of common stock (approximately) have been
reserved in connection with an ongoing offering of securities presently being
conducted under Regulation D of the Securities Act (the "Unit Offering"), which
offering is described below. The Company also has reserved 600,000 shares for
issuance under two employment agreements, which shares are to be issued in the
immediate future, and approximately 430,000 shares that may be issued to
minority shareholders of HealthMax in connection with a pending share exchange.
The Company anticipates reserving an additional 2.0 million shares in
connection with a planned stock option plan, which has not been finalized.
Holders of Common Stock are entitled to cast one vote for each share
held at all stockholder meetings for all purposes, including the election of
directors. Cumulative voting for the election of directors is not permitted.
The holders of more than 50% of the Common Stock issued and outstanding and
entitled to vote, present in person or by proxy, constitute a quorum at all
meetings of stockholders. The vote of the holders of a majority of Common Stock
present at such a meeting will decide any question brought before such a
meeting, except for certain actions such as amendments to the Articles of
Incorporation, or a merger or dissolution of the Company, which would require
the affirmative vote of the holders of a majority of the outstanding shares of
Common Stock. Upon liquidation or dissolution, the holder of each outstanding
share of Common Stock will be entitled to share equally in the assets of the
Company legally available for distribution to the shareholders, after payment
of all liabilities (including distributions to investors in the LLCs). Holders
of Common Stock do not have any preemptive, subscription or redemption rights.
All outstanding shares of Common Stock are, and the shares of Common Stock
offered hereby, upon purchase on the terms hereof will be, fully paid and
nonassessable.
26
<PAGE> 27
PREFERRED STOCK
The Company is authorized to issue 10,000,000 shares of preferred
stock, $.01 par value per share, the rights and preferences of which may be
designated by the Board of Directors without shareholder approval. On March 3,
1999, the Company designated the rights and preferences of its Series A
Redeemable Convertible Preferred Stock, and authorized the sale of up to
1,400,000 shares as part of the Unit Offering. Prior to the Unit Offering, no
series of preferred stock had been designated. No shares of Series A Redeemable
Convertible Preferred Stock are currently outstanding, although one share has
been sold and is due to be issued.
The following is a summary of the rights and preferences of the Series
A Redeemable Convertible Preferred Stock:
Voting: none until conversion
Preference on liquidation: none
Dividend: 10.5% per year per share until
conversion or redemption; payable
quarterly commencing on the six
month anniversary of the completion
of this offering; funds must be
legally available for payment
Conversion: At the holder's election, by
written notice, at any time from
March 15, 2000 (the one-anniversary
of the commencement of the Unit
Offering) to March 14, 2002, into
one share of common stock
Redemption: By the Company at any time prior to
conversion, at a redemption price
of $1.44 per share
Registration: The Company will include the shares
of common stock into which the
Series A Redeemable Convertible
Preferred Stock may be converted
(or have been converted, as the
case may be) in the Company's first
registration statement to be filed
under the Securities Act of 1933,
as amended. In the event the
Company does not file such a
registration statement within 90
days following the completion of
the Unit Offering, the holders of a
majority of the Preferred Stock may
27
<PAGE> 28
demand that the Company file such a
registration statement within 90
days from receipt of written notice
by such holders, or as soon
thereafter as possible. Each
shareholder to whom these
registration rights pertains must
agree not to dispose of any of the
registered securities for at least
60 business days following the
effective date of the registration
statement if an underwritten
offering is then pending.
CLASS A WARRANTS
The Company has authorized the issuance of up to 1,400,000 Class A
Warrants, which are included in the Units offered in the Unit Offering. Each
Class A Warrant entitles the holder to purchase one share of the Company's
common stock for $3.00 per share, commencing on March 15, 2000, and for a
period of 90 days thereafter. The Company may redeem the Class A Warrants at
any time that the average closing bid and asked price for its common stock has
been at least $4.00 for a minimum of 20 consecutive trading days, at a
redemption price of $.01 per share, upon 30 days' written notice to the warrant
holders, during which time the warrant holders may exercise their warrants
(even if such exercise would precede March 15, 2000); provided, however, that a
current registration statement covering the underlying shares of common stock
is then available.
CLASS B WARRANTS
The Company has authorized the issuance of up to 1,400,000 Class B
Warrants, which are included in the Units offered in the Unit Offering. Each
Class B Warrant entitles the holder to purchase one share of the Company's
common stock for $4.50 per share, commencing on September 15, 2000, and for a
period of 90 days thereafter. The Company may redeem the Class B Warrants at
any time that the average closing bid and asked price for its common stock has
been at least $6.00 for a minimum of 20 consecutive trading days, at a
redemption price of $.01 per share, upon 30 days' written notice to the warrant
holders, during which time the warrant holders may exercise their warrants
(even if such exercise would precede September 15, 2000); provided, however,
that a current registration statement covering the underlying shares of common
stock is then available.
TRANSFER AGENT
The Transfer Agent for the Company's Common Stock is Interwest
Transfer and Trust Company of Salt Lake City, Utah.
ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Amended and Restated Articles of Incorporation and Bylaws of the
Company contain provisions limiting or eliminating the liability of directors
of the Company to the Company or to its shareholders to the fullest extent
permitted by the Florida Business Corporation Act and indemnifying officers and
directors of the Company to the fullest extent permitted by Florida law.
28
<PAGE> 29
The Company does not presently maintain directors' and officers'
liability insurance.
ITEM 13. FINANCIAL STATEMENTS.
The Company's financial statements, as well as the financial
statements for HealthCare and certain pro forma information related to the
acquisition of HealthCare by the Company, begin at page F-1.
ITEM 14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not applicable.
ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS.
(a) The following financial statements are submitted herewith:
(i) For Access Health Alternatives, Inc., and Subsidiary F-1
Independent Auditors' Report F-2
Consolidated Balance Sheets at December 31, 1998 F-3
Consolidated Statements of Operations for the
years ended December 31, 1998 and 1997 F-4
Consolidated Statements of Stockholders' Deficit
for the years ended December 31,1998 and 1997 F-5
Consolidated Statements of Cash Flows for the
years ended December 31, 1998 and 1997 F-6
Notes to Consolidated Financial Statements F-7
(ii) For Access HealthCare, Inc. F-18
Independent Auditors' Report F-19
Balance Sheet at December 31, 1998 F-20
Statement of Operations for the years ended
December 31, 1998 and 1997 F-21
Statement of Stockholders' Deficit for the
years ended December 31, 1998 and 1997 F-22
Statement of Cash Flow for the years ended
December 31, 1998 and 1997 F-23
Notes to Financial Statements F-24
29
<PAGE> 30
(iii) Pro Forma (unaudited) Consolidated Statements F-29
Pro Forma Consolidated Balance Sheet at
December 31, 1998 F-30
Pro Forma Consolidated Statements of Operations
for the years ended December 31, 1998 and 1997 F-31
Notes to Pro Forma Consolidated Financial Statements F-33
(b) The following exhibits are submitted herewith:
Exhibit 3.1.1 Articles of Incorporation of B C Insurance
Services, Inc.
Exhibit 3.1.2 Articles of Amendment to B C Insurance
Services, Inc.
Exhibit 3.1.3 Articles of Restatement to the Articles of
Incorporation of PLC Ventures Corp.
Exhibit 3.1.4 Articles of Amendment to the Amended and
Restated Articles of Incorporation of
Access HealthMax Holdings, Inc.
Exhibit 3.1.5 Articles of Amendment to the Amended and
Restated Articles of Incorporation of
Access HealthMax Holdings, Inc.
Exhibit 3.2 Bylaws
Exhibit 4.1 Class A Common Stock Purchase Warrant
Exhibit 4.2 Class B Common Stock Purchase Warrant
Exhibit 10.1 Employment Agreement with Steven Miracle
Exhibit 10.2 Employment Agreement with Donald Metchick
Exhibit 10.3 Form of LLC Operating Agreement (LLC II
given as example)
Exhibit 11 Statement re: computation of per share
earnings
Exhibit 21 List of Subsidiaries
30
<PAGE> 31
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934,
the registrant caused this registration statement to be signed on its behalf by
the undersigned, thereunto duly authorized.
ACCESS HEALTH ALTERNATIVES, INC.
-------------------------------------
(Registrant)
Date: June 18, 1999 By: /s/ Daniel J. Pavlik
---------------------------------
Daniel J. Pavlik, President
31
<PAGE> 32
ACCESS HEALTH ALTERNATIVES, INC.
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
(WITH INDEPENDENT AUDITORS' REPORT THEREON)
F-1
<PAGE> 33
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Access Health Alternatives, Inc.:
We have audited the accompanying consolidated balance sheet of Access Health
Alternatives, Inc. as of December 31, 1998, and the related consolidated
statements of operations, stockholders' deficit, and cash flows for the years
ended December 31, 1998 and 1997. These consolidated financial statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Access Health
Alternatives, Inc. at December 31, 1998 and the results of their operations and
their cash flows for the years ended December 31, 1998 and 1997, in conformity
with generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 9 to
the financial statements, the Company has suffered recurring losses from
operations and has a net capital and working capital deficiency, which raises
substantial doubt about their ability to continue as a going concern.
Management's plans regarding those matters are described in Note 9. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
Tedder, James, Worden & Associates, P.A.
March 3, 1999, except as to note 1a which is as of March 11, 1999 and notes 10
and 11 which are as of April 30, 1999
F-2
<PAGE> 34
ACCESS HEALTH ALTERNATIVES, INC.
CONSOLIDATED BALANCE SHEET
December 31, 1998
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Current assets:
Cash $ 419
Receivables:
Trade 8,218
Other 7,988
-----------
Total receivables 16,206
Inventories 68,968
-----------
Total current assets 85,593
Property and equipment, net 51,034
Other assets, net 16,711
-----------
Total assets $ 153,338
===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Notes and commercial paper $ 1,155,723
Current obligation under capital lease 7,523
Bank overdraft 101,357
Accounts payable 284,637
Accrued liabilities 452,188
Due to related parties:
Shareholders 117,378
Limited liability companies 1,084,099
Access Healthcare, Inc 39,383
-----------
Total due to related parties 1,240,860
-----------
Total current liabilities 3,242,288
Unearned income 278,417
Obligation under capital lease, less current portion 5,226
Minority interest in subsidiary 405,063
-----------
Total liabilities 3,930,994
Stockholders' deficit:
Preferred stock, $.01 par value, 10,000,000 shares authorized,
no shares issued and outstanding --
Common stock, $.001 par value, 50,000,000 share authorized,
1,023,350 shares issued and outstanding 1,023
Capital in excess of par value 26,477
Accumulated deficit (3,805,156)
-----------
Total stockholders' deficit (3,777,656)
-----------
Total liabilities and stockholders' deficit $ 153,338
===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE> 35
ACCESS HEALTH ALTERNATIVES, INC.
CONSOLIDATED STATEMENTS OF OPERATONS
For the years ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
Revenues:
Equipment $ 299,989 $ 411,610
Products 439,601 240,607
Other 94,968 96,672
---------- ----------
Total revenues 834,558 748,889
Cost of sales:
Equipment 58,799 135,670
Products 125,027 109,938
Other 7,180 --
---------- ----------
Total cost of sales 191,006 245,608
---------- ----------
Gross profit 643,552 503,281
Selling, general and administrative 1,191,534 1,010,221
---------- ----------
Operating loss (547,982) (506,940)
Other expense:
Interest expense 164,057 235,030
Other, net 2,559 5,470
---------- ----------
Total other expense 166,616 240,500
---------- ----------
Net loss $ (714,598) $ (747,440)
========== ==========
Basic net loss per share $ (0.71) $ (0.74)
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE> 36
ACCESS HEALTH ALTERNATIVES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
For the years ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
Common Stock Capital in
------------------------ Excess of Accumulated
Shares Amount Par Value Deficit Total
------ ------ ----------- ----------- -----
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1996 750 $ -- 7,500 (2,343,118) (2,335,618)
Net loss -- -- -- (747,440) (747,440)
--------- ------ ------ ---------- ----------
Balance, December 31, 1997 750 -- 7,500 (3,090,558) (3,083,058)
Shares issued to reflect
recapitalization for reverse
acquisition (Note 1a) 565,100 565 (565) -- --
Impact of reverse acquisition
of PLC Ventures Corp.
shares outstanding (Note 1a) 437,500 438 (438) -- --
Shares issued for services 20,000 20 19,980 -- 20,000
Net loss -- -- -- (714,598) (714,598)
--------- ------ ------ ---------- ----------
Balance, December 31, 1998 1,023,350 $1,023 26,477 (3,805,156) (3,777,656)
========= ====== ====== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE> 37
ACCESS HEALTH ALTERNATIVES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (714,598) $ (747,440)
Adjustment to reconcile net loss to net
cash provided by (used in) operating activities:
Depreciation and amortization 33,520 26,641
Losses of limited liability companies 506,255 363,341
Unearned income recognized (78,000) (33,583)
Issuance of common stock for services 20,000 --
Cash provided by (used for) changes in:
Receivables 515 (6,226)
Inventories (15,202) 39,835
Other assets -- (500)
Bank overdraft 61,749 36,174
Accounts payable 132,788 64,343
Accrued liabilities 390,044 (1,243)
----------- ----------
Net cash provided by (used for) operating activities 337,071 (258,658)
Cash flows from investing activities:
Payments for the purchase of property and equipment (6,633) (53,712)
----------- ----------
Net cash used in investing activities (6,633) (53,712)
Cash flows from financing activities:
Payments on notes and commercial paper (520,664) (813,596)
Proceeds from notes and commercial paper 150,015 --
Principal payments under capital lease obligations (5,536) (1,845)
Due to (from) related party 143,233 (103,850)
Due to (from) shareholders (23,741) 148,619
Advances (to) from limited liability companies (610,144) 824,647
Increase in unearned income 130,000 260,000
Proceeds from private placement of subsidiary's common stock-
reflected as minority interest 405,063 --
----------- ----------
Net cash provided by (used for) financing activities (331,774) 313,975
----------- ----------
Net increase (decrease) in cash and cash equivalents (1,336) 1,605
Cash and cash equivalents at beginning of year 1,755 150
----------- ----------
Cash and cash equivalents at end of year $ 419 $ 1,755
=========== ==========
Supplemental disclosure of non-cash activities
Cash paid during the year for interest $ 146,448 $ 226,561
=========== ==========
Capital lease obligation $ -- $ 20,130
=========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE> 38
ACCESS HEALTH ALTERNATIVES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998 and 1997
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) ORGANIZATION
On September 2, 1998, Access HealthMax Holdings, Inc. ("Holdings"),
f/k/a PLC Ventures Corp. ("PLC") acquired approximately 94.3% of the
outstanding common stock of Access HealthMax, Inc. (HealthMax), for
565,100 shares of authorized but previously unissued common stock.
Immediately preceding the exchange, there were 437,500 shares
outstanding of PLC. The shares of PLC had been issued for a total
consideration of $1,000. PLC had no sales or revenues since its
formation on October 2, 1988 and had zero stockholders' equity at the
time of acquisition of HealthMax. For accounting purposes, the
acquisition has been treated as an acquisition of PLC by HealthMax and
as a recapitilization ("Reverse Acquisition") of HealthMax. The
historical financial statements prior to September 2, 1998 are those
of HealthMax. Pro forma information is not presented, since the
combination is a recapitilization rather than a business combination.
The deficiency in the net assets of PLC were not adjusted in
connection with the Reverse Acquisition since it consisted of accounts
payable.
On March 11, 1999 Holdings changed its name to Access Health
Alternatives, Inc. ("Alternatives"). Unless the context indicates
otherwise, references hereinafter to (the "Company") include HealthMax
or Alternatives.
On March 3, 1999 the Board of Directors authorized a ten-for-one
reverse stock split effective March 15, 1999. All references in the
financial statements to number of shares, per share amounts and market
prices of the Company's common stock have been retroactively restated
to reflect the decreased number of common shares outstanding.
(B) BUSINESS
The Company, through HealthMax, distributes clinical nutrition
programs and products throughout the United States using small doctor
practices as its sales and clinical support base. HealthMax commenced
operations in 1996 and has spent the past three years developing its
blends of nutritional health care products, and in establishing an
infrastructure for the distribution and sales of those products, as
well as a system of support for the participating doctors.
(Continued)
F-7
<PAGE> 39
ACCESS HEALTH ALTERNATIVES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
(B) BUSINESS, CONTINUED
A portion of the Company's operations, specifically those related to
sales and distribution, are conducted through three affiliated limited
liability companies ("LLC"), each of which is responsible for a
separate geographic territory under operating agreements with the
Company. HealthMax is the manager of the LLC's, and performs all
operating and administrative functions for them. The operating
agreement with the LLC's provide that net profits shall be allocated
100% to the investors in the LLC's until they receive 125% of their
investment, then 25% to the investor and 75% to the Company. Losses
are allocated 99% to the investor and 1% to HealthMax. The term of the
LLC's is for five years. Since all operating activities are conducted
by HealthMax on behalf of the LLC's, HealthMax recognizes all of the
sales and expenses related to the operations being conducted for the
LLC's.
(C) INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out) or
market.
(D) STATEMENT OF CASH FLOW
For purposes of the statement of cash flows, the Company considers all
short-term investments with a maturity of three months or less, at the
date of purchase, to be cash equivalents.
(E) INCOME TAXES
The Company accounts for income taxes under the provisions of
Statement of Financial accounting Standards No. 109 "Accounting for
Income Taxes." Under Statement 109, deferred tax assets and
liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying
amounts of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carryforwards. Deferred tax
assets and liabilities are measured using enacted tax rates expected
to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. Under Statement
109, the effect on deferred tax assets and liabilities of a change in
tax rates is recognized in income in the period that includes the
enactment date.
(Continued)
F-8
<PAGE> 40
ACCESS HEALTH ALTERNATIVES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
(F) USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and reported amount of revenues and
expenses during the reporting period. Actual results could differ from
these estimates.
(G) REVENUE RECOGNITION
Sales are recognized when the product is shipped.
(H) PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation, which
includes amortization of assets under capital leases, is provided over
the estimated useful lives of the individual assets using the
declining-balance method.
(I) OTHER ASSETS
Intangible assets included in the other assets on the balance sheet
are amortized over five years.
(J) NET LOSS PER SHARE
Basic loss per share is computed giving effect to the recapitalization
with Holdings. For purposes of the computation of the basic net loss
per share 1,003,350 shares of common stock are assumed to be
outstanding for 1997. The weighted average shares outstanding for 1998
of 1,007,581 reflects the issuance of 20,000 shares for services.
(K) FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount reported in the Company's balance sheet for cash,
accounts receivable, notes and commercial paper payable, accounts
payable and accrued expenses approximate their fair value because of
the short term maturity of these instruments.
(Continued)
F-9
<PAGE> 41
ACCESS HEALTH ALTERNATIVES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
(L) MINORITY INTEREST
The net proceeds received from a private placement of common stock of
HealthMax in 1998 has been reflected as a minority interest in
subsidiary. In view of agreement to acquire the minority interest in
1999, (see Note 11) all of the loss of HealthMax was reflected in the
accompanying consolidated financial statement of operations.
(M) RECLASSIFICATION
Certain prior year amounts have been reclassified to conform with the
current year presentation.
(2) PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
Computer equipment $ 71,944
Medical equipment 12,943
Furniture and fixtures 12,266
Computer equipment 3,950
Computer software
Leasehold improvements 1,596
Office equipment 1,381
-----------
104,080
Less accumulated depreciation
and amortization 53,046
-----------
Total $ 51,034
===========
For the years ended December 31, 1998 and 1997, depreciation
expense amounted to $28,049 and $21,172, respectively. The Company
has reviewed its long-lived assets and intangibles for impairment
and has determined that no adjustment to the carrying value of
long-lived assets is required.
(Continued)
F-10
<PAGE> 42
ACCESS HEALTH ALTERNATIVES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(3) NOTES AND COMMERCIAL PAPER
Notes and commercial paper are as follows at December 31, 1998:
Commercial paper, bearing interest
at 10 1/2%; collateralized by
Inventory and accounts receivable
of Access HealthMax, Inc. $ 869,637
Notes payable, bearing interest
at 10 1/2%; unsecured 159,294
Lines of credit, bearing interest
at 10% to 22%; unsecured 29,277
Note payable, bearing interest
at 18%; unsecured 20,015
Note payable, non-interest bearing;
Unsecured 77,500
-----------
Total $ 1,155,723
===========
The notes and commercial paper are all due within one year unless
extended.
(4) TRANSACTIONS WITH RELATED PARTIES
The Company commenced operations January 1, 1996. Prior to that, start
up activities were conducted in Access HealthCare, Inc.
("HealthCare"). The principal beneficial owners of HealthCare are also
the principal beneficial owners of the Company. In January 1997, the
Company reimbursed HealthCare in the amount of $1,831,970 related to
the development of the clinical nutritional programs distributed by
the Company and its blends of nutritional health care products, and
for costs relating to financial start-up activities. The reimbursement
to HealthCare was recorded in the 1996 statement of operations as
start up costs, interest expense and general and administrative
expense in the amount of $1,182,041, $173,197 and $476,732,
respectively. In connection with the reimbursement to HealthCare, the
Company assumed $2,339,969 in commercial paper. In addition, prior
advances to HealthCare in the amount of $507,999 were repaid.
(Continued)
F-11
<PAGE> 43
ACCESS HEALTH ALTERNATIVES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(4) TRANSACTIONS WITH RELATED PARTIES, CONTINUED
In connection with forming the three LLC's, HealthMax received
$225,000 as reimbursement for costs incurred in connection with the
formation and development of their business plan, which has been
reflected as a reduction of selling, general and administrative
expenses in the years ended December 31, 1998 and 1997 in the amount
of $75,000 and $150,000, respectively. HealthMax also received $65,000
for each regional office opened by the Company, which amounted to
$130,000 and $260,000 in the years ended December 31, 1998 and 1997,
respectively. These amounts are being recognized over a 60 month
period. HealthMax recognized income of $78,000 and $33,583 in 1998 and
1997, respectively. HealthMax also received a $10,000 fee per month
from each regional office as reimbursement for HealthMax's ongoing
administrative overhead expense, which amounted to $490,000 and
$370,000 in 1998 and 1997, respectively. The reimbursements were
reflected as a reduction of selling, general and administrative
expenses. The LLC's were operating at a loss in 1998 and 1997. In
accordance with the operating agreement, 99% of the LLC's losses,
which amounted to $506,255 and $363,341, were reflected as a reduction
of selling, general and administrative expense of HealthMax in 1998
and 1997, respectively. HealthMax has an option, exercisable within a
five year period, to purchase some or all of the members interest in
the LLC's at a price equal to 125% of their capital contribution, less
any prior returns of capital contributions, plus any amount necessary
to pay a 10 1/2% preference return to members. The amount of
$1,084,099 due to LLC's reflects proceeds from the Limited Liability
Company offerings reduced by charges to the LLC's for formation,
opening regional offices, reimbursement for administrative overhead
expenses and 99% of the operating losses of the LLC's.
The Company rents its administrative office from a partnership in
which the principal shareholder of the Company is a partner. Lease
expense relating to the lease was $15,000 and $36,000 in 1998 and
1997, respectively. At December 31, 1998 the Company had a liability
for unpaid rent to the partnership of $74,385, which is included in
accrued liabilities (see note 7). The Company sells nutritional
products to HealthCare at cost. Such sales amounted to $36,517 and
$24,187 in 1998 and 1997, respectively. The liability of $39,383 to
HealthCare is net of product sales and advances made to HealthCare and
a loan from HealthCare.
(Continued)
F-12
<PAGE> 44
ACCESS HEALTH ALTERNATIVES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(5) LEASES
The following is a schedule by year of future minimum lease payments
under capital leases together with the present value of the net lease
payments for furniture and equipment as of December 31, 1998.
Year ended December 31,
1999 $ 8,944
2000 5,504
---------
Total lease payments 14,448
Less amount representing interest 1,699
---------
Present value of lease payments $ 12,749
=========
Total rental expense was $31,240 and $68,016 in 1998 and 1997,
respectively.
(6) INCOME TAXES
The actual income tax benefit for 1998 and 1997 differs from the
"expected" tax benefit, computed by applying the U.S. Federal
Corporate Income Tax Rate of 34%, to the loss before income taxes, as
follows:
<TABLE>
<CAPTION>
1998 1997
---------- ---------
<S> <C> <C>
Income tax benefit computed at the federal
statutory rate of 34% $ 243,000 $ 254,000
State income tax benefit, net of federal
tax benefit 26,000 27,000
Nondeductible expenses (2,000) (10,000)
Increase in valuation allowances (267,000) (271,000)
---------- ---------
$ -- $ --
========== =========
</TABLE>
(Continued)
F-13
<PAGE> 45
ACCESS HEALTH ALTERNATIVES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(6) INCOME TAXES, CONTINUED
The components of the deferred income tax asset for the year ended
December 31, 1998 are as follows:
<TABLE>
<CAPTION>
1998
-----------
<S> <C>
Deferred tax assets:
Net operating losses $ 890,000
Start up costs capitalized for tax purposes
and amortized over a five year period,
expensed for financial statement purposes 421,000
Unearned income 105,000
Other 3,000
-----------
1,419,000
Valuation allowance (1,419,000)
-----------
$ --
===========
</TABLE>
At December 31, 1998, the Company had tax operating loss carryforwards
of approximately $2,118,000 available to reduce future federal income
taxes, which if unused, will expire from 2011 to 2018.
(7) ACCRUED LIABILITIES
Accrued liabilities are as follows at December 31, 1998:
<TABLE>
<CAPTION>
<S> <C>
Estimated value of common stock to be issued to
non-employees for services (note 10) $ 225,000
Accrued salaries including $100,961 due to a principal
beneficial owner of the Company 105,356
Accrued interest 43,033
Accrued rent 74,385
Accrued property taxes 3,477
Other 937
---------
$ 452,188
==========
</TABLE>
(8) LITIGATION
The Company is a nominal defendant in a legal action. While the
results of the legal action cannot be predicted with certainty, the
Company believes that the final outcome of such litigation will not
have a materially adverse effect on its financial condition.
(Continued)
F-14
<PAGE> 46
ACCESS HEALTH ALTERNATIVES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(9) CONTINGENCY
At December 31, 1998, the Company has suffered recurring loses and has
a net capital deficiency of $3,147,593 and a working capital
deficiency of $2,931,695, which raises substantial doubt about its
ability to continue as a going concern. The Company is contemplating a
public or private offering of securities as a means of raising funds
to implement its business plan.
(10) COMMON STOCK ISSUED OR ISSUABLE FOR SERVICES
During the year ended December 31, 1998, the Company issued 20,000
shares of common stock valued at $20,000 for consulting services from
a nonemployee. The Company also accrued $75,000 in 1998 for consulting
services rendered from a nonemployee. In April 1999 the Company issued
75,000 shares of common stock to satisfy this obligation. The Company
valued these transactions at the estimated fair value of the services
received.
In April 1999 the Company issued 150,000 shares of common stock to a
nonemployee in consideration for facilitating revisions in January and
February 1999 to the original agreement with PLC (see Note 1a) that
had not been complied with as of December 31, 1998. The Company
recorded a liability of $150,000 at December 31, 1998 for these
services. The $150,000 accrual was based on the trading price of the
Company's common stock in January and February 1999, less a discount
for the restriction on transferability of the shares.
(11) SUBSEQUENT EVENTS
In April 1999, the Company agreed to acquire HealthCare (see Note 4),
subject to certain conditions. Under the terms of the acquisition, to
be accounted for as a pooling of interests, the Company will exchange
approximately 2,000,000 shares of common stock for all of HealthCare's
outstanding shares. HealthCare operates a chiropractic group practice
in Central Florida and has affiliated chiropractic practices
throughout Florida.
The financial position and results of operations of the Company and
HealthCare will be combined in 1999 retroactive to January 1, 1999. In
addition, all prior periods presented will be restated to give effect
to the pooling.
Presented below are condensed combined pro forma financial statements
as of and for the year ended December 31, 1998 to give effect to the
transaction. The condensed combined financial statements reflect the
elimination of intercompany transactions.
(Continued)
F-15
<PAGE> 47
ACCESS HEALTH ALTERNATIVES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(11) SUBSEQUENT EVENTS, CONTINUED
Condensed balance sheet:
<TABLE>
<CAPTION>
Company HealthCare Eliminations Combined
---------------- ---------------- ----------------- --------------
<S> <C> <C> <C>
Assets:
Current assets $ 85,593 $ 55,106 $ -- $ 140,699
Property & equipment, net 51,034 61,923 -- 112,957
Other assets 16,711 39,383 (39,383) 16,711
---------------- ---------------- ----------------- --------------
153,338 156,412 (39,383) 270,367
================ ================ ================= ==============
Liabilities:
Current liabilities 3,242,288 361,535 (39,383) 3,564,440
Unearned income 278,417 -- -- 278,417
Long-term obligations 5,226 179,926 -- 185,152
Minority interest 405,063 -- -- 405,063
---------------- ---------------- ----------------- --------------
3,930,994 541,461 (39,383) 4,433,072
Shareholders' deficit (3,777,656) (385,049) -- (4,162,705)
================ ================ ================= ==============
$ 153,338 $ 156,412 $ (39,383) 270,367
================ ================ ================= ==============
Condensed statement of operations:
Revenues $ 834,558 $ 1,588,823 $ (36,517) 2,386,864
Operating costs and expenses
1,382,540 1,626,134 (36,517) 2,972,157
---------------- ---------------- ----------------- --------------
Operating loss (547,982) (37,311) -- (585,293)
Other expenses 166,616 38,195 -- 204,811
================ ================ ================= ==============
Net loss $ (714,598) $ (75,506) $ -- $ (790,104)
================ ================ ================= ==============
Basic net loss per share $ (.26)
==============
</TABLE>
In April 1999, the Company agreed to acquire the minority interests in
HealthMax for restricted stock of the Company, at the rate of one
share of the Company's common stock for each share of HealthMax stock
exchanged. If all of the minority shareholders exchange their
HealthMax stock for the Company's stock, the Company would be required
to issue an additional approximate 430,000 shares of common stock.
This transaction is expected to conclude by the end of June 1999.
(Continued)
F-16
<PAGE> 48
ACCESS HEALTH ALTERNATIVES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(11) SUBSEQUENT EVENTS, CONTINUED
In May 1999 the Company formed Access Health Assurance Plans, Inc., a
Florida corporation that will market the Company's member benefits
programs.
OTHER STOCK ISSUANCES
In February 1999, the Company sold a total of 323,334 shares of Common
Stock, for an aggregate of $485,000, pursuant to Rule 504 promulgated
under the Securities Act of 1933, as amended.
In March 1999, the Company began an offering of units consisting of
preferred stock and warrants, for gross proceeds of up to $1,008,000.
That offering is pending and only one Unit ($25,000) has been sold to
date. The Unit consisted of one share of Series A Redeemable
Convertible Preferred Stock, one Class A Warrant and one Class B
Warrant.
EMPLOYMENT AGREEMENTS
Effective January 1, 1999, the Company entered into employment
agreements with two officers, which provided that each officer will
receive a base salary plus a cash bonus equal to two percent (2%) of
the Company's net profit after income taxes, subject to maximums of
$100,000, $150,000 and $200,000 in 1999, 2000 and 2001, respectively.
The employment agreements also provide common stock bonuses to each
officer of 100,000 shares in 1999, 2000 and 2001, respectively.
F-17
<PAGE> 49
ACCESS HEALTHCARE, INC.
CONSOLIDATED FINANCIAL STATEMENTs
DECEMBER 31, 1998 AND 1997
(WITH INDEPENDENT AUDITORS' REPORT THEREON)
F-18
<PAGE> 50
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Access HealthCare, Inc.:
We have audited the accompanying consolidated balance sheet of Access
HealthCare, Inc. as of December 31, 1998, and the related consolidated
statements of operations, stockholders' deficit, and cash flows for the years
ended December 31, 1998 and 1997. These consolidated financial statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. Also, an
audit includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Access HealthCare,
Inc. at December 31, 1998, the results of their operations and their cash flows
for the years ended December 31, 1998 and 1997, in conformity with generally
accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
company will continue as a going concern. As discussed in Note 8 to the
financial statements, the Company has suffered recurring losses from operations
and has a net capital and working capital deficiency, which raises substantial
doubt about their ability to continue as a growing concern. Management's plans
regarding those matters are described in Note 8. The financial statements do
not include any adjustments that might result from the outcome of this
uncertainty.
Tedder, James, Worden & Associates, P.A.
March 11, 1999
F-19
<PAGE> 51
ACCESS HEALTHCARE, INC.
CONSOLIDATED BALANCE SHEET
December 31, 1998
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Current assets:
Cash $ 754
Accounts receivable 54,352
---------
Total current assets 55,106
Property and equipment, net 61,923
Due from related parties-Access Health Alternatives, Inc. and
Subsidiaries 39,383
---------
Total assets $ 156,412
=========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Line of credit $ 25,000
Current obligations under capital leases 30,237
Current maturities of long-term debt 14,822
Bank overdraft 26,995
Accounts payable 129,089
Due to stockholders 57,179
Due to related parties-limited liability company 78,213
---------
Total current liabilities 361,535
Obligations under capital leases, less current portion 145,080
Long-term debt, less current portion 34,846
---------
Total liabilities 541,461
Stockholders' deficit:
Common stock, $.001 par value, 40,000,000 shares authorized,
7,868,750 shares issued and outstanding 787
Capital in excess of par value 301,757
Accumulated deficit (687,593)
---------
Total stockholders' deficit (385,049)
---------
Total liabilities and stockholders' deficit $ 156,412
=========
</TABLE>
F-20
<PAGE> 52
ACCESS HEATHCARE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the years ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Revenues:
Patient services, net $1,588,823 $1,358,332
Expenses:
Selling, general and administrative 1,626,134 1,479,425
---------- ----------
Operating loss (37,311) (121,093)
Other income (expense):
Interest expense (35,515) (33,807)
Loss on sale of assets (2,847) (27,527)
Miscellaneous income 167 --
---------- ----------
Total other expense (38,195) (61,334)
---------- ----------
Net loss $ (75,506) $ (182,427)
========== ==========
</TABLE>
F-21
<PAGE> 53
ACCESS HEALTHCARE, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
For the years ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
Common Stock Capital
------------------------ in Excess of Accumulated
Shares Amount Par Value Deficit Total
------ ------ ------------ ----------- --------
<S> <C> <C> <C> <C> <C>
Balances, December 31, 1996 7,868,750 $ 787 183,694 (429,660) (245,179)
Capital contribution -- -- 118,063 -- 118,063
Net loss, 1997 -- -- -- (182,427) (182,427)
--------- ------- ------- -------- --------
Balances, December 31, 1997 7,868,750 787 301,757 (612,087) (309,543)
Net loss, 1998 -- -- -- (75,506) (75,506)
========= ======= ======= ======== ========
Balances, December 31, 1998 7,868,750 $ 787 301,757 (687,593) (385,049)
========= ======= ======= ======== ========
</TABLE>
F-22
<PAGE> 54
ACCESS HEALTHCARE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (75,506) $(182,427)
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation 26,693 27,296
Loss on sale of assets 2,847 27,527
Cash provided by (used for) changes in:
Accounts receivable 8,348 1,844
Other assets -- 1,466
Bank overdraft 26,995 --
Accounts payable (12,634) 75,390
---------- ---------
Net cash used in operating activities (23,257) (48,904)
Cash flows from investing activities:
Purchases of equipment (3,334) (38,330)
Proceeds from sale of equipment 1,500 --
---------- ---------
Net cash used in investing activities (1,834) (38,330)
Cash flows from financing activities:
Proceeds from borrowings 342,635 31,076
Principal payments on borrowings (217,255) (202,834)
Due from related parties (87,500) --
Due to stockholders 40,679 16,500
Due to related parties (55,733) 102,486
Capital contribution -- 118,063
---------- ---------
Net cash provided by financing activities 22,826 65,291
---------- ---------
Net decrease in cash and cash equivalent (2,265) (21,943)
Cash and cash equivalents at beginning of year 3,019 24,962
---------- ---------
Cash and cash equivalents at end of year $ 754 $ 3,019
========== =========
Supplemental disclosure:
Cash paid during the year for interest $ 35,515 $ 33,807
========== =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-23
<PAGE> 55
ACCESS HEALTHCARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998 and 1997
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) ORGANIZATION AND BUSINESS
Access HealthCare, Inc. (the Company) was originally organized as
Daniel J. Pavlik, D.C., P.A., a corporation in the State of Florida in
April 1983. In October 1993 the name was charged to Access HealthCare,
Inc.
(B) PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the
accounts of the Company and its affiliated entity, Pavlik Chiropractic
Group, P.A. All significant intercompany transactions and balances
have been eliminated in consolidation.
(C) BUSINESS
The Company operates a chiropractic group practice in Central Florida
and has affiliated chiropractic practices throughout Florida.
(D) STATEMENT OF CASH FLOW
For purposes of the statement of cash flows, the Company considers all
short-term investments with a maturity of three months or less, at the
date of purchase, to be cash equivalents.
(E) INCOME TAXES
The Company accounts for income taxes under the provisions of
Statement of Financial Accounting Standards No. 109 "Accounting for
Income Taxes." Under Statement 109, deferred tax assets and
liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying
amounts of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carryforwards. Deferred tax
assets and liabilities are measured using enacted tax rates expected
to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. Under Statement
109, the effect on deferred tax assets and liabilities of a change in
tax rates is recognized in income in the period that includes the
enactment date.
(Continued)
F-24
<PAGE> 56
ACCESS HEALTHCARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
(F) USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and reported amount of revenues and
expenses during the reporting period. Actual results could differ from
these estimates.
(G) PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is provided
over the estimated useful lives of the individual assets using the
straight-line method. Property under capital leases is amortized over
the lease terms.
(2) PROPERTY AND EQUIPMENT
Property and equipment consists of the following at December 31, 1998:
Computer equipment $ 37,251
Medical equipment 62,488
Furniture and fixtures 16,335
Vehicles 14,298
Leasehold improvements 32,158
---------
162,530
Less accumulated depreciation 100,607
---------
Total $ 61,923
=========
For the years ended December 31, 1998 and 1997, depreciation expense
amounted to $26,693 and $27,296, respectively. The Company has
reviewed its long-lived assets for impairment and has determined that
no adjustments to the carrying value of long-lived assets is required.
(Continued)
F-25
<PAGE> 57
ACCESS HEALTHCARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(3) LONG-TERM DEBT
Long-term debt consists of the following at December 31, 1998:
Notes payable to an individual with
interest rates ranging from 8.75% to 14.24%;
with an aggregated payment
of $1,000 due monthly $ 38,264
Note payable to a Bank, bearing
interest at 10.23%; $284 due
monthly, secured by vehicle 10,741
Other notes 663
---------
Total $ 49,668
=========
The following is a schedule by year of principal payments of long-term
debt at December 31, 1998.
Year Ended December 31,
-----------------------
1999 $ 14,822
2000 13,121
2001 11,640
2002 8,823
2003 1,262
---------
Total principal payments 49,668
Less current obligations 14,822
---------
Long-term debt $ 34,846
=========
(4) TRANSACTIONS WITH RELATED PARTIES
The company rents its administrative office and a chiropractic clinic
from a partnership in which the principal shareholder of the Company
is a partner. Lease expense relating to the lease was $50,100 in 1998
and 1997, respectively. At December 31, 1998 the Company had a
liability for unpaid rent to the partnership of $59,814, which is
included in accounts payable. Future minimum lease payments under this
lease are $50,100 per year through 2002.
The Company purchases nutritional products from a related party. Such
purchases are recorded at cost and amounted to $36,517 and $24,187 at
December 31, 1998 and 1997, respectively.
(Continued)
F-26
<PAGE> 58
ACCESS HEALTHCARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(5) LEASES
During 1998 the Company obligated existing equipment under long-term
capital leases. Total proceeds were $187,635. The following is a
schedule by year of future minimum lease payments under capital leases
at December 31, 1998.
Year Ended December 31,
-----------------------
1999 $ 74,844
2000 74,844
2001 71,619
2002 52,065
2003 22,395
---------
Total lease payments 295,767
Less amount representing interest
(11% to 35%) 120,450
---------
Present value of lease payments 175,317
Less current obligations 30,237
---------
Long-term capital lease obligations $ 145,080
=========
(6) INCOME TAXES
The actual income tax benefit for both 1998 and 1997 differs from the
"expected" tax benefit, computed by applying the U.S. Federal
Corporate Income Tax Rate of 34%, to the loss before income taxes, as
follows:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Income tax benefit computed at the federal
statutory rate of 34% $ 25,672 $ 62,026
State income tax benefit, net of federal
tax benefit 2,741 6,622
Nondeductible expenses (5,270) (5,088)
Increase in valuation allowances (23,143) (63,560)
-------- --------
$ -- $ --
======== ========
</TABLE>
(Continued)
F-27
<PAGE> 59
ACCESS HEALTHCARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(6) INCOME TAXES, CONTINUED
The components of the deferred income tax asset for the year ended
December 31, 1998 are as follows;
1998
----------
Deferred tax assets:
Net operating losses $ 212,001
Accrual method (book) to cash method
(tax) adjustment 40,541
----------
252,542
Valuation allowance (252,542)
----------
$ --
==========
At December 31, 1998, the Company had tax operating loss carryforwards
of approximately $563,000 available to reduce future federal income
taxes, which expire from 2011 and 2018.
(7) LITIGATION
The Company is a party to a legal action. While the results of the
legal action cannot be predicted with certainty, the Company believes
that the final outcome of such litigation will not have a materially
adverse effect on its financial condition.
(8) CONTINGENCY
At December 31, 1998, the Company has suffered recurring loses and has
a net capital deficiency of $385,049 and a working capital deficiency
of $306,429, which raises substantial doubt about its ability to
continue as a going concern. The Company is contemplating a public or
private offering of securities as a means of raising funds to
implement its business plan.
(9) SUBSEQUENT EVENT
During April 1999, the Company entered into an agreement to be
acquired by Access Health Alternatives, Inc. Under the terms of the
acquisition, to be accounted for as a pooling of interests, the
shareholders of the Company will exchange 7,868,750 shares of common
stock for 2,000,000 shares of common stock of Access Health
Alternatives, Inc.
F-28
<PAGE> 60
ACCESS HEALTH ALTERNATIVES, INC
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
F-29
<PAGE> 61
ACCESS HEALTH ALTERNATIVES,INC.
PRO FORMA CONSOLIDATED BALANCE SHEET
December 31, 1998
<TABLE>
<CAPTION>
Company HealthCare Eliminations Combined
------- ---------- ------------ ---------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash $ 419 $ 754 $ -- $ 1,173
Accounts receivable 16,206 54,352 -- 70,558
Inventories 68,968 -- -- 68,968
------------ ---------- -------- ------------
Total current assets 85,593 55,106 -- 140,699
Property and equipment 51,034 61,923 -- 112,957
Due from related parties -- 39,383 (39,383) --
Other assets, net 16,711 -- -- 16,711
------------ ---------- -------- ------------
Total assets 153,338 156,412 (39,383) 270,367
============ ========== ======== ============
LIABILITIES
Current liabilities:
Notes and commercial paper 1,155,723 39,822 -- 1,195,545
Obligations under capital leases 7,523 30,237 -- 37,760
Bank overdraft 101,357 26,995 -- 128,352
Accounts payable 284,637 129,089 -- 413,726
Accrued liabilities 452,188 -- -- 452,188
Due to related parties 1,240,860 135,392 (39,383) 1,336,869
------------ ---------- -------- ------------
Total current liabilities 3,242,288 361,535 (39,383) 3,564,440
------------ ---------- -------- ------------
Unearned income 278,417 -- -- 278,417
Long-term debt -- 34,846 -- 34,846
Obligation under capital leases,
Less current portion 5,226 145,080 -- 150,306
Minority interest in subsidiary 405,063 -- -- 405,063
------------ ---------- -------- ------------
Total liabilities 3,930,994 541,461 (39,383) 4,433,072
Stockholders' deficit
Common stock 1,023 787 -- 1,810
Capital in excess of par value 26,477 301,757 -- 328,234
Accumulated deficit (3,805,156) (687,593) -- (4,492,749)
------------ ---------- -------- ------------
Total stockholders' deficit (3,777,656) $(385,049) -- (4,162,705)
------------ ---------- -------- ------------
Total liabilities and stockholders' deficit $ 153,338 156,412 $(39,383) $ 270,367
============ ========== ======== ============
</TABLE>
F-30
<PAGE> 62
ACCESS HEALTH ALTERNATIVES,INC.
PRO FORMA STATEMENT OF OPERATIONS
December 31, 1998
<TABLE>
<CAPTION>
Company HealthCare Eliminations Combined
------- ---------- ------------ ---------
<S> <C> <C> <C> <C>
Revenue:
Equipment and product sales $ 739,590 $ -- $(36,517) $ 703,073
Patient services -- 1,588,823 -- 1,588,823
Other 94,968 -- -- 94,968
---------- ---------- --------- ----------
Total revenue 834,558 1,588,823 (36,517) 2,386,864
Costs and expenses:
Cost of sales 191,006 -- (36,517) 154,489
Selling, general and administrative 1,191,534 1,626,134 -- 2,817,668
---------- ---------- --------- ----------
Total costs and expenses 1,382,540 1,626,134 (36,517) 2,972,157
---------- ---------- --------- ----------
Operating loss (547,982) (37,311) -- (585,293)
Other expense:
Interest expense 164,057 35,515 -- 199,572
Other, net 2,559 2,680 -- 5,239
---------- ---------- --------- ----------
Total other expense 166,616 38,195 -- 204,811
---------- ---------- --------- ----------
Net loss $ (714,598) $ (75,506) $ -- (790,104)
========== ========== ========= ==========
Basic net loss per share $ (0.26)
==========
</TABLE>
F-31
<PAGE> 63
ACCESS HEALTH ALTERNATIVES,INC.
PRO FORMA STATEMENT OF OPERATIONS
December 31, 1998
<TABLE>
<CAPTION>
Company HealthCare Eliminations Combined
------- ---------- ------------ ---------
<S> <C> <C> <C> <C>
Revenue:
Equipment and product sales $ 652,217 $ -- $(24,187) $ 628,030
Patient services -- 1,358,332 -- 1,358,332
Other 96,672 -- -- 96,672
---------- ---------- -------- ----------
Total revenue 748,889 1,358,332 (24,187) 2,083,034
Costs and expenses:
Cost of sales 245,608 -- (24,187) 221,421
Selling, general and administrative 1,010,221 1,479,425 -- 2,489,646
---------- ---------- -------- ----------
Total costs and expenses 1,255,829 1,479,425 (24,187) 2,711,067
---------- ---------- -------- ----------
Operating loss (506,940) (121,093) -- (628,033)
Other expense:
Interest expense 235,030 33,807 -- 268,837
Other, net 5,470 27,527 -- 32,997
---------- ---------- -------- ----------
Total other expense 240,500 61,334 -- 301,834
---------- ---------- -------- ----------
Net loss $ (747,440) $ (182,427) $ -- $ (929,867)
========== ========== ======== ==========
Basic net loss per share $ (0.31)
=========
</TABLE>
F-32
<PAGE> 64
ACCESS HALTH ALTERNATIVES, INC.
NOTE TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998 and 1997
On April 1999, Access Health Alternatives, Inc. (the "Company") entered into an
agreement to acquire Access HealthCare, Inc. ("HealthCare") subject to certain
conditions. Under the terms of the acquisition, to be accounted for as a
pooling of interests, the Company will exchange approximately 2,000,000 shares
of common stock for all of HealthCare's outstanding shares. HealthCare operates
a chiropractic group practice in Central Florida and has affiliated
chiropractic practices throughout Florida.
The financial position and results of operations of the Company and HealthCare
will be combined in 1999 retroactive to January 1, 1999. In addition, all prior
period presented will be restated to give effect to the pooling.
Immediately preceding are pro forma balance sheets as of December 31, 1998 and
pro forma statements of operations for the years ended December 31, 1998 and
1997. The pro forma combined financial statements reflect the elimination of
intercompany transactions.
The pro forma basic loss per share, assumed that the estimated 2,000,000 shares
of common stock to be issued to HealthCare are outstanding for both periods
presented.
F-33
<PAGE> 1
Exhibit 3.1.1
ARTICLES OF INCORPORATION
OF
B C INSURANCE SERVICES, INC.
KNOW ALL MEN BY THESE PRESENTS:
That the undersigned incorporator being a natural person of the age of
18 years or more and desiring to form a body corporate under the laws of the
State of Florida does hereby sign, verify and deliver in duplicate to the State
of Florida these Articles of Incorporation:
ARTICLE I
NAME
The name of the corporation shall be: B C Insurance Services, Inc.
ARTICLE II
PERIOD OF DURATION
The corporation shall exist in perpetuity, from and after the date of
the filing of the Articles of Incorporation with the Secretary of State of
Florida unless dissolved according to law.
ARTICLE III
PURPOSES AND POWERS
3.1 Purposes. The corporation is organized for the purpose of
engaging in any lawful act or activity for which corporations
may be organized under the General Corporation Law of
Florida.
3.2 Powers. The corporation shall have all of the rights,
privileges and powers now or hereafter conferred upon
corporations by he Florida General Corporation Act. The
corporation shall have and may exercise all powers necessary
or convenient to effect any of the purposes for which the
corporation has organized.
ARTICLE IV
CAPITAL STOCK
4.1 Authorized Stock. The total number of shares which the
corporation shall have authority to issue is 1,000 shares of
common stock, and the par value of each such share is $.001
per share.
4.2 Voting Rights; No Cumulative Voting. Each outstanding share
of Common Stock shall be entitled to one vote on each matter
submitted to a vote of shareholders. Cumulative voting in the
election of directors of the corporation shall not b allowed.
4.3 Denial of Preemptive Rights. No holder of any shares of the
corporation, whether nor or hereafter authorized, shall have
any preemptive or preferential right to acquire any shares or
securities of the corporation, including shares or securities
held in the treasury of the corporation.
<PAGE> 2
ARTICLE V
RIGHT OF DIRECTORS TO CONTRACT WITH CORPORATION
No contract or other transaction between the corporation and one or
more of its directors or any other corporation, firm, association or entity in
which one or more of the corporation's directors are directors or officers or
are financially interested shall be either void or voidable solely because of
such relationship or interest or solely because such directors are present at
the meeting of the Board of Directors or a committee thereof which authorizes,
approves, or ratifies such contract or transaction or solely because their
votes are counted for such purposes if:
(a) The material facts as to such relationship or interest and as
to the contract or transaction are disclosed or known to the
Board of Directors or committee, and the Board of committee
in good faith, authorizes, approves or ratifies the contract
or transaction by the affirmative vote of a majority of the
disinterested directors, even though the disinterested
directors are less than a quorum; or
(b) The material facts as to such relationship or interest and as
to the contract or transaction are disclosed or known to the
shareholders entitled to vote thereon, and they authorize,
approve or ratify in good faith such contract or transaction
by vote or written consent; or
(c) The contract or transaction is fair and reasonable as to the
corporation as of the time it is authorized, approved or
ratified by the Board of Directors, a committee thereof, or
the shareholders.
Common or interested directors may be counted in determining the
presence of a quorum at the meeting of the Board of Directors or a committee
thereof which authorizes, approves or ratifies such contract or transaction.
ARTICLE VI
LIMITATION OF LIABILITY OF DIRECTORS
The personal liability of directors of the corporation shall be
limited to the fullest extent permitted by the Florida General Corporation Law,
as amended.
ARTICLE VII
AMENDMENTS
The corporation reserves the right to amend its Articles of
Incorporation from time to time in accordance with the General Corporation Law
of Florida.
ARTICLE VIII
ADOPTION AND AMENDMENT OF BY-LAWS
The initial By-Laws of the corporation shall be adopted by the Board
of Directors. The power to alter or amend or repeal the By-Laws or new By-Laws
shall be vested in the Board of Directors. The By-Laws may contain provisions
for the regulation and management of the affairs of the corporation unless
inconsistent with the law or these Articles of Incorporation.
2
<PAGE> 3
ARTICLE IX
REGISTERED OFFICE AND REGISTERED AGENT
The address of the initial registered office of the corporation is 401
Boy Scout Boulevard, Suite 300, Tampa, Florida 33607, and the name of the
initial registered agent at such address is Noel F. Birns. Either the
registered office or the registered agent may be changed in the manner provided
by law.
ARTICLE X
BOARD OF DIRECTORS
The initial Board of Directors of the Corporation shall consist of
four (4) members, each being natural persons of the age of eighteen (18) years
or older. The names and addresses of the persons who are to serve as directors
until the first annual meeting of shareholders or until their successors are
elected and qualified are as follows:
Name Address
- ---- -------
Stuart M. Cohen 4010 Boy Scout Blvd., #300
Tampa, Florida 33607
Noel F. Birns 4010 Boy Scout Blvd., #300
Tampa, Florida 33607
Rick E. Hartness 4010 Boy Scout Blvd., #300
Tampa, Florida 33607
Gary Griffin 8055 E. Tufts Avenue, #300
Denver, Colorado 80237
ARTICLE XI
INCORPORATOR
The name and address of the incorporator is as follows:
Name Address
- ---- -------
Richard B. Vincent 7225 S. Quebec Court
Englewood, Colorado 80112
3
<PAGE> 4
The undersigned, being the incorporator named hereinbefore, for the
purposes of forming a corporation pursuant to the General Corporation Law of
the State of Florida does make this certificate, hereby declaring and
certifying that this is his act and deed and that facts herein stated are true,
and, accordingly, has hereunto set his hand this day of September, 1988.
/s/ Richard B. Vincent
-------------------------------------
Richard B. Vincent
Incorporator
STATE OF COLORADO )
) ss:
CITY OF ARAPAHOE )
SUBSCRIBED AND SWORN to before me this ______________ day of
September, 1988, by Richard B. Vincent, Incorporator.
-------------------------------------
Notary Public
My Commission Expires:
- --------------------------------
4
<PAGE> 5
CERTIFICATE OF REGISTERED AGENT
I, Noel F. Birns, hereby accept the designation as initial registered
agent of B C Insurance Services, Inc.
/s/ Noel F. Birns
------------------------------------
Noel F. Birns
5
<PAGE> 1
Exhibit 3.1.2
ARTICLES OF AMENDMENT TO
B C INSURANCE SERVICES, INC.
THE UNDERSIGNED, being the sole director and president of B C
Insurance Services, Inc. does hereby amend its Articles of Incorporation as
follows:
ARTICLE I
CORPORATE NAME
The name of the Corporation shall be PLC Ventures Corp.
ARTICLE II
PURPOSE
The Corporation shall be organized for any and all purposes authorized
under the laws of the state of Florida.
ARTICLE III
PERIOD OF EXISTENCE
The period during which the Corporation shall continue is perpetual.
ARTICLE IV
SHARES
The capital stock of this corporation shall consist of 50,000,000
shares of common stock, $.001 par value.
ARTICLE V
PLACE OF BUSINESS
The address of the principal place of business of this corporation in
the State of Florida shall be 203 Waymouth Harbor Cove, Longwood, FL 32799. The
Board of Directors may at any time and from time to time move the principal
office of this corporation.
ARTICLE VI
DIRECTORS AND OFFICERS
The business of this corporation shall be managed by its Board of
Directors. The number of such directors shall be not be less than one (1) and,
subject to such minimum may be increased or decreased from time to time in the
manner provided in the By-Laws.
1
<PAGE> 2
ARTICLE VII
DENIAL OF PREEMPTIVE RIGHTS
No shareholder shall have any right to acquire shares or other
securities of the Corporation except to the extent such right may be granted by
an amendment to these Articles of Incorporation or by a resolution of the board
of Directors.
ARTICLE VIII
AMENDMENT OF BYLAWS
Anything in these Articles of Incorporation, the Bylaws, or the
Florida Corporation Act notwithstanding, bylaws shall not be adopted, modified,
amended or repealed by the shareholders of the Corporation except upon the
affirmative vote of a simple majority vote of the holders of all the issued and
outstanding shares of the corporation entitled to vote thereon.
ARTICLE IX
SHAREHOLDERS
9.1. INSPECTION OF BOOKS. The board of directors shall make
reasonable rules to determine at what times and places and under what
conditions the books of the Corporation shall be open to inspection by
shareholders or a duly appointed representative of a shareholder.
9.2. CONTROL SHARE ACQUISITION. The provisions relating to any control
share acquisition as contained in Florida Statutes now, or hereinafter amended,
and any successor provision shall not apply to the Corporation.
9.3. QUORUM. The holders of shares entitled to one-third of the votes
at a meeting of shareholder's shall constitute a quorum.
9.4. REQUIRED VOTE. Acts of shareholders shall require the approval of
holders of 50.01% of the outstanding votes of shareholders.
ARTICLE X
LIABILITY AND INDEMNIFICATION OF DIRECTORS AND OFFICERS
To the fullest extent permitted by law, no director or officer of the
Corporation shall be personally liable to the Corporation or its shareholders
for damages for breach of any duty owed to the Corporation or its shareholders.
In addition, the Corporation shall have the power, in its By-Laws or in any
resolution of its stockholders or directors, to undertake to indemnify the
officers and directors of this corporation against any contingency or peril as
may be determined to be in the best interests of this corporation, and in
conjunction therewith, to procure, at this corporation's expense, policies of
insurance.
2
<PAGE> 3
ARTICLE XI
CONTRACTS
No contract or other transaction between this corporation and any
person, firm or corporation shall be affected by the fact that any officer or
director of this corporation is such other party or is, or at some time in the
future becomes, an officer, director or partner of such other contracting
party, or has now or hereafter a direct or indirect interest in such contract.
I hereby certify that the following was adopted by a majority vote of
the shareholders and directors of the corporation on May 13, 1998 and that the
number of votes cast was sufficient for approval.
IN WITNESS WHEREOF, I have hereunto subscribed to and executed this
Amendment to Articles of Incorporation on May 13, 1998.
/s/ Patricia Cohen
- -----------------------------------------
Patricia Cohen, Sole Director
The foregoing instrument was acknowledged before me on May 13, 1998,
by Patricia Cohen, who is personally known to me.
/s/ Nichole Johnson
---------------------------------------
Notary Public
My commission expires:
3
<PAGE> 1
Exhibit 3.1.3
ARTICLES OF RESTATEMENT
TO THE ARTICLES OF INCORPORATION, AS AMENDED
OF
PLC VENTURES CORP.,
a Florida corporation
THE UNDERSIGNED, being the President of PLC VENTURES CORP, submits for
filing the following articles of restatement to the Articles of Incorporation
of PLC Ventures Corp., a Florida corporation, pursuant to Section 607.1007 of
the Florida Business Corporation Act.
1. The name of the corporation is PLC Ventures Corp. (the
"Corporation").
2. The restatement of the Corporation's Articles of Incorporation
includes amendments to the Articles that require shareholder approval, which
requisite approval has been obtained by the written consent of the holders of a
sufficient number of capital stock for approval, and has been approved by the
Corporation's Board of Directors on August 31, 1998.
ARTICLE I. NAME AND ADDRESS
The name of the Corporation is Access HealthMax Holdings, Inc. (the
"Corporation"). The principal office address and mailing address of the
Corporation is 2106 S. Orange Avenue, Orlando, Florida 32806.
ARTICLE II. NATURE OF BUSINESS
This Corporation may engage or transact in any or all lawful
activities or business permitted under the laws of the United States, the State
of Florida or any other state, country, territory or nation.
ARTICLE III. CAPITAL STOCK
The Corporation is authorized to issue 50,000,000 shares of common
stock, par value $.001 per share, and 10,000,000 shares of preferred stock, par
value $.01 per share.
The preferred stock may be issued from time to time in series, with
such designations, preferences, conversion rights, cumulative, relative,
participating, optional
<PAGE> 2
ARTICLE IV. TERM OF EXISTENCE
This Corporation is to exist perpetually.
ARTICLE VI. OPT OUT OF $607.0901 AND $607.0902
The Corporation expressly elects not to be governed by Section
607.0901 of the Florida Business Corporation Act, as amended from time to time,
relating to affiliated transactions.
The Corporation expressly elects not to be governed by Section
607.0902 of the Florida Business Corporation Act, as amended from time to
time, relating to control share acquisitions.
ARTICLE VII. INDEMNIFICATION
The Corporation shall indemnify, or advance expenses to, to the
fullest extent authorized or permitted by the Florida Business Corporation Act,
any person made, or threatened to be made, a party to any action, suit or
proceeding by reason of the fact that he is or was a director of the
Corporation, or is or was serving at the request of the Corporation as a
director of another corporation. The corporation shall also indemnify, or
advance expenses to, to the fullest extent authorized or permitted by the
Florida Business Corporation Act, any person made, or threatened to be made, a
party to any action, suit or proceeding by reason of the fact that he is or was
an officer of the Corporation at the same time as he is or was a director of
the Corporation, or is or was serving at the request of the Corporation as an
officer of another corporation at the same time as he is or was a director of
the Corporation. Unless otherwise expressly prohibited by the Florida Business
Corporation Act, and except as otherwise provided in the foregoing sentence,
the Board of Directors of the Corporation shall have the sole and exclusive
discretion, on such terms and conditions as it shall determine, to indemnify,
or advance expenses to, any person made, or threatened to be made, a party to
any action, suit or proceeding by reason of the fact that he is or was an
officer, employee or agent of the Corporation, or is or was serving at the
request of the Corporation as an officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise. No person
falling within the purview of the foregoing sentence may apply for
indemnification or advancement of expenses to any court of competent
jurisdiction.
ARTICLE VIII. DIRECTORS AND OFFICERS
The business of this Corporation shall be managed by its Board of
Directors. The number of such directors shall be not less than one (1) and,
subject to such minimum, may be increased or decreased from time to time in the
manner provided for in the Corporation's By-laws.
<PAGE> 3
ARTICLE IX. DENIAL OF PREEMPTIVE RIGHTS
No shareholder shall have any right to acquire shares or other
securities of the Corporation except to the extent such right may be granted by
an amendment to these Articles of Incorporation or by a resolution of the Board
of Directors.
ARTICLE X. CONTRACTS
No contract or other transaction between this Corporation and any
person, firm or corporation shall be affected by the fact that any officer or
director of this Corporation is the other contracting party, or is, or at some
future time becomes, an officer, director, or partner of such other contracting
party, or has now or hereafter acquires a direct or indirect interest in such
contract.
3. These Amended and Restated Articles of Incorporation were adopted
on August 27, 1998.
I hereby certify that the following was adopted by a majority vote of
the shareholders and directors of the corporation on August 27, 1998 and that
the number of votes cast was sufficient for approval.
IN WITNESS WHEREOF, I have hereunto subscribed to and executed this
Amendment to Articles of Incorporation on August 27, 1998.
/s/ Patricia Cohen
- ------------------------------------
Patricia Cohen, President
The foregoing instrument was acknowledged before me on August 27,
1998, by Patricia Cohen, who is personally known to
/s/ Nicole Johnson
----------------------------------
Notary Public
My commission expires:
<PAGE> 1
Exhibit 3.1.4
ARTICLES OF AMENDMENT
TO THE AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
ACCESS HEALTHMAX HOLDINGS, INC.,
a Florida corporation
THE UNDERSIGNED, being the President of Access HealthMax Holdings, Inc.,
a Florida corporation (the "Company") submits for filing the following articles
of amendment to the amended and restated articles of incorporation of the
Company, pursuant to Section 607.0602 of the Florida Business Corporation Act.
1. The name of the Company in Access HealthMax Holdings, Inc., as of
the date hereof, but shall be Access Health Alternatives as of the
effective date of these articles of amendment.
2. The following amendment to Article III of the Amended and Restated
Articles of Incorporation of the Company was adopted by the Board
of Directors of the Company on March 11, 1999; approval by the
Company's shareholders was not required, in accordance with such
Article.
ARTICLE III. CAPITAL STOCK
The Corporation is authorized to issue 50,000,000 shares of common
stock, par value $.001 per share, and 10,000,000 shares of
preferred stock, par value $.01 per share.
The preferred stock may be issued from time to time in series, with
such designations, preferences, conversion rights, cumulative,
relative, participating, optional or other rights, qualifications,
limitations or restrictions thereof as shall be stated and
expressed in the resolution or resolutions providing for the
issuance of such preferred stock, adopted by the Board of Directors
pursuant to the authority granted in these Amended and Restated
Articles of Incorporation.
There is declared a Series A Redeemable Convertible Preferred
Stock, of which 1,400,000 shares shall be authorized to be issued,
with the following preferences, limitations and rights:
Voting: none until conversion
Preference on liquidation: none
Dividend: 10.5% per year per share
until conversion or
redemption; payable quarterly
commencing on the six month
anniversary of the issuance of
such shares funds must be
legally available for payment.
<PAGE> 2
Conversion: At the holder's election, by
written notice, at any time
from March 15, 2000 to March
14, 2002, into one share of
common stock.
Redemption: By the Corporation at any
time prior to conversion, at a
redemption price of $1.44 per
share.
3. The effective date of this amendment is March 15, 1999.
IN WITNESS WHEREOF, the undersigned has executed these Articles of
Amendment this 11th day of March, 1999.
ACCESS HEALTHMAX HOLDINGS, INC.
/s/ DANIEL J. PAVLIK
-------------------------------
Daniel J. Pavlik, President
<PAGE> 1
Exhibit 3.1.5
ARTICLES OF AMENDMENT
TO THE AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
ACCESS HEALTHMAX HOLDINGS, INC.,
a Florida corporation
THE UNDERSIGNED, being the President of Access HealthMax Holdings,
Inc., a Florida corporation (the "Company") submits for filing the following
articles of amendment to the amended and restated articles of incorporation of
the Company, pursuant to Section 607.1007 of the Florida Business Corporation
Act.
1. The name of the Company is Access HealthMax Holdings, Inc.
2. The following amendment to Article I of the Amended and
Restated Articles of Incorporation of the Company was adopted
by the Board of Directors of the Company on March 3, 1999,
and was approved by the holders of a majority of the capital
stock of the Company by written consent in lieu of a meeting,
on March 3, 1999:
ARTICLE I. NAME AND ADDRESS
The name of the Corporation is Access Health Alternatives,
Inc. (the "Corporation"). The principal office and mailing
address of the Corporation is 2016 S. Orange Avenue, Orlando,
Florida 32806.
3. The effective date of this amendment is March 15, 1999.
IN WITNESS WHEREOF, the undersigned has executed these Articles of
Amendment this 4th day of March, 1999.
ACCESS HEALTHMAX HOLDINGS, INC.
/s/ Daniel J. Pavlik
-----------------------------------------
Daniel J. Pavlik, President
<PAGE> 1
Exhibit 3.2
BY-LAWS
OF
PLC VENTURES CORP.
ARTICLE I. MEETINGS OF SHAREHOLDERS
SECTION 1. ANNUAL MEETING. The annual meeting of the shareholders of
this corporation shall be held on the 30th day of June of each year or at such
other time and place designated by the Board of Directors of the corporation.
Business transacted at the annual meeting shall include the election of
directors of the corporation. If the designated day shall fall on a Sunday or
legal holiday, then the meeting shall be held on the first business day
thereafter.
SECTION 2. SPECIAL MEETINGS. Special meetings of the shareholders
shall be held when directed by the President or the Board of Directors, or when
requested in writing by the holders of not less than 10% of all the shares
entitled to vote at the meeting. A meeting requested by shareholders shall be
called for a date not less than 3 nor more than 30 days after the request is
made, unless the shareholders requesting the meeting designate a later date.
The call for the meeting shall be issued by the Secretary, unless the
President, Board of Directors, or shareholders requesting the meeting shall
designate another person to do so.
SECTION 3. PLACE. Meetings of shareholders shall be held at the
principal place of business of the corporation or at such other place as may be
designated by the Board of Directors.
SECTION 4. NOTICE. Written notice stating the place, day and hour of
the meeting and in the case of a special meeting, the purpose or purposes for
which the meeting is called, shall be delivered not less than 3 nor more than
30 days before the meeting, either personally or by first class mail, or by the
direction of the President, the
<PAGE> 2
Secretary or the officer or persons calling the meeting to each shareholder of
record entitled to vote at such meeting. If mailed, such notice shall be deemed
to be delivered when deposited in the United States mail addressed to the
shareholder at his address as it appears on the stock transfer books of the
corporation, with postage thereon prepaid.
SECTION 5. NOTICE OF ADJOURNED MEETING. When a meeting is adjourned to
another time or place, it shall not be necessary to give any notice of the
adjourned meeting if the time and place to which the meeting is adjourned are
announced at the meeting at which the adjournment is taken, and at the
adjourned meeting any business may be transacted that might have been
transacted on the original date of the meeting. If, however, after the
adjournment the Board of Directors fixes a new record date for the adjourned
meeting, a notice of the adjourned meeting shall be given as provided in this
Article to each shareholder of record on a new record date entitled to vote at
such meeting.
SECTION 6. SHAREHOLDER QUORUM AND VOTING. A majority of the shares
entitled to vote, represented in person or by proxy, shall constitute a quorum
at a meeting of shareholders. If a quorum is present, the affirmative vote of a
majority of the shares represented at the meeting and entitled to vote on the
subject matter shall be the act of the shareholders unless otherwise provided
by law.
SECTION 7. VOTING OF SHARES. Each outstanding share shall be entitled
to one vote on each matter submitted to a vote at a meeting of shareholders.
SECTION 8. PROXIES. A shareholder may vote either in person or by
proxy executed in writing by the shareholder or his duly authorized
attorney-in-fact. No proxy shall be valid after the duration of 11 months from
the date thereof unless otherwise provided in the proxy.
SECTION 9. ACTION BY SHAREHOLDERS WITHOUT A MEETING. Any action
required by law or authorized by these by-laws or the Articles of Incorporation
of this corporation or
2
<PAGE> 3
taken or to be taken at any annual or special meeting of shareholders, or any
action which may be taken at any annual or special meeting of shareholders, may
be taken without a meeting, without prior notice and without a vote, if a
consent in writing, setting forth the action so taken, shall be signed by the
holders of outstanding stock having not less than the minimum number of votes
that would be necessary to authorize or take such action at a meeting at which
all shares entitled to vote thereon were present and voted.
ARTICLE II. DIRECTORS
SECTION 1. FUNCTION. All corporate powers shall be exercised by or
under the authority of, and the business and affairs of the corporation shall
be managed under the direction of, the Board of Directors.
SECTION 2. QUALIFICATION. Directors need not be residents of this
state or shareholders of this corporation.
SECTION 3. COMPENSATION. The Board of Directors shall have authority
to fix the compensation of directors.
SECTION 4. PRESUMPTION OF ASSENT. A director of the corporation who is
present at a meeting of the Board of Directors at which action on any corporate
matter is taken shall be presumed to have assented to the action taken unless
he votes against such action or abstains from voting in respect thereto because
of an asserted conflict of interest.
SECTION 5. NUMBER. This corporation shall have a minimum of 1 director
but no more than 7.
SECTION 6. ELECTION AND TERM. Each person named in the Articles of
Incorporation as a member of the initial Board of Directors shall hold office
until the first annual meeting of shareholders, and until his successor shall
have been elected and qualified or until his earlier resignation, removal from
office or death. At the first annual meeting of shareholders and at each annual
meeting thereafter the shareholders shall
3
<PAGE> 4
elect directors to hold office until the next succeeding annual meeting. Each
director shall hold office for a term for which he is elected and until his
successor shall have been elected and qualified or until his earlier
resignation, removal from office or death.
SECTION 7. VACANCIES. Any vacancy occurring in the Board of Directors,
including any vacancy created by reason of an increase in the number of
Directors, may be filled by the affirmative vote of a majority of the remaining
directors though less than a quorum of the Board of Directors. A director
elected to fill a vacancy shall hold office only until the next election of
directors by the shareholders.
SECTION 8. REMOVAL OF DIRECTORS. At a meeting of shareholders called
expressly for that purpose, any director or the entire Board of Directors may
be removed, with or without cause, by a vote of the holders of a majority of
the shares then entitled to vote at an election of directors.
SECTION 9. QUORUM AND VOTING. A majority of the number of directors
fixed by these by-laws shall constitute a quorum for the transaction of
business. The act of a majority of the directors present at a meeting at which
a quorum is present shall be the act of the Board of Directors.
SECTION 10. EXECUTIVE AND OTHER COMMITTEES. The Board of Directors, by
resolution adopted by a majority of the full Board of Directors, may designate
from among its members an executive committee and one or more other committees
each of which, to the extent provided in such resolution shall have and may
exercise all the authority of the Board of Directors, except as is provided by
law.
SECTION 11. PLACE OF MEETING. Regular and special meetings of the
Board of Directors shall be held at the principal place of business of the
corporation or as otherwise determined by the Directors.
SECTION 12. TIME-NOTICE AND CALL OF MEETINGS. Regular meetings of the
Board of Directors shall be held without notice on the first Monday of the
calendar month two (2) months following the end of the corporation's fiscal, or
if the said first Monday is a
4
<PAGE> 5
legal holiday, then on the next business day. Written notice of the time and
place of special meetings of the Board of Directors shall be given to each
director by either personal delivery, telegram or cablegram at least three (3)
days before the meeting or by notice mailed to the director at least 3 days
before the meeting.
Notice of a meeting of the Board of Directors need not be given to any
director who signs a waiver of notice either before or after the meeting.
Attendance of a director at a meeting shall constitute a waiver of notice of
such meeting and waiver of any and all objections to the place of the meeting,
the time of the meeting, or the manner in which it has been called or convened,
except when a director states, at the beginning of the meeting, any objection
to the transaction of business because the meeting is not lawfully called or
convened.
Neither the business to be transacted at, nor the purpose, of any
regular or special meeting of the Board of Directors need be specified in the
notice of waiver of notice of such meeting. A majority of the directors
present, whether or not a quorum exists, may adjourn any meeting of the Board
of Directors to another time and place. Notice of any such adjourned meeting
shall be given to the directors who were not present at the time of the
adjournment, and unless the time and place of adjourned meeting are announced
at the time of the adjournment, to the other directors. Meetings of the Board
of Directors may be called by the chairman of the board, by the president of
the corporation or by any two directors.
Members of the Board of Directors may participate in a meeting of such
board by means of a conference telephone or similar communications equipment by
means of which all persons participating in the meeting can hear each other at
the same time. Participation by such means shall constitute presence in person
at a meeting.
SECTION 13. ACTION WITHOUT A MEETING. Any action, required to be taken
at a meeting of the Board of Directors, or any action which may be taken at a
meeting of the Board of Directors or a committee thereof, may be taken without
a meeting if a consent
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in writing, setting forth the action so to be taken, is signed by such number
of the directors, or such number of the members of the committee, as the case
may be, as would constitute the requisite majority thereof for the taking of
such actions, is filed in the minutes of the proceedings of the board or of the
committee. Such actions shall then be deemed taken with the same force and
effect as though taken at a meeting of such board or committee whereat all
members were present and voting throughout and those who signed such action
shall have voted in the affirmative and all others shall have voted in the
negative. For informational purposes, a copy of such signed actions shall be
mailed to all members of the board or committee who did not sign said action,
provided however, that the failure to mail said notices shall in no way
prejudice the actions of the board or committee.
ARTICLE III. OFFICERS
SECTION 1. OFFICERS. The officers of this corporation shall consist of
a president, a secretary and a treasurer, each of whom shall be elected by the
Board of Directors. Such other officers and assistant officers and agents as
may be deemed necessary may be elected or appointed by the Board of Directors
from time to time. Any two or more offices may be held by the same person.
SECTION 2. DUTIES. The officers of this corporation shall have the
following duties:
The President shall be the chief executive officer of the corporation,
shall have general and active management of the business and affairs of the
corporation subject to the directions of the Board of Directors, and shall
preside at all meetings of the shareholders and Board of Directors.
The Secretary shall have custody of, and maintain, all of the
corporate records except the financial records; shall record the minutes of all
meetings of the shareholders and Board of Directors, send all notices of all
meetings and perform such other duties as may be prescribed by the Board of
Directors or the President.
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The Treasurer shall have custody of all corporate funds and financial
records, shall keep full and accurate accounts of receipts and disbursements
and render accounts thereof at the annual meetings of shareholders and whenever
else required by the Board of Directors or the President, and shall perform
such other duties as may be prescribed by the Board of Directors or the
president.
SECTION 3. REMOVAL OF OFFICERS. An officer or agent elected or
appointed by the Board of Directors may be removed by the board whenever in its
judgment the best interests of the corporation will be served thereby. Any
vacancy in any office may be filed by the Board of Directors.
ARTICLE IV. STOCK CERTIFICATES
SECTION 1. ISSUANCE. Every holder of shares in this corporation shall
be entitled to have a certificate representing all shares to which he is
entitled. No certificate shall be issued for any share until such share is
fully paid.
SECTION 2. FORM. Certificates representing shares in this corporation
shall be signed by the President or Vice President and the Secretary or an
Assistant Secretary and may be sealed with the seal of this corporation or a
facsimile thereof.
SECTION 3. TRANSFER OF STOCK. The corporation shall register a stock
certificate presented to it for transfer if the certificate is properly
endorsed by the holder of record or by his duly authorized attorney.
SECTION 4. LOST, STOLEN OR DESTROYED CERTIFICATES. If the shareholder
shall claim to have lost or destroyed a certificate of shares issued by the
corporation, a new certificate shall be issued upon the making of an affidavit
of that fact by the person claiming the certificate of stock to be lost, stolen
or destroyed, and, at the discretion of the Board of Directors, upon the
deposit of a bond or other indemnity in such amount and with such sureties, if
any, as the board may reasonably require.
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ARTICLE V. BOOKS AND RECORDS
SECTION 1. BOOKS AND RECORDS. This corporation shall keep correct and
complete books and records of account and shall keep minutes of the proceedings
of its shareholders, Board of Directors and committee of directors.
This corporation shall keep at its registered office, or principal
place of business a record of its shareholders, giving the names and addresses
of all shareholders and the number of the shares held by each.
Any books, records and minutes may be in written form or in any other
form capable of being converted into written form within a reasonable time.
SECTION 2. SHAREHOLDERS' INSPECTION RIGHTS. Any person who shall have
been a holder of record of shares of voting trust certificates therefor at
least six months immediately preceding his demand or shall be the holder of
record of, or the holder of record of voting trust certificates for, at least
five percent of the outstanding shares of the corporation, upon written demand
stating the purpose thereof, shall have the right to examine, in person or by
agent or attorney, at any reasonable time or times, for any proper purpose its
relevant books and records of accounts, minutes and records of shareholders and
to make extracts therefrom.
SECTION 3. FINANCIAL INFORMATION. Not later than four months after the
close of each fiscal year, this corporation shall prepare a balance sheet
showing in reasonable detail the financial condition of the corporation as of
the close of its fiscal year, and a profit and loss statement showing the
results of the operations of the corporation during the fiscal year.
Upon the written request of any shareholder or holder of voting trust
certificates for shares of the corporation, the corporation shall mail to each
shareholder or holder of voting trust certificates a copy of the most recent
such balance sheet and profit and loss statement. The balance sheets and profit
and loss statements shall be filed in
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the registered office of the corporation in this state, shall be kept for at
least five years, and shall be subject to inspection during business hours by
any shareholder or holder of voting trust certificates, in person or by agent.
ARTICLE VI. DIVIDENDS
The Board of Directors of this corporation may, from time to time,
declare and the corporation may pay dividends on its shares in cash, property
or its own shares, except when the corporation is insolvent or when the payment
thereof would render the corporation insolvent subject to the provisions of the
Florida Statutes.
ARTICLE VII. CORPORATE SEAL
The Board of Directors shall provide a corporate seal which shall be
in circular form.
ARTICLE VIII. AMENDMENT
These by-laws may be altered, amended or repealed, and new by-laws may
be adopted by the majority vote of the directors of the corporation.
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<PAGE> 1
Exhibit 4.1
THIS WARRANT, AND THE SECURITIES ISSUABLE UPON THE EXERCISE OF THIS WARRANT,
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT") OR APPLICABLE STATE LAW AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF UNLESS REGISTERED UNDER THE ACT AND ANY APPLICABLE STATE ACT OR
UNLESS THE COMPANY IS SATISFIED THAT THIS WARRANT AND THE UNDERLYING SECURITIES
MAY BE SOLD WITHOUT REGISTRATION UNDER THE ACT.
FORM
ACCESS HEALTH ALTERNATIVES, INC.
Class A Common Stock Purchase Warrant
VOID AFTER 5:00 P.M., EASTERN TIME
June 12, 2000
THIS WARRANT IS ONE OF A SERIES OF WARRANTS WHICH, IN THE
AGGREGATE, WOULD ENTITLE THE HOLDERS TO ACQUIRE UP TO
1,400,000 SHARES OF COMMON STOCK OF ACCESS HEALTH
ALTERNATIVES, INC.
FOR VALUE RECEIVED, Access Health Alternatives, Inc., a Florida
corporation (the "Company"), promises to issue in the name of, and sell and
deliver to (the "Holder"), or the Holder's registered transferee or assignee
(also the "Holder"), a certificate or certificates for (the "Shares") of Common
Stock, $.001 par value per share (the "Common Stock"), of the Company, at any
time commencing on March 15, 2000 and expiring on or before 5:00 P.M., Eastern
Time, on June 12, 2000 (the "Expiration Date"), upon payment therefore of $3.00
per Share in lawful funds of the United States of America, such amount (the
"Basic Exercise Price") being subject to adjustment in the circumstances set
forth hereinbelow. This applicable Basic Exercise, until such adjustment is
made and thereafter as adjusted from time to time is called the "Exercise
Price."
1. EXERCISE OF THE WARRANT. In case the Holder of this Warrant shall
desire to exercise this Warrant in whole or in part, the Holder shall surrender
this Warrant, with the form of exercise notice on the last page hereof duly
executed by the Holder, to the Company, accompanied by payment of the Exercise
Price of $3.00 per Share, subject to adjustment as noted herein.
This Warrant may be exercised in whole or in part but not for
fractional Shares. In case of the exercise in part only, the Company will
deliver to the Holder a new Warrant of like tenor in the name of the Holder
evidencing the right to purchase the number of Shares as to which this Warrant
has not been exercised. This Warrant, at any time prior to the exercise hereof,
upon presentation and surrender to the Company may be exchanged, along or with
other Warrants of like tenor registered in the name of the same Holder, for
another Warrant or other Warrants of like tenor in the name of such Holder
exercisable for the same aggregate number of Shares as the Warrant or Warrants
surrendered.
<PAGE> 2
2. STOCK DIVIDENDS, RECLASSIFICATIONS, REORGANIZATIONS, ANTI-DILUTION
PROVISIONS. This Warrant is subject to the following further provisions:
a. In case, prior to the expiration of this Warrant by
exercise or by its terms, the Company shall issue any Common Stock as a stock
dividend or subdivide the number of outstanding shares of Common Stock into a
greater number of shares, then, in such case, the number of Shares underlying
this Warrant shall be proportionately increased; and conversely, in the event
the Company shall contract the number of outstanding shares of Common Stock by
combining such shares into a smaller number of shares then, in such case, the
number of Shares underlying this Warrant shall be proportionately decreased. If
the Company shall, at any time during the life of this Warrant, declare a
dividend payable in cash on its Common Stock and shall at substantially the
same time offer to its shareholders generally a right to purchase new shares of
Common Stock from the proceeds of such dividend or for an amount substantially
equal to the dividend, all shares of Common Stock so issued shall, for the
purpose of this Warrant, be deemed to have been issued as a stock dividend. Any
dividend paid or distributed upon the shares of Common Stock or any class of
stock convertible into Common Stock shall be treated as a dividend paid in
Common Stock to the extent that Common Stock is issuable upon the conversion
thereof.
b. In case, prior to the expiration of this Warrant by
exercise or by its terms, the Company shall be recapitalized by reclassifying
its outstanding Common Stock into shares with a different nominal value, or
shall thereafter reclassify any such shares in a like manner, or the Company or
a successor corporation shall consolidate, or merge with or convey all or
substantially all of its, or all of substantially all of any successor
corporation's, property and assets to any other corporation or corporations
(any such corporation being included within the meaning of the term "successor
corporation" hereinbefore used in the event of any consolidation or merger of
any such corporation with, or the sale of all or substantially all of the
property of any such corporation to another corporation or corporations), the
Holder shall thereafter have the right to purchase, pursuant to and on the
terms and conditions and during the time specified in this Warrant, in lieu of
the Shares of Common Stock underlying this Warrant and that are purchasable
upon the exercise of this Warrant, such Common Stock, securities or assets as
may be issued or payable with respect to, or in exchange for, the number of
Shares underlying this Warrant and that are purchasable upon the exercise of
this Warrant as herein provided, shall continue and be preserved in respect to
any shares, securities or assets that the Holder of this Warrant becomes
entitled to purchase.
c. Upon the occurrence of each event requiring an adjustment
of the Exercise Price or of the number of shares of Common Stock included in
the Shares underlying this Warrant that are purchasable pursuant to this
Warrant in accordance with, and as required by, the terms of Subsection (a) or
(b) of this Section, the Company shall use its best efforts to forthwith cause
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<PAGE> 3
either a firm of independent certified public accountants (who may be the
regular accountants for the Company) or the Chief Financial Officer of the
Company to compute the adjusted Exercise Price or the adjusted number of Shares
of Common Stock issuable upon exercise of this Warrant by reason of such event
in accordance with the provisions of Subsection (a) or (b). The Company shall
forthwith mail to the Holder of this Warrant a copy of such computations, which
shall be conclusive and shall be binding upon such Holder unless contested by
such Holder by written notice to the Company within 14 days after the mailing
thereof by the Company.
d. In case:
(1) the Company shall make a record of the holders
of its Common Stock for the purpose of entitling them to receive a dividend
payable otherwise than in cash, or a cash dividend constituting a partial
liquidating dividend, as hereinafter defined; or
(2) the Company shall make a record of the holders
of its Common Stock for the purpose of entitling them to subscribe for or
purchase any shares of any class or to receive any other rights; or
(3) the Company shall set a date for any
reclassification or other reorganization of the capital stock of the Company,
consolidation or merger of the Company with or into another corporation, or
conveyance of all or substantially all of the assets of the Company; or
(4) the Company shall set a date for the voluntary
or involuntary dissolution, liquidation or winding up of the Company;
then, in any such case, the Company shall mail to the Holder of this Warrant,
at least 30 days prior to such record date or the date set for any actions
described in subparagraphs (d)(1) through (d)(4) above, a notice advising such
Holder of the date or expected date on which a record is to be taken for the
purpose of such dividend, distribution of rights or the date on which a record
is to be taken for the purpose of such dividend, distribution of rights or the
date on which such reclassification, reorganization, consolidation, merger,
conveyance, dissolution, liquidation or winding up, as the case may be. Each
such written notice shall be given by certified mail, postage prepaid, return
receipt requested, addressed to the holder of the Warrant at the address of
such Holder as shown on the books of the Company.
e. In case the Company, at any time while this Warrant shall
remain valid and unexercised, shall sell all or substantially all of its
property, or dissolve, liquidate or wind up its affairs or sell or dispose of
all or any part of the assets, securities or property of any wholly-owned
subsidiary, the Holder of this Warrant shall thereafter be entitled to receive
upon exercise hereof (in lieu of such Shares of Common Stock underlying this
Warrant) the same kind and amount of any securities or assets as may be
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<PAGE> 4
issuable, distributable or payable upon any such sale, dissolution, liquidation
or winding up with respect to such number of Shares of Common Stock of the
Company as would otherwise have been issuable upon exercise of this Warrant.
The Company shall mail notice thereof by registered mail to the Holder and
shall make no distribution to the shareholders of the Company until the
expiration of thirty (30) days from the date of such mailing; provided,
however, than in any such event if the Holder shall not exercise this Warrant
within 30 days from the date of mailing such notice, all rights herein granted
not so exercised within such thirty (30) day period shall thereafter become
null and void. The Company shall not, however be prevented from consummating
any such sale without awaiting the expiration of such thirty (30) day period,
it being the intent and purposes hereof to enable the Holder upon exercise of
this Warrant to participate in the distribution of the consideration to be
received by the Company upon any such sale or the distribution of assets upon
any dissolution or liquidation of the Company.
f. In the event the Company, at any time while this Warrant
shall remain valid and unexercised, shall propose to declare any partial
liquidating dividend, it shall notify the Holder of this Warrant as set forth
herein. The term "partial liquidating dividend" shall include a dividend in
cash or other property of an amount that, together with all other dividends in
cash or other property paid or declared and set aside for payment is equal to
or greater than 40% of the cumulative consolidated net income of the Company
subsequent to one year from the date hereof.
g. The provisions of this Section are for the purpose of, and
shall be interpreted to the effect that, upon any exercise of this Warrant, the
Holder shall be entitled to receive the same amount and kind of securities and
other property that it would have been entitled to receive as the owner at all
times subsequent to the date hereof of the umber of Shares of Common Stock
purchased upon any such exercise.
h. It is agreed and understood that no adjustments shall be
made hereunder solely as a result of the issuance by the Company of stock,
stock options, warrants or other rights, regardless of the purpose therefor,
except as expressly provided in the foregoing provisions of Section 4.
5. COVENANTS OF THE COMPANY. The Company hereby covenants and agrees
that prior to the expiration of this Warrant by exercise or by its terms:
a. The Company will not by amendment of its Articles of
Incorporation or through reorganization, consolidation, merger, dissolution, or
sale of assets, or by any other voluntary act or deed, avoid or seek to avoid
the observance or performance of any of the covenants, stipulations or
conditions to be observed or performed hereunder by the Company, but will at
all times in good faith assist, insofar as it is able, in the carrying out of
all provisions oft his Warrant and in the taking of all other actions that may
be necessary in order to protect the rights of the Holder against dilution.
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<PAGE> 5
b. If at any time or from time to time the Company shall, by
subdivision, consolidation or reclassification of shares, or otherwise, change
as a whole the outstanding Common Stock into a different number or class of
shares, the number and class of shares as so changed shall, for the purpose of
each Warrant and the terms and conditions hereof, replace the shares
outstanding immediately prior to such change, and the Warrant purchase price in
effect, and the number of Shares purchasable under each Warrant, immediately
prior to the date on which such change shall become effective, shall be
proportionately adjusted.
c. Irrespective of any adjustment or change in the Warrant
purchase price or the number of Shares of Common Stock actually purchasable
under each Warrant of like tenor, the Warrants therefore and thereafter issued
may continue to express the Warrant purchase price per Share and the number of
Shares purchasable thereunder as the Warrant purchase price per Share and the
number of shares purchasable were expressed on the Warrants when initially
issued.
d. If at any time while any Warrant is outstanding the
Company consolidates with or merges into another corporation, firm or entity,
or otherwise enters into a form of business combination, the Holder, upon
exercise hereof, shall be entitled to purchase, with respect to each Share of
Common Stock purchasable hereunder, that number of shares to which a holder of
one (1) share of Common Stock would have been entitled upon the occurrence of
such business combination without any change in, or payment in addition to, the
Warrant purchase price in effect immediately prior to such merger or
consolidation, and the Company shall take such steps in connection with such
consolidation or merger as may be necessary to ensure that all the provisions
of each Warrant shall thereafter be applicable, as nearly as reasonably may be,
in relation to any securities or property thereafter deliverable upon the
exercise of each Warrant. The Company shall not effect any such consolidation,
merger or other form of business combination unless, prior to the consummation
thereof, the successor corporation (if other than the Company) resulting
therefrom shall assume by written instrument executed and mailed to the
registered Holder of each Warrant at the address of such Holder shown on the
books of the Company, the obligation to deliver to such holder such securities
or property such holder shall be entitled to purchase in accordance with the
foregoing provisions.
e. Upon the happening of any event requiring an adjustment of
the Warrant purchase price hereunder, the Company shall forthwith give written
notice thereof to the registered Holder of each Warrant, stating the adjusted
Warrant purchase price and the adjusted number of Shares purchasable upon the
exercise thereof resulting from such event, and setting forth in reasonable
detail the method of calculation. The certificate of either the Company's
independent certified public accountants or Chief Financial Officer shall be
conclusive evidence of the correctness of any computation made hereunder unless
contested by a Holder by written notice to the Company within 30 days after the
mailing thereof by the Company. Notice pursuant to this paragraph shall be
given by certified mail, postage prepaid, return receipt requested, addressed
to the registered Holder of each warrant at the address of such Holder
appearing in the records of the Company.
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<PAGE> 6
f. The Company shall at all times reserve and keep available,
out of its authorized and unissued share capital, solely for the purpose of
providing for the exercise, forthwith upon the request of the Holder of the
Warrants then outstanding and in effect, such number of shares of Common Stock
as shall, from time to time, be sufficient for the exercise of the Warrants.
The Company shall, from time to time, in accordance with the laws of the State
of Florida, increase the authorized amount of is share capital if at any time
the number of shares of Common Stock remaining unissued and unreserved for
other purposes shall not be sufficient to permit the exercise of the Warrants
then outstanding and in effect.
g. The Company covenants and agrees that all shares that may
be issued upon the exercise of the rights represented by this Warrant will,
upon issuance, be validly issued, fully paid an non-assessable, and free from
all taxes, liens and charges with respect to the issue thereof.
6. LOSS, THEFT, DESTRUCTION OR MUTILATION. In case this Warrant shall
become mutilated or defaced or be destroyed, lost or stolen, the Company shall
execute and deliver a new Warrant in exchange for and upon surrender and
cancellation of such mutilated or defaced Warrant or in lieu of and in
substitution for such Warrant so destroyed, lost or stolen, upon the Holder of
such warrant filing with the Company such evidence satisfactory to it that such
Warrant has been so mutilated, defaced, destroyed, lost or stolen and of the
ownership thereof by the Holder; provided, however, that the Company shall be
entitled, as a condition to the execution and delivery of such new Warrant, to
demand indemnity satisfactory to it and payment of expenses and charges
incurred in connection with the delivery of such new Warrant, and may demand a
bond from the Holder. All Warrants so surrendered to the Company shall be
canceled.
7. RECORD OWNER. At the time of the surrender of this Warrant,
together with the form of subscription properly executed and payment of the
Exercise Price, the person exercising this Warrant s hall be deemed to be the
Holder of record of the Common Stock deliverable upon such exercise, in whole
or in part, notwithstanding that the stock transfer books of the Company shall
then be closed or that certificates representing such securities shall not then
be actually delivered to such person.
8. FRACTIONAL SECURITIES. No fractional shares of Common Stock or
scrip representing fractional shares shall be issued upon the exercise of this
Warrant. With respect to any fraction of a share called for on such exercise,
the Holder may elect to receive, and the Company shall pay to the Holder, an
amount in cash equal to such fraction multiplied by the Exercise Price. In the
alternative, the Holder may elect to remit to the Company an amount in cash
equal to the difference between such fraction and one, multiplied by the
Exercise Price, and the Company will issue the Holder one share of Common Stock
in addition to the number of whole shares required by the exercise of the
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<PAGE> 7
Warrant; provided, however, that the Company shall not be obligated by the
operation of this Section to issue shares in the aggregate exceeding the number
of shares as to which an exemption from federal and state registration has been
determined to be available.
9. ORIGINAL ISSUE TAXES. The Company will pay all United States, state
and local original issue taxes, if any, upon the issuance of this Warrant or
the Common Stock deliverable upon exercise hereof.
10. MAILING OF NOTICES, ETC. All notices and other communications from
the Company to the Holder of this Warrant shall be mailed by first-class
registered or certified mail, return receipt requested, postage prepaid, to the
Holder at the address set forth in the records of the Company, or to such other
address furnished to the Company in writing from time to time by the Holder of
this Warrant. All notices from the Holder of this Warrant to the Company shall
be mailed to the Company at 2016 South Orange Avenue, Orlando, Florida 32806,
attn: President.
11. REDEMPTION. The Company may redeem this Warrant at any time that
the average closing bid and asked price for its common stock has been at least
$4.00 for a minimum of 20 consecutive trading days, at a redemption price of
$.01 per share, upon 30 days' written notice to the Holder, during which time
the Holder may exercise this Warrants (even if such exercise would precede
March 15, 2000); provided, however, that a current registration statement
covering the underlying shares of common stock is then available.
12. REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED. Neither
this Warrant nor the Shares underlying it have been registered under the
Securities Act of 1933, as amended (the "Act"). Unless and until registered
under the Act, this Warrant and all replacement Warrants shall bear the
following legend;
NEITHER THIS WARRANT (NOR THE SHARES UNDERLYING IT) HAS BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"),
AND IT THEREFORE MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF
UNLESS (I) A REGISTRATION STATEMENT UNDER WHICH THIS WARRANT AND THE
SHARES UNDERLYING IT ARE REGISTERED HAS BECOME EFFECTIVE, OR (II) THE
COMPANY IS SATISFIED THAT NO SUCH REGISTRATION STATEMENT IS THEN
REQUIRED AND THAT THIS WARRANT AND THE SHARES UNDERLYING IT MAY BE
SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF IN THE MANNER CONTEMPLATED
WITHOUT REGISTRATION UNDER THE ACT.
The Company will include the Shares of common stock issuable upon the
exercise of this Warrant in the Company's first registration statement to be
filed under the Act. In the event the Company has not filed such a registration
statement at such time as this Warrant may be exercised, the holders of a
majority of the outstanding Warrants may demand that the Company file such a
registration statement within 90 days from receipt of written notice by such
holders, or as soon thereafter as possible; provided, however, that the Shares
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<PAGE> 8
may not be disposed of in any manner for at least 60 business days following
the effective date of the registration statement if an underwritten offering is
then pending.
13. LAWS OF THE STATE OF FLORIDA. This Warrant shall be governed by,
interpreted under and construed in all respects in accordance with the laws of
the State of Florida, irrespective of the place of domicile or residence of any
party. In the event of a controversy arising out of the interpretation,
constructions, performance or breach of this Warrant, the parties hereby agree
and consent to the jurisdiction and venue of the Courts of the State of
Florida, Orange County, or the United States District Court for the Middle
District of Florida; and further agree and consent that personal service of
process in any such action or proceeding outside the State of Florida shall be
tantamount to service in person in Florida.
14. ENTIRE AGREEMENT AND MODIFICATION. The Company and the Holder of
this Warrant hereby represent and warrant that this Warrant is intended to and
does contain and embody all of the understandings and agreements, both written
and oral, of the parties hereto with respect to the subject matter of this
Warrant, and that there exists no oral agreement or understanding, express or
implied, whereby the absolute, final and unconditional character and nature of
this Warrant shall be in any way invalidated, empowered or affected. A
modification or waiver of any of the terms, conditions or provisions of this
Warrant shall be effective only if made in writing and executed with the same
formality as this Warrant.
This Warrant will become wholly void and of no effect and the rights
evidences hereby will terminate unless exercised in accordance with the terms
and provisions hereof at or before 5:00 P.M., Eastern Time, on the Expiration
Date.
IN WITNESS WHEREOF, the Company by its duly authorized officer, has
executed this Warrant on the _____ day of ___________, 1999.
Attest: ACCESS HEALTH ALTERNATIVES, INC.
- ----------------------------------- ---------------------------------
Donald D. Metchick, Secretary Daniel J. Pavlik, President
(CORPORATE SEAL)
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FORM OF EXERCISE
The undersigned hereby irrevocably elects to exercise the purchase
rights represented by this Warrant for, and to purchase thereunder, _______
Shares of Common Stock, $.001 par value per share, of Access Health
Alternatives, Inc., and herewith makes payment of $3.00 per Share, or a total
of $___________ therefore, and requests that such Shares be issued to:
_______________________________________________________________________________
(print name)
_______________________________________________________________________________
(address)
_______________________________________________________________________________
(social security number)
Dated: ___________________________________________________________
(signature must conform in all respects to
name of holder as specified on the face of
this Warrant)
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FORM OF ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto _________________ the right represented by this Warrant to
purchase ____ Shares of Common Stock, $.001 par value per Share of Access
Health Alternatives, Inc., to which this Warrant relates, and appoints
_________________________, attorney to transfer said right on the books of the
premises.
Dated: ___________________________ __________________________________________
(Signature must conform in all respects to
name of holder as specified on the face of
the Warrant)
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Exhibit 4.2
THIS WARRANT, AND THE SECURITIES ISSUABLE UPON THE EXERCISE OF THIS WARRANT,
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT") OR APPLICABLE STATE LAW AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF UNLESS REGISTERED UNDER THE ACT AND ANY APPLICABLE STATE ACT OR
UNLESS THE COMPANY IS SATISFIED THAT THIS WARRANT AND THE UNDERLYING SECURITIES
MAY BE SOLD WITHOUT REGISTRATION UNDER THE ACT.
FORM
ACCESS HEALTH ALTERNATIVES, INC.
Class B Common Stock Purchase Warrant
VOID AFTER 5:00 P.M., EASTERN TIME
December 13, 2000
THIS WARRANT IS ONE OF A SERIES OF WARRANTS WHICH, IN THE
AGGREGATE, WOULD ENTITLE THE HOLDERS TO ACQUIRE UP TO
1,400,000 SHARES OF COMMON STOCK OF ACCESS HEALTH
ALTERNATIVES, INC.
FOR VALUE RECEIVED, Access Health Alternatives, Inc., a Florida
corporation (the "Company"), promises to issue in the name of, and sell and
deliver to _____________ (the "Holder"), or the Holder's registered transferee
or assignee (also the "Holder"), a certificate or certificates for ____________
(the "Shares") of Common Stock, $.001 par value per share (the "Common Stock"),
of the Company, at any time commencing on September 15, 2000 and expiring on or
before 5:00 P.M., Eastern Time, on December 13, 2000 (the "Expiration Date"),
upon payment therefore of $4.50 per Share in lawful funds of the United States
of America, such amount (the "Basic Exercise Price") being subject to
adjustment in the circumstances set forth hereinbelow. This applicable Basic
Exercise, until such adjustment is made and thereafter as adjusted from time to
time is called the "Exercise Price."
1. EXERCISE OF THE WARRANT. In case the Holder of this Warrant shall
desire to exercise this Warrant in whole or in part, the Holder shall surrender
this Warrant, with the form of exercise notice on the last page hereof duly
executed by the Holder, to the Company, accompanied by payment of the Exercise
Price of $4.50 per Share, subject to adjustment as noted herein.
This Warrant may be exercised in whole or in part but not for
fractional Shares. In case of the exercise in part only, the Company will
deliver to the Holder a new Warrant of like tenor in the name of the Holder
evidencing the right to purchase the number of Shares as to which this Warrant
has not been exercised. This Warrant, at any time prior to the exercise hereof,
upon presentation and surrender to the Company may be exchanged, along or with
other Warrants of like tenor registered in the name of the same Holder, for
another Warrant or other Warrants of like tenor in the name of such Holder
exercisable for the same aggregate number of Shares as the Warrant or Warrants
surrendered.
<PAGE> 2
2. STOCK DIVIDENDS, RECLASSIFICATIONS, REORGANIZATIONS, ANTI-DILUTION
PROVISIONS. This Warrant is subject to the following further provisions:
a. In case, prior to the expiration of this Warrant by
exercise or by its terms, the Company shall issue any Common Stock as a stock
dividend or subdivide the number of outstanding shares of Common Stock into a
greater number of shares, then, in such case, the number of Shares underlying
this Warrant shall be proportionately increased; and conversely, in the event
the Company shall contract the number of outstanding shares of Common Stock by
combining such shares into a smaller number of shares then, in such case, the
number of Shares underlying this Warrant shall be proportionately decreased. If
the Company shall, at any time during the life of this Warrant, declare a
dividend payable in cash on its Common Stock and shall at substantially the
same time offer to its shareholders generally a right to purchase new shares of
Common Stock from the proceeds of such dividend or for an amount substantially
equal to the dividend, all shares of Common Stock so issued shall, for the
purpose of this Warrant, be deemed to have been issued as a stock dividend. Any
dividend paid or distributed upon the shares of Common Stock or any class of
stock convertible into Common Stock shall be treated as a dividend paid in
Common Stock to the extent that Common Stock is issuable upon the conversion
thereof.
b. In case, prior to the expiration of this Warrant by
exercise or by its terms, the Company shall be recapitalized by reclassifying
its outstanding Common Stock into shares with a different nominal value, or
shall thereafter reclassify any such shares in a like manner, or the Company or
a successor corporation shall consolidate, or merge with or convey all or
substantially all of its, or all of substantially all of any successor
corporation's, property and assets to any other corporation or corporations
(any such corporation being included within the meaning of the term "successor
corporation" hereinbefore used in the event of any consolidation or merger of
any such corporation with, or the sale of all or substantially all of the
property of any such corporation to another corporation or corporations), the
Holder shall thereafter have the right to purchase, pursuant to and on the
terms and conditions and during the time specified in this Warrant, in lieu of
the Shares of Common Stock underlying this Warrant and that are purchasable
upon the exercise of this Warrant, such Common Stock, securities or assets as
may be issued or payable with respect to, or in exchange for, the number of
Shares underlying this Warrant and that are purchasable upon the exercise of
this Warrant as herein provided, shall continue and be preserved in respect to
any shares, securities or assets that the Holder of this Warrant becomes
entitled to purchase.
c. Upon the occurrence of each event requiring an adjustment
of the Exercise Price or of the number of shares of Common Stock included in
the Shares underlying this Warrant that are purchasable pursuant to this
Warrant in accordance with, and as required by, the terms of Subsection (a) or
(b) of this Section, the Company shall use its best efforts to forthwith cause
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<PAGE> 3
either a firm of independent certified public accountants (who may be the
regular accountants for the Company) or the Chief Financial Officer of the
Company to compute the adjusted Exercise Price or the adjusted number of Shares
of Common Stock issuable upon exercise of this Warrant by reason of such event
in accordance with the provisions of Subsection (a) or (b). The Company shall
forthwith mail to the Holder of this Warrant a copy of such computations, which
shall be conclusive and shall be binding upon such Holder unless contested by
such Holder by written notice to the Company within 14 days after the mailing
thereof by the Company.
d. In case:
(1) the Company shall make a record of the holders
of its Common Stock for the purpose of entitling them to receive a dividend
payable otherwise than in cash, or a cash dividend constituting a partial
liquidating dividend, as hereinafter defined; or
(2) the Company shall make a record of the holders
of its Common Stock for the purpose of entitling them to subscribe for or
purchase any shares of any class or to receive any other rights; or
(3) the Company shall set a date for any
reclassification or other reorganization of the capital stock of the Company,
consolidation or merger of the Company with or into another corporation, or
conveyance of all or substantially all of the assets of the Company; or
(4) the Company shall set a date for the voluntary
or involuntary dissolution, liquidation or winding up of the Company;
then, in any such case, the Company shall mail to the Holder of this Warrant,
at least 30 days prior to such record date or the date set for any actions
described in subparagraphs (d)(1) through (d)(4) above, a notice advising such
Holder of the date or expected date on which a record is to be taken for the
purpose of such dividend, distribution of rights or the date on which a record
is to be taken for the purpose of such dividend, distribution of rights or the
date on which such reclassification, reorganization, consolidation, merger,
conveyance, dissolution, liquidation or winding up, as the case may be. Each
such written notice shall be given by certified mail, postage prepaid, return
receipt requested, addressed to the holder of the Warrant at the address of
such Holder as shown on the books of the Company.
e. In case the Company, at any time while this Warrant shall
remain valid and unexercised, shall sell all or substantially all of its
property, or dissolve, liquidate or wind up its affairs or sell or dispose of
all or any part of the assets, securities or property of any wholly-owned
subsidiary, the Holder of this Warrant shall thereafter be entitled to receive
upon exercise hereof (in lieu of such Shares of Common Stock underlying this
Warrant) the same kind and amount of any securities or assets as may be
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<PAGE> 4
issuable, distributable or payable upon any such sale, dissolution, liquidation
or winding up with respect to such number of Shares of Common Stock of the
Company as would otherwise have been issuable upon exercise of this Warrant.
The Company shall mail notice thereof by registered mail to the Holder and
shall make no distribution to the shareholders of the Company until the
expiration of thirty (30) days from the date of such mailing; provided,
however, than in any such event if the Holder shall not exercise this Warrant
within 30 days from the date of mailing such notice, all rights herein granted
not so exercised within such thirty (30) day period shall thereafter become
null and void. The Company shall not, however be prevented from consummating
any such sale without awaiting the expiration of such thirty (30) day period,
it being the intent and purposes hereof to enable the Holder upon exercise of
this Warrant to participate in the distribution of the consideration to be
received by the Company upon any such sale or the distribution of assets upon
any dissolution or liquidation of the Company.
f. In the event the Company, at any time while this Warrant
shall remain valid and unexercised, shall propose to declare any partial
liquidating dividend, it shall notify the Holder of this Warrant as set forth
herein. The term "partial liquidating dividend" shall include a dividend in
cash or other property of an amount that, together with all other dividends in
cash or other property paid or declared and set aside for payment is equal to
or greater than 40% of the cumulative consolidated net income of the Company
subsequent to one year from the date hereof.
g. The provisions of this Section are for the purpose of, and
shall be interpreted to the effect that, upon any exercise of this Warrant, the
Holder shall be entitled to receive the same amount and kind of securities and
other property that it would have been entitled to receive as the owner at all
times subsequent to the date hereof of the umber of Shares of Common Stock
purchased upon any such exercise.
h. It is agreed and understood that no adjustments shall be
made hereunder solely as a result of the issuance by the Company of stock,
stock options, warrants or other rights, regardless of the purpose therefor,
except as expressly provided in the foregoing provisions of Section 4.
5. COVENANTS OF THE COMPANY. The Company hereby covenants and agrees
that prior to the expiration of this Warrant by exercise or by its terms:
a. The Company will not by amendment of its Articles of
Incorporation or through reorganization, consolidation, merger, dissolution, or
sale of assets, or by any other voluntary act or deed, avoid or seek to avoid
the observance or performance of any of the covenants, stipulations or
conditions to be observed or performed hereunder by the Company, but will at
all times in good faith assist, insofar as it is able, in the carrying out of
all provisions oft his Warrant and in the taking of all other actions that may
be necessary in order to protect the rights of the Holder against dilution.
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<PAGE> 5
b. If at any time or from time to time the Company shall, by
subdivision, consolidation or reclassification of shares, or otherwise, change
as a whole the outstanding Common Stock into a different number or class of
shares, the number and class of shares as so changed shall, for the purpose of
each Warrant and the terms and conditions hereof, replace the shares
outstanding immediately prior to such change, and the Warrant purchase price in
effect, and the number of Shares purchasable under each Warrant, immediately
prior to the date on which such change shall become effective, shall be
proportionately adjusted.
c. Irrespective of any adjustment or change in the Warrant
purchase price or the number of Shares of Common Stock actually purchasable
under each Warrant of like tenor, the Warrants therefore and thereafter issued
may continue to express the Warrant purchase price per Share and the number of
Shares purchasable thereunder as the Warrant purchase price per Share and the
number of shares purchasable were expressed on the Warrants when initially
issued.
d. If at any time while any Warrant is outstanding the
Company consolidates with or merges into another corporation, firm or entity,
or otherwise enters into a form of business combination, the Holder, upon
exercise hereof, shall be entitled to purchase, with respect to each Share of
Common Stock purchasable hereunder, that number of shares to which a holder of
one (1) share of Common Stock would have been entitled upon the occurrence of
such business combination without any change in, or payment in addition to, the
Warrant purchase price in effect immediately prior to such merger or
consolidation, and the Company shall take such steps in connection with such
consolidation or merger as may be necessary to ensure that all the provisions
of each Warrant shall thereafter be applicable, as nearly as reasonably may be,
in relation to any securities or property thereafter deliverable upon the
exercise of each Warrant. The Company shall not effect any such consolidation,
merger or other form of business combination unless, prior to the consummation
thereof, the successor corporation (if other than the Company) resulting
therefrom shall assume by written instrument executed and mailed to the
registered Holder of each Warrant at the address of such Holder shown on the
books of the Company, the obligation to deliver to such holder such securities
or property such holder shall be entitled to purchase in accordance with the
foregoing provisions.
e. Upon the happening of any event requiring an adjustment of
the Warrant purchase price hereunder, the Company shall forthwith give written
notice thereof to the registered Holder of each Warrant, stating the adjusted
Warrant purchase price and the adjusted number of Shares purchasable upon the
exercise thereof resulting from such event, and setting forth in reasonable
detail the method of calculation. The certificate of either the Company's
independent certified public accountants or Chief Financial Officer shall be
conclusive evidence of the correctness of any computation made hereunder unless
contested by a Holder by written notice to the Company within 30 days after the
mailing thereof by the Company. Notice pursuant to this paragraph shall be
given by certified mail, postage prepaid, return receipt requested, addressed
to the registered Holder of each warrant at the address of such Holder
appearing in the records of the Company.
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<PAGE> 6
f. The Company shall at all times reserve and keep available,
out of its authorized and unissued share capital, solely for the purpose of
providing for the exercise, forthwith upon the request of the Holder of the
Warrants then outstanding and in effect, such number of shares of Common Stock
as shall, from time to time, be sufficient for the exercise of the Warrants.
The Company shall, from time to time, in accordance with the laws of the State
of Florida, increase the authorized amount of is share capital if at any time
the number of shares of Common Stock remaining unissued and unreserved for
other purposes shall not be sufficient to permit the exercise of the Warrants
then outstanding and in effect.
g. The Company covenants and agrees that all shares that may
be issued upon the exercise of the rights represented by this Warrant will,
upon issuance, be validly issued, fully paid an non-assessable, and free from
all taxes, liens and charges with respect to the issue thereof.
6. LOSS, THEFT, DESTRUCTION OR MUTILATION. In case this Warrant shall
become mutilated or defaced or be destroyed, lost or stolen, the Company shall
execute and deliver a new Warrant in exchange for and upon surrender and
cancellation of such mutilated or defaced Warrant or in lieu of and in
substitution for such Warrant so destroyed, lost or stolen, upon the Holder of
such warrant filing with the Company such evidence satisfactory to it that such
Warrant has been so mutilated, defaced, destroyed, lost or stolen and of the
ownership thereof by the Holder; provided, however, that the Company shall be
entitled, as a condition to the execution and delivery of such new Warrant, to
demand indemnity satisfactory to it and payment of expenses and charges
incurred in connection with the delivery of such new Warrant, and may demand a
bond from the Holder. All Warrants so surrendered to the Company shall be
canceled.
7. RECORD OWNER. At the time of the surrender of this Warrant,
together with the form of subscription properly executed and payment of the
Exercise Price, the person exercising this Warrant s hall be deemed to be the
Holder of record of the Common Stock deliverable upon such exercise, in whole
or in part, notwithstanding that the stock transfer books of the Company shall
then be closed or that certificates representing such securities shall not then
be actually delivered to such person.
8. FRACTIONAL SECURITIES. No fractional shares of Common Stock or
scrip representing fractional shares shall be issued upon the exercise of this
Warrant. With respect to any fraction of a share called for on such exercise,
the Holder may elect to receive, and the Company shall pay to the Holder, an
amount in cash equal to such fraction multiplied by the Exercise Price. In the
alternative, the Holder may elect to remit to the Company an amount in cash
equal to the difference between such fraction and one, multiplied by the
Exercise Price, and the Company will issue the Holder one share of Common Stock
in addition to the number of whole shares required by the exercise of the
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<PAGE> 7
Warrant; provided, however, that the Company shall not be obligated by the
operation of this Section to issue shares in the aggregate exceeding the number
of shares as to which an exemption from federal and state registration has been
determined to be available.
9. ORIGINAL ISSUE TAXES. The Company will pay all United States, state
and local original issue taxes, if any, upon the issuance of this Warrant or
the Common Stock deliverable upon exercise hereof.
10. MAILING OF NOTICES, ETC. All notices and other communications from
the Company to the Holder of this Warrant shall be mailed by first-class
registered or certified mail, return receipt requested, postage prepaid, to the
Holder at the address set forth in the records of the Company, or to such other
address furnished to the Company in writing from time to time by the Holder of
this Warrant. All notices from the Holder of this Warrant to the Company shall
be mailed to the Company at 2016 South Orange Avenue, Orlando, Florida 32806,
attn: President.
11. REDEMPTION. The Company may redeem this Warrant at any time that
the average closing bid and asked price for its common stock has been at least
$6.00 for a minimum of 20 consecutive trading days, at a redemption price of
$.01 per share, upon 30 days' written notice to the Holder, during which time
the Holder may exercise this Warrants (even if such exercise would precede
September 15, 2000); provided, however, that a current registration statement
covering the underlying shares of common stock is then available.
12. REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED. Neither
this Warrant nor the Shares underlying it have been registered under the
Securities Act of 1933, as amended (the "Act"). Unless and until registered
under the Act, this Warrant and all replacement Warrants shall bear the
following legend;
NEITHER THIS WARRANT (NOR THE SHARES UNDERLYING IT) HAS BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"),
AND IT THEREFORE MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF
UNLESS (I) A REGISTRATION STATEMENT UNDER WHICH THIS WARRANT AND THE
SHARES UNDERLYING IT ARE REGISTERED HAS BECOME EFFECTIVE, OR (II) THE
COMPANY IS SATISFIED THAT NO SUCH REGISTRATION STATEMENT IS THEN
REQUIRED AND THAT THIS WARRANT AND THE SHARES UNDERLYING IT MAY BE
SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF IN THE MANNER CONTEMPLATED
WITHOUT REGISTRATION UNDER THE ACT.
The Company will include the Shares of common stock issuable upon the
exercise of this Warrant in the Company's first registration statement to be
filed under the Act. In the event the Company has not filed such a registration
statement at such time as this Warrant may be exercised, the holders of a
majority of the outstanding Warrants may demand that the Company file such a
registration statement within 90 days from receipt of written notice by such
holders, or as soon thereafter as possible; provided, however, that the Shares
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<PAGE> 8
may not be disposed of in any manner for at least 60 business days following
the effective date of the registration statement if an underwritten offering is
then pending.
13. LAWS OF THE STATE OF FLORIDA. This Warrant shall be governed by,
interpreted under and construed in all respects in accordance with the laws of
the State of Florida, irrespective of the place of domicile or residence of any
party. In the event of a controversy arising out of the interpretation,
constructions, performance or breach of this Warrant, the parties hereby agree
and consent to the jurisdiction and venue of the Courts of the State of
Florida, Orange County, or the United States District Court for the Middle
District of Florida; and further agree and consent that personal service of
process in any such action or proceeding outside the State of Florida shall be
tantamount to service in person in Florida.
14. ENTIRE AGREEMENT AND MODIFICATION. The Company and the Holder of
this Warrant hereby represent and warrant that this Warrant is intended to and
does contain and embody all of the understandings and agreements, both written
and oral, of the parties hereto with respect to the subject matter of this
Warrant, and that there exists no oral agreement or understanding, express or
implied, whereby the absolute, final and unconditional character and nature of
this Warrant shall be in any way invalidated, empowered or affected. A
modification or waiver of any of the terms, conditions or provisions of this
Warrant shall be effective only if made in writing and executed with the same
formality as this Warrant.
This Warrant will become wholly void and of no effect and the rights
evidences hereby will terminate unless exercised in accordance with the terms
and provisions hereof at or before 5:00 P.M., Eastern Time, on the Expiration
Date.
IN WITNESS WHEREOF, the Company by its duly authorized officer, has
executed this Warrant on the _____ day of _____________, 1999.
Attest: ACCESS HEALTH ALTERNATIVES, INC.
_______________________________ ___________________________________
Donald D. Metchick, Secretary Daniel J. Pavlik, President
(CORPORATE SEAL)
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<PAGE> 9
FORM OF EXERCISE
The undersigned hereby irrevocably elects to exercise the purchase
rights represented by this Warrant for, and to purchase thereunder, _______
Shares of Common Stock, $.001 par value per share, of Access Health
Alternatives, Inc., and herewith makes payment of $4.50 per Share, or a total
of $___________ therefore, and requests that such Shares be issued to:
_______________________________________________________________________________
(print name)
_______________________________________________________________________________
(address)
_______________________________________________________________________________
(social security number)
Dated: ___________________________________________________________
(signature must conform in all respects to
name of holder as specified on the face of
this Warrant)
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<PAGE> 10
FORM OF ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto _________________ the right represented by this Warrant to
purchase ____ Shares of Common Stock, $.001 par value per Share of Access
Health Alternatives, Inc., to which this Warrant relates, and appoints
_________________________, attorney to transfer said right on the books of the
premises.
Dated: ___________________________ __________________________________________
(Signature must conform in all respects to
name of holder as specified on the face of
the Warrant)
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<PAGE> 1
Exhibit 10.1
EXECUTIVE EMPLOYMENT AGREEMENT
THIS EXECUTIVE EMPLOYMENT AGREEMENT (the "Agreement") is entered into
as of the 1st day of January 1999 by and between Steven Miracle (the
"Executive") and Access HealthMax Holdings, Inc., a Florida corporation (the
"Employer").
RECITALS
A. The Executive is an integral part of the development and operation
of the Employer and is an important member of the management of the Employer.
B. The Employer wishes to ensure the continued relationship between
the Employer and the Executive and to recognize the contributions of the
Executive to the continued growth of the Employer.
C. The Executive wishes to be employed by the Employer and the
Employer wishes to employ the Executive, all on the terms and conditions set
forth herein.
NOW, THEREFORE, in consideration of the foregoing premises, and for
such other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties, intending to be legally bound,
hereby agree as follows.
1. EMPLOYMENT. The Employer hereby employs the Executive as the Chief
Operating Officer of the Employer, with such duties and responsibilities as
shall be customarily assumed by such officer, and such additional duties and
responsibilities as may be reasonably assigned from time to time by the Board
of Directors of the Employer.
2. TERM. The initial term of this Agreement shall be for three (3)
years from the effective date hereof, and shall be renewed, upon 90 (ninety)
days written notice, for additional one-year terms unless terminated in
accordance with the termination provisions set forth elsewhere herein. The
terms of any renewal period shall be no less favorable to the Executive than
<PAGE> 2
the terms of the immediately preceding year of employment, unless otherwise
agreed by the Executive prior to the commencement of such renewal term. That
period of time commencing with the Effective Date and ending with the
Termination Date (as hereinafter defined) shall be known as the "Term."
3. NATURE OF EMPLOYMENT. The employment of the Executive hereunder
shall be considered full-time in nature. Nothing set forth herein, however,
shall preclude the Executive from accepting any employment with any other
company or entity under Common Control (as hereinafter defined) with the
Employer; provided, however, that the Board of Directors of the Employer shall
be satisfied that such other employment does not represent a conflict of
interest with the interests of the Employer and that such other employment does
not impair the Executive's ability to faithfully and effectively execute his
responsibilities to the Employer.
4. COMPENSATION. In consideration for his employment hereunder, the
Executive shall receive the following compensation:
a. BASE SALARY. During the Term hereof, the Executive shall
receive an annual base salary of $125,000. The Base Salary shall be paid no
less frequently than monthly and otherwise in accordance with the Employer's
general payroll policy.
b. BONUS. During the Term hereof, and to the extent funds are
legally available therefor, the Executive shall receive a bonus (the "Bonus")
equal to 2% of the Employer's annual net profits after taxes, which bonus shall
be paid to the Executive within 30 days following the Employer's receipt of the
audited financial statements for the fiscal year in questions. The Bonus shall
be subject to the following annual maximums:
Year one: $100,000
Year two: $150,000
Year three: $200,000
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<PAGE> 3
Nothing set forth herein shall prevent the Board of Directors
from authorizing the payment of bonus compensation to the Executive in addition
to the foregoing Bonus.
c. STOCK BONUS. Upon the effective date of this Agreement,
the Employer shall issue in the name of the Executive 300,000 restricted shares
of the Employer's common stock, which shares shall have been issued under an
exemption from registration under the Securities Act of 1933, as amended, and
which shares shall be subject to substantial restrictions on transferability.
The Executive shall be deemed to have earned, and shall receive, 100,000 of
theses shares upon commencement of the Term; certificates evidencing the
remaining shares shall be held in escrow by legal counsel for the Employer, to
be released to the Executive in equal amounts on each of the first and second
anniversaries of the effective date of this Agreement, provided the Executive
remains in the employment of the Employer at such times. Until the escrowed
shares are released from escrow, the Executive shall not be entitled to vote,
dispose of, encumber or otherwise exercise any rights or incidents of ownership
pertaining to the escrowed shares.
5. BENEFITS. In addition to the foregoing compensation, during the
Term hereof the Executive shall be entitled to the following benefits.
a. EXPENSES. As soon as it is able to obtain corporate
credit, the Employer shall provide the Executive with a corporate credit card.
Any single expense in excess of $1,000 (not including travel or travel-related
expenses) shall be approved in advance by at least one other executive officer
of the Employer. Any expenses reasonably incurred in connection with the
Executive's performance of his duties hereunder shall be promptly reimbursed
upon presentation of receipts therefore.
b. HOUSING AND TRAVEL. Must be pre-approved
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<PAGE> 4
c. MEDICAL. The Executive, and his eligible dependents, if
any, shall receive the same medical, dental and other health benefits that the
Employer may provide during the Term hereof, from time to time, to the other
member of senior management.
d. VACATION. The Executive shall be entitled to two weeks per
year of paid vacation time, which time shall not accrue from year to year and
for which no additional compensation will be paid if not taken.
e. STOCK OPTION, PROFIT SHARING, PENSION, RETIREMENT AND
OTHER PLANS. The Executive shall be entitled to participate in any stock
option, profit sharing, pension, retirement or other plans as may be
implemented from time to time by the Board of Directors of the Employer.
f. DIRECTORS' AND OFFICERS' INSURANCE. The Employer agrees
that as promptly following its first profitable month of operation as possible,
it will use its best efforts to acquire directors' and officers' insurance, it
being agreed and understood that this is an essential factor in the Executive's
agreement to serve as an officer of the Employer.
6. DEATH; PERMANENT DISABILITY. Upon the death of the Executive during
the term of this Agreement, the Term shall terminate. If, during the Term, the
Executive fails, because of illness or other incapacity, to perform the
services required to be performed by him hereunder for any period of more than
120 days during any calendar year (provided that up to the first four weeks of
any such inability shall be treated as vacation time and vacation time, if not
previously taken, shall be exhausted before the above 120-day period commences
to run) (any such illness or incapacity being hereinafter referred to as
"Permanent Disability"), then the Employer, in its discretion, may at any time
thereafter either (a) give the Executive a Consulting Officer's Notice (as
hereinafter defined), except that in these circumstances the payment of Base
Salary due after the effective date of such Consulting Officer's Notice shall
be reduced on a dollar-for-dollar basis by the amount of all disability
insurance payments actually received by the Executive by reason of such
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<PAGE> 5
Permanent Disability, or (b) terminate the Term upon not less than 30 days'
written notice thereof to the Executive, and the Term shall terminate and come
to an end upon the date set forth in said notice as if said date were the
termination date of the Term; provided, however, that no such termination shall
be effective if prior to the date when such notice is given, the Executive's
illness or incapacity shall be terminated and he shall be physically and
mentally able to perform the services required hereunder and shall have taken
up and be performing such duties.
If the Executive's employment shall be terminated by reason of his
death or Permanent Disability, the Executive or his estate, as the case may be,
shall be entitled to receive (i) any earned and unpaid salary accrued through
the date of termination; (ii) a pro rata portion of any annual bonus that the
Executive otherwise would have been entitled to receive pursuant to any bonus
plan or arrangement for senior executives of the Employer, such pro rata
portion to be payable at the time such annual bonus otherwise would have been
payable to the Executive; (iii) a lump sum payment on the effective date of
termination for Permanent Disability or within 60 days after the Executive's
death (payment in such case being payable to the Executive's estate) equal to
12 months' Base Salary at the rate in effect immediately prior to such
termination of employment; and (iv) subject to the terms thereof, any benefits
that may be due to the Executive on the date of termination under the
provisions of any employee benefit plan, program or policy.
7. TERMINATION FOR CAUSE. The Employer may at any time during the term
of this Agreement, by written notice, terminate the Term for cause, the cause
to be specified in the notice. For purposes of this Agreement, "cause" and "for
cause" shall mean (i) any intentional breach of the Executive's fiduciary duty
to the Employer that is intended to cause, and actually causes, injury to the
Employer's business or business relationships; (ii) the Executive's material
breach under this Agreement; (iii) the Executive's gross negligence in the
performance of his duties that materially adversely affects the Employer; and
(iv) conviction of a felony during the Term; provided, however, that (A) the
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Employer shall give the Executive notice of any circumstances described in (i),
(ii) or (iii), above, which notice shall describe such circumstances in
reasonable detail, and (B) no "cause" for termination shall be deemed to exist
if the Executive shall remedy or cure the relevant circumstances within 10 days
from his receipt of such notice. Termination for cause under clause (i), (ii)
or (iii) shall be effective on the second business day after receipt by the
Executive of a further written notice from the Employer, following expiration
of the 10-day cure period as aforesaid; provided the Executive has not
previously cured the event of cause; and termination for cause under (iv) above
shall be effective immediately upon receipt by the Executive of written notice
of termination. The Executive shall be entitled to receive upon termination for
cause (i) any earned and unpaid salary accrued through the date of termination;
and (ii) subject to the terms thereof, any benefits that may be due to the
Executive on such date under the provisions of any employee benefit plan,
program or policy.
In the event the Executive is indicted for a felony, then the Employer
may give him a Consulting Officer's Notice and deposit all compensation
accruing thereafter into an interest-bearing escrow account with a mutually
acceptable escrow agent (or failing such agreement, under control of two escrow
agents, one appointed by the Employer and the other by the Executive). In the
event that the ensuing criminal proceedings are resolved without a felony
conviction as provided in (iv) above, then the Executive shall be entitled to
all compensation so deposited into escrow and all accrued interest thereon, and
the escrow agent(s) shall promptly pay the same to him. If the criminal
proceedings result in a felony conviction (based upon a plea bargain or
otherwise) as described in (iv) above, then the Executive shall forfeit all
compensation placed into escrow and shall be deemed to have been terminated for
cause as of the date of the Consulting Officer's Notice given to him.
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8. TERMINATION; CHANGE OF CONTROL.
(a) The Employer shall have the right to terminate the Term
upon at least 15 days' prior written notice to the Executive other than for
cause, provided that upon the effective date of such termination not for cause
(and as a condition precedent thereto) the Employer shall deliver to the
Executive full payment of the Parachute Payment as hereinafter defined. The
Employer also shall have the right, exercisable without terminating the term of
this Agreement by giving a notice of this election to the Executive (a
"Consulting Officer's Notice") to request that the Executive no longer serve as
an officer and director of the Employer and perform only occasional consulting
duties for the balance of the Term. After the Executive receives a Consulting
Officer's Notice: (i) he shall resign from all offices and as a director and
officer of the Employer; (ii) the Employer may employ another person to assume
a substantial portion of the Executive's duties; (iii) the Executive shall
perform only those consulting duties (which shall not include menial or other
duties that are not consistent with the duties of a corporate executive) as the
Employer may request; (iv) all payments of Base Salary, COLA increases and
other economic and benefit provisions of this Agreement and the vesting of all
restricted stock and stock options as provided for in any employee benefit plan
shall continue and remain in effect during the balance of the Term; and (v) the
giving of the Consulting Officer's Notice and performance of the foregoing
provisions of this paragraph shall not, by itself, constitute a breach of this
Agreement by the Employer or otherwise entitle the Executive to a Parachute
Payment.
(b) For purposes hereof, a "Change in Control" shall mean if there is
any change in the beneficial ownership or title to voting securities of the
Employer (other than pursuant to transfers among present shareholders of the
Employer or underwritten public offerings of the Employer's securities)
representing more than 30% (approximately 3 million shares) of the combined
voting power of the Employer's securities, outstanding on the date of this
Agreement, or a party not a shareholder of the Employer on the date hereof
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acquires the power to elect a majority of the Board of Directors of the
Employer. The Executive's sale of Common Stock of the Employer shall not create
a change in control or count against the more than 30% stock ownership test.
The Executive may terminate the Term by giving notice of such termination to
the Employer at any time upon the Employer's material breach hereunder or
within 90 days after the Executive acquires actual knowledge, or receives
notice from the Employer of a change of control of the Employer.
9. PARACHUTE PAYMENTS. If the Term is terminated due to (a) the
occurrence of a Change of Control of the Employer, as defined herein; or (b)
the termination of the Term by the Employer without cause, as described herein;
or (c) the termination by the Executive of his employment with the Employer as
a result of the Employer's material breach hereof, then in any such event (an
"Event of Termination"), (i) the Employer shall pay to the Executive in a lump
sum payment (a "Parachute Payment") on the effective date of the termination of
the Term (the "Termination Date") an amount equal to the sum of (A) three times
the Executive's annualized includible compensation for the base period, as such
may be defined in *280(G) of the Internal Revenue Code of 1986, as amended (or
the regulations promulgated thereunder) (the "Code") minus one dollar; and (B)
such additional sum (the "Additional Sum") as is necessary to indemnify the
Executive (on an after-income-and-excise-tax basis) for any excises tax
liability the Executive may incur, pursuant to *280(G) of the Code (or any
successor thereto) by reason of all payments, benefits and other consideration
in the nature of compensation made to the Executive contingent upon or in
connection with an Event of Termination (including any tax on the Additional
Sum), provided that the Employer's maximum liability under this subparagraph
(i)(B) shall be $250,000 as well as full vesting of the Three Hundred Thousand
shares described in paragraph 4(c) above/, subject to (x) COLA increases in
such amount, and (y) to equitable adjustment to reflect the effect of increases
in he marginal federal income tax rates for individuals above 40%; and (ii) the
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Employer shall maintain in full force and effect, at the Employer's sole
expense (pursuant to waiver of COBRA premiums or otherwise) and for the
Executive's continued benefit until one year after the Termination Date all
life insurance, medical, health and accident, and disability plans and similar
arrangements in which the Executive was entitled to participate immediately
prior to the Event of Termination. In the event that the Executive's
participation in any such plan or program is barred by the plans or programs,
the Employer shall arrange to provide the Executive with benefits, at the
Employer's sole expense, substantially similar to those to which the Executive
is entitled under such plans and programs. The Executive shall not be required
to mitigate the amount of any payment provided for in this Section by seeking
other employment or otherwise, nor shall the amount of any payment provided for
in this Section be reduced by any compensation earned by the Executive as the
result of employment by another employer after the Termination Date or
otherwise; however, the Executive shall have the right (but not the obligation)
to voluntarily reduce the consideration payable to him upon a Change in
Control, in any manner the Executive may elect by written notice to the
Employer.
10. NON-COMPETITION; SOLICITATION.
(a) The Executive agrees that during the Term and for a
period of one year (the "Non-Compete Period") after the Executive receives a
Parachute Payment or the Employer gives the Executive a notice (a "Covenant
Exercise Notice") requesting the Executive to perform the Non-Compete Covenant
(as defined below), he shall not, without the written consent of the Employer,
directly or indirectly, either individually or as an employee, agent, partner,
shareholder, director, consultant, employer, lender of money, guarantor or in
any other capacity, participate in, engage in or have a financial interest or
management position or other interest in any business, firm, corporation or
other entity that competes directly against the Employer in any market in which
the Employer, at the time this Non-Compete Covenant is in effect, generates at
least $250,000 in gross revenue, nor will he solicit any other person to engage
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in any of the foregoing activities (the foregoing is referred to herein as the
"Non-Compete Covenant"). Participation in the management of any business
operation other than in connection with the management of a business operation
that is in competition with the Employer shall not be deemed to be a breach of
this section, nor shall any activities entered into pursuant to or as
contemplated by Section 3 hereof. The foregoing provisions of this section
shall not prohibit the passive ownership by the Executive of five percent (5%)
or less of any class of capital stock of any public corporation. The Employer
shall give a Covenant Exercise Notice, if at all, no later than the effective
date of any termination of the Term, and its failure or delay in giving a
Covenant Exercise Notice shall constitute its irrevocable election not to
enforce the Non-Compete Covenant. In the event the Employer, at its sole
election, invokes this provision by giving the Executive a Covenant Exercise
Notice as aforesaid, then during such time that the Non-Compete Covenant
remains in effect (and as a condition of continued performance of the
Non-Compete Covenant by the Executive) the Employer shall continue to pay to
the Executive the Base Salary in effect at the end of the Term.
(b) The Executive will not at any time during his employment with the
Employer and for the Non-Compete Period thereafter, solicit (or assist or
encourage the solicitation of) any employee of the Employer to work for the
Executive or for any business, firm, corporation or other entity in which the
Executive, directly or indirectly, participates or engages (or expects to
participate or engage) or has (or expects to have) a financial interest or
management position if, and so long as, the Non-Compete Covenant is in effect.
(c) If any of the covenants contained in this section of any part
thereof is held by a court of competent jurisdiction to be unenforceable
because of the duration of such provision, the activity limited by or the
subject of such provision and/or the area covered thereby, then the court
making such determination shall construe such restriction so as to thereafter
be limited or reduced to be enforceable to the greatest extent permissible by
applicable law.
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In no event shall the Non-Compete Covenant become or remain
effective if the Employer fails to make a Parachute Payment or payment of Base
Salary as provided for in this Section.
11. TRADE SECRETS, ETC. The Executive agrees that he shall not, during
or after the termination of this Agreement, divulge, furnish or make accessible
to any person, firm, corporation or other business entity, any information,
trade secrets, technical data or know-how relating to the business, business
practices, methods, products, processes, equipment, clients' prices or other
confidential or secret aspect of the business of the Employer and/or any
subsidiary or affiliate, except as may be required in good faith in the course
of his employment with the Employer or by law, without the prior written
consent of the Employer, unless such information shall become public knowledge
(other than by reason of the Executive's breach of the provisions hereof). Upon
termination of the term of this Agreement, the Executive shall return to the
Employer all tangible embodiments of any trade secrets of the Employer.
12. ACCEPTANCE BY THE EXECUTIVE. The Executive accepts all of the
terms and provisions of this Agreement and agrees to perform all of the
covenants on his part to be performed hereunder.
13. EQUITABLE REMEDIES. The Executive acknowledges that he has been
employed for his unique talents and that his leaving the employ of the Employer
would seriously hamper the business of the Employer and the parties acknowledge
that any violation or breach of this Agreement will cause the non-breaching
party to suffer irreparable damage. The parties hereby expressly agree that the
non-breaching party shall be entitled as a matter of right to injunctive or
other equitable relief, in addition to all other remedies permitted by law, to
prevent a breach or violation by the other party and to secure enforcement of
the provisions of this Agreement. Resort to such equitable relief, however,
shall not constitute a waiver of any other rights or remedies which the
non-breaching party may have.
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14. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties hereto and there are no terms other than those contained
herein. No variation hereof shall be deemed valid unless in writing and signed
by the parties hereto and no discharge of the terms hereof shall be deemed
valid unless by full performance of the parties hereto or by a writing signed
by the parties hereto. No waiver by any party of any breach by the other party
of any provision or condition of this Agreement by it to be performed shall be
deemed a waiver of a breach of a similar or dissimilar provision or condition
at the same time or any prior or subsequent time.
15. SEVERABILITY. In case any provision in this Agreement shall be
declared invalid, illegal or unenforceable by any court of competent
jurisdiction, the validity and enforceability of the remaining provisions shall
not in any way be affected or impaired thereby.
16. NOTICES. All notices, requests, demands and other communications
provided for by this Agreement ("Notices") shall be in writing and shall be
deemed to have been given and to have been effective at the time when hand
delivered or delivered by Federal Express or other recognized overnight courier
delivery service, such Notices to be addressed to the addresses of the
respective parties stated below or to such changed addresses as such parties
may fix by Notice given as aforesaid:
To the Employer: Access HealthMax Holdings, Inc.
2016 Orange Drive
Orlando, Florida 32806
To the Executive: Steven Miracle
3530 New Heritage Drive
Alpharetta, Georgia, 30022
provided, however, that any Notice of change of address shall be effective only
upon receipt.
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17. SUCCESSORS AND ASSIGNS. This Agreement is personal in its nature
and neither of the parties hereto shall, without the consent of the other,
assign or transfer this Agreement or any rights or obligations hereunder
(except for an assignment or transfer by the Employer to a successor as
contemplated by the following proviso); provided, however, that the provisions
hereof shall inure to the benefit of, and be binding upon, any successor of the
Employer, whether by merger, consolidation, transfer of all or substantially
all of the assets of the Employer or otherwise, and upon the Executive, his
heirs, executors, administrators and legal representatives.
18. GOVERNING LAW. This Agreement and its validity, construction and
performance shall be governed in all respects by the internal laws of the State
of Florida without giving effect to any principles of conflict of laws.
19. HEADINGS. The headings in this Agreement are for convenience of
reference only and shall not control or affect the meaning or construction of
this Agreement.
20. NUMBER AND GENDER. All words in this Agreement refer to whatever
number or gender the context requires; if more than one party or person is
referred to, their obligations and liabilities shall be joint and several. All
of the terms and words used in this Agreement, regardless of the number and
gender in which they are used, shall be deemed and construed to include any
other number (singular or plural) or any other gender (masculine, feminine or
neuter) as the context or sense of this Agreement, or any section or clause
hereof, may require. The locative adverbs "herein," "hereunder," "hereto,"
"hereinafter" and the like words wherever the same appear herein mean and refer
to this Agreement in its entirety and not to any specific paragraph section or
subsection hereof unless otherwise expressly designated in context.
21. FURTHER ASSURANCES. Subsequent to the execution of this Agreement
from time to time, as and when reasonably requested by any of the parties, each
party shall execute and deliver, or cause to be executed and delivered, all
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such documents and instruments and shall take, or cause to be taken all such
further or other actions as the requesting party may reasonably deem necessary
or desirable to carry out the intent and purpose of this Agreement.
THE REST OF THIS PAGE LEFT INTENTIONALLY BLANK
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed and delivered as of the date first written above.
ACCESS HEALTHMAX HOLDINGS, INC.
By: /s/ Daniel J. Pavlik
------------------------------------
Daniel J. Pavlik
President
EXECUTIVE:
/s/ Steven Miracle
----------------------------------------
Steven Miracle
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Exhibit 10.2
EXECUTIVE EMPLOYMENT AGREEMENT
THIS EXECUTIVE EMPLOYMENT AGREEMENT (the "Agreement") is entered into
as of the 1st day of January 1999 by and between Donald Metchick (the
"Executive") and Access Health Alternatives, Inc., a Florida corporation (the
"Employer").
RECITALS
A. The Executive is an integral part of the development and operation
of the Employer and is an important member of the management of the Employer.
B. The Employer wishes to ensure the continued relationship between
the Employer and the Executive and to recognize the contributions of the
Executive to the continued growth of the Employer.
C. The Executive wishes to be employed by the Employer and the
Employer wishes to employ the Executive, all on the terms and conditions set
forth herein.
NOW, THEREFORE, in consideration of the foregoing premises, and for
such other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties, intending to be legally bound,
hereby agree as follows.
1. EMPLOYMENT. The Employer hereby employs the Executive as the
Executive Vice President in charge of Access Health Assurance Plans, Inc., a
wholly owned subsidiary of the Employer, with such duties and responsibilities
as shall be customarily assumed by such officer, and such additional duties and
responsibilities as may be reasonably assigned from time to time by the Board
of Directors of the Employer.
2. TERM. The initial term of this Agreement shall be for three (3)
years from the effective date hereof, and shall be renewed, upon 90 (ninety)
days written notice, for additional one-year terms unless terminated in
<PAGE> 2
accordance with the termination provisions set forth elsewhere herein. The
terms of any renewal period shall be no less favorable to the Executive than
the terms of the immediately preceding year of employment, unless otherwise
agreed by the Executive prior to the commencement of such renewal term. That
period of time commencing with the Effective Date and ending with the
Termination Date (as hereinafter defined) shall be known as the "Term."
3. NATURE OF EMPLOYMENT. The employment of the Executive hereunder
shall be considered full-time in nature. Nothing set forth herein, however,
shall preclude the Executive from accepting any employment with any other
company or entity under Common Control (as hereinafter defined) with the
Employer; provided, however, that the Board of Directors of the Employer shall
be satisfied that such other employment does not represent a conflict of
interest with the interests of the Employer and that such other employment does
not impair the Executive's ability to faithfully and effectively execute his
responsibilities to the Employer.
4. COMPENSATION. In consideration for his employment hereunder, the
Executive shall receive the following compensation:
a. BASE SALARY. During the Term hereof, the Executive shall
receive an annual base salary of $100,000. The Base Salary shall be paid no
less frequently than monthly and otherwise in accordance with the Employer's
general payroll policy.
b. BONUS. During the Term hereof, and to the extent funds are
legally available therefor, the Executive shall receive a bonus (the "Bonus")
equal to 2% of the Employer's annual net profits after taxes, which bonus shall
be paid to the Executive within 30 days following the Employer's receipt of the
audited financial statements for the fiscal year in questions. The Bonus shall
be subject to the following annual maximums:
Year one: $100,000
Year two: $150,000
Year three: $200,000
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Nothing set forth herein shall prevent the Board of Directors
from authorizing the payment of bonus compensation to the Executive in addition
to the foregoing Bonus.
c. STOCK BONUS. Upon the effective date of this Agreement,
the Employer shall issue in the name of the Executive 300,000 restricted shares
of the Employer's common stock, which shares shall have been issued under an
exemption from registration under the Securities Act of 1933, as amended, and
which shares shall be subject to substantial restrictions on transferability.
The Executive shall be deemed to have earned, and shall receive, 100,000 of
theses shares upon commencement of the Term; certificates evidencing the
remaining shares shall be held in escrow by legal counsel for the Employer, to
be released to the Executive in equal amounts on each of the first and second
anniversaries of the effective date of this Agreement, provided the Executive
remains in the employment of the Employer at such times. Until the escrowed
shares are released from escrow, the Executive shall not be entitled to vote,
dispose of, encumber or otherwise exercise any rights or incidents of ownership
pertaining to the escrowed shares.
5. BENEFITS. In addition to the foregoing compensation, during the
Term hereof the Executive shall be entitled to the following benefits.
a. EXPENSES. As soon as it is able to obtain corporate
credit, the Employer shall provide the Executive with a corporate credit card.
Any single expense in excess of $1,000 (not including travel or travel-related
expenses) shall be approved in advance by at least one other executive officer
of the Employer. Any expenses reasonably incurred in connection with the
Executive's performance of his duties hereunder shall be promptly reimbursed
upon presentation of receipts therefore.
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b. HOUSING AND TRAVEL. Must be pre-approved
c. MEDICAL. The Executive, and his eligible dependents, if
any, shall receive the same medical, dental and other health benefits that the
Employer may provide during the Term hereof, from time to time, to the other
members of senior management.
d. VACATION. The Executive shall be entitled to two weeks per
year of paid vacation time, which time shall not accrue from year to year and
for which no additional compensation will be paid if not taken.
e. STOCK OPTION, PROFIT SHARING, PENSION, RETIREMENT AND
OTHER PLANS. The Executive shall be entitled to participate in any stock
option, profit sharing, pension, retirement or other plans as may be
implemented from time to time by the Board of Directors of the Employer.
f. DIRECTORS' AND OFFICERS' INSURANCE. The Employer agrees
that as promptly following its first profitable month of operation as possible,
it will use its best efforts to acquire directors' and officers' insurance, it
being agreed and understood that this is an essential factor in the Executive's
agreement to serve as an officer of the Employer.
6. DEATH; PERMANENT DISABILITY. Upon the death of the Executive during
the term of this Agreement, the Term shall terminate. If, during the Term, the
Executive fails, because of illness or other incapacity, to perform the
services required to be performed by him hereunder for any period of more than
120 days during any calendar year (provided that up to the first four weeks of
any such inability shall be treated as vacation time and vacation time, if not
previously taken, shall be exhausted before the above 120-day period commences
to run) (any such illness or incapacity being hereinafter referred to as
"Permanent Disability"), then the Employer, in its discretion, may at any time
thereafter either (a) give the Executive a Consulting Officer's Notice (as
hereinafter defined), except that in these circumstances the payment of Base
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Salary due after the effective date of such Consulting Officer's Notice shall
be reduced on a dollar-for-dollar basis by the amount of all disability
insurance payments actually received by the Executive by reason of such
Permanent Disability, or (b) terminate the Term upon not less than 30 days'
written notice thereof to the Executive, and the Term shall terminate and come
to an end upon the date set forth in said notice as if said date were the
termination date of the Term; provided, however, that no such termination shall
be effective if prior to the date when such notice is given, the Executive's
illness or incapacity shall be terminated and he shall be physically and
mentally able to perform the services required hereunder and shall have taken
up and be performing such duties.
If the Executive's employment shall be terminated by reason of his
death or Permanent Disability, the Executive or his estate, as the case may be,
shall be entitled to receive (i) any earned and unpaid salary accrued through
the date of termination; (ii) a pro rata portion of any annual bonus that the
Executive otherwise would have been entitled to receive pursuant to any bonus
plan or arrangement for senior executives of the Employer, such pro rata
portion to be payable at the time such annual bonus otherwise would have been
payable to the Executive; (iii) a lump sum payment on the effective date of
termination for Permanent Disability or within 60 days after the Executive's
death (payment in such case being payable to the Executive's estate) equal to
12 months' Base Salary at the rate in effect immediately prior to such
termination of employment; and (iv) subject to the terms thereof, any benefits
that may be due to the Executive on the date of termination under the
provisions of any employee benefit plan, program or policy.
7. TERMINATION FOR CAUSE. The Employer may at any time during the term
of this Agreement, by written notice, terminate the Term for cause, the cause
to be specified in the notice. For purposes of this Agreement, "cause" and "for
cause" shall mean (i) any intentional breach of the Executive's fiduciary duty
to the Employer that is intended to cause, and actually causes, injury to the
Employer's business or business relationships; (ii) the Executive's material
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breach under this Agreement; (iii) the Executive's gross negligence in the
performance of his duties that materially adversely affects the Employer; and
(iv) conviction of a felony during the Term; provided, however, that (A) the
Employer shall give the Executive notice of any circumstances described in (i),
(ii) or (iii), above, which notice shall describe such circumstances in
reasonable detail, and (B) no "cause" for termination shall be deemed to exist
if the Executive shall remedy or cure the relevant circumstances within 10 days
from his receipt of such notice. Termination for cause under clause (i), (ii)
or (iii) shall be effective on the second business day after receipt by the
Executive of a further written notice from the Employer, following expiration
of the 10-day cure period as aforesaid; provided the Executive has not
previously cured the event of cause; and termination for cause under (iv) above
shall be effective immediately upon receipt by the Executive of written notice
of termination. The Executive shall be entitled to receive upon termination for
cause (i) any earned and unpaid salary accrued through the date of termination;
and (ii) subject to the terms thereof, any benefits that may be due to the
Executive on such date under the provisions of any employee benefit plan,
program or policy.
In the event the Executive is indicted for a felony, then the Employer
may give him a Consulting Officer's Notice and deposit all compensation
accruing thereafter into an interest-bearing escrow account with a mutually
acceptable escrow agent (or failing such agreement, under control of two escrow
agents, one appointed by the Employer and the other by the Executive). In the
event that the ensuing criminal proceedings are resolved without a felony
conviction as provided in (iv) above, then the Executive shall be entitled to
all compensation so deposited into escrow and all accrued interest thereon, and
the escrow agent(s) shall promptly pay the same to him. If the criminal
proceedings result in a felony conviction (based upon a plea bargain or
otherwise) as described in (iv) above, then the Executive shall forfeit all
compensation placed into escrow and shall be deemed to have been terminated for
cause as of the date of the Consulting Officer's Notice given to him.
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8. TERMINATION; CHANGE OF CONTROL.
(a) The Employer shall have the right to terminate the Term
upon at least 15 days' prior written notice to the Executive other than for
cause, provided that upon the effective date of such termination not for cause
(and as a condition precedent thereto) the Employer shall deliver to the
Executive full payment of the Parachute Payment as hereinafter defined. The
Employer also shall have the right, exercisable without terminating the term of
this Agreement by giving a notice of this election to the Executive (a
"Consulting Officer's Notice") to request that the Executive no longer serve as
an officer and director of the Employer and perform only occasional consulting
duties for the balance of the Term. After the Executive receives a Consulting
Officer's Notice: (i) he shall resign from all offices and as a director and
officer of the Employer; (ii) the Employer may employ another person to assume
a substantial portion of the Executive's duties; (iii) the Executive shall
perform only those consulting duties (which shall not include menial or other
duties that are not consistent with the duties of a corporate executive) as the
Employer may request; (iv) all payments of Base Salary, COLA increases and
other economic and benefit provisions of this Agreement and the vesting of all
restricted stock and stock options as provided for in any employee benefit plan
shall continue and remain in effect during the balance of the Term; and (v) the
giving of the Consulting Officer's Notice and performance of the foregoing
provisions of this paragraph shall not, by itself, constitute a breach of this
Agreement by the Employer or otherwise entitle the Executive to a Parachute
Payment.
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(b) For purposes hereof, a "Change in Control" shall mean if there is
any change in the beneficial ownership or title to voting securities of the
Employer (other than pursuant to transfers among present shareholders of the
Employer or underwritten public offerings of the Employer's securities)
representing more than 30% (approximately 3 million shares) of the combined
voting power of the Employer's securities, outstanding on the date of this
Agreement, or a party not a shareholder of the Employer on the date hereof
acquires the power to elect a majority of the Board of Directors of the
Employer. The Executive's sale of Common Stock of the Employer shall not create
a change in control or count against the more than 30% stock ownership test.
The Executive may terminate the Term by giving notice of such termination to
the Employer at any time upon the Employer's material breach hereunder or
within 90 days after the Executive acquires actual knowledge, or receives
notice from the Employer of a change of control of the Employer.
9. PARACHUTE PAYMENTS. If the Term is terminated due to (a) the
occurrence of a Change of Control of the Employer, as defined herein; or (b) the
termination of the Term by the Employer without cause, as described herein; or
(c) the termination by the Executive of his employment with the Employer as a
result of the Employer's material breach hereof, then in any such event (an
"Event of Termination"), (i) the Employer shall pay to the Executive in a lump
sum payment (a "Parachute Payment") on the effective date of the termination of
the Term (the "Termination Date") an amount equal to the sum of (A) three times
the Executive's annualized includible compensation for the base period, as such
may be defined in Section 280(G) of the Internal Revenue Code of 1986, as
amended (or the regulations promulgated thereunder) (the "Code") minus one
dollar; and (B) such additional sum (the "Additional Sum") as is necessary to
indemnify the Executive (on an after-income-and-excise-tax basis) for any
excises tax liability the Executive may incur, pursuant to Section 280(G) of the
Code (or any
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successor thereto) by reason of all payments, benefits and other consideration
in the nature of compensation made to the Executive contingent upon or in
connection with an Event of Termination (including any tax on the Additional
Sum), provided that the Employer's maximum liability under this subparagraph
(i)(B) shall be $250,000 as well as full vesting of the Three Hundred Thousand
shares described in paragraph 4(c) above/, subject to (x) COLA increases in
such amount, and (y) to equitable adjustment to reflect the effect of increases
in he marginal federal income tax rates for individuals above 40%; and (ii) the
Employer shall maintain in full force and effect, at the Employer's sole
expense (pursuant to waiver of COBRA premiums or otherwise) and for the
Executive's continued benefit until one year after the Termination Date all
life insurance, medical, health and accident, and disability plans and similar
arrangements in which the Executive was entitled to participate immediately
prior to the Event of Termination. In the event that the Executive's
participation in any such plan or program is barred by the plans or programs,
the Employer shall arrange to provide the Executive with benefits, at the
Employer's sole expense, substantially similar to those to which the Executive
is entitled under such plans and programs. The Executive shall not be required
to mitigate the amount of any payment provided for in this Section by seeking
other employment or otherwise, nor shall the amount of any payment provided for
in this Section be reduced by any compensation earned by the Executive as the
result of employment by another employer after the Termination Date or
otherwise; however, the Executive shall have the right (but not the obligation)
to voluntarily reduce the consideration payable to him upon a Change in
Control, in any manner the Executive may elect by written notice to the
Employer.
10. NON-COMPETITION; SOLICITATION.
(a) The Executive agrees that during the Term and for a
period of one year (the "Non-Compete Period") after the Executive receives a
Parachute Payment or the Employer gives the Executive a notice (a "Covenant
9
<PAGE> 10
Exercise Notice") requesting the Executive to perform the Non-Compete Covenant
(as defined below), he shall not, without the written consent of the Employer,
directly or indirectly, either individually or as an employee, agent, partner,
shareholder, director, consultant, employer, lender of money, guarantor or in
any other capacity, participate in, engage in or have a financial interest or
management position or other interest in any business, firm, corporation or
other entity that competes directly against the Employer in any market in which
the Employer, at the time this Non-Compete Covenant is in effect, generates at
least $250,000 in gross revenue, nor will he solicit any other person to engage
in any of the foregoing activities (the foregoing is referred to herein as the
"Non-Compete Covenant"). Participation in the management of any business
operation other than in connection with the management of a business operation
that is in competition with the Employer shall not be deemed to be a breach of
this section, nor shall any activities entered into pursuant to or as
contemplated by Section 3 hereof. The foregoing provisions of this section
shall not prohibit the passive ownership by the Executive of five percent (5%)
or less of any class of capital stock of any public corporation. The Employer
shall give a Covenant Exercise Notice, if at all, no later than the effective
date of any termination of the Term, and its failure or delay in giving a
Covenant Exercise Notice shall constitute its irrevocable election not to
enforce the Non-Compete Covenant. In the event the Employer, at its sole
election, invokes this provision by giving the Executive a Covenant Exercise
Notice as aforesaid, then during such time that the Non-Compete Covenant
remains in effect (and as a condition of continued performance of the
Non-Compete Covenant by the Executive) the Employer shall continue to pay to
the Executive the Base Salary in effect at the end of the Term.
(b) The Executive will not at any time during his employment with the
Employer and for the Non-Compete Period thereafter, solicit (or assist or
encourage the solicitation of) any employee of the Employer to work for the
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<PAGE> 11
Executive or for any business, firm, corporation or other entity in which the
Executive, directly or indirectly, participates or engages (or expects to
participate or engage) or has (or expects to have) a financial interest or
management position if, and so long as, the Non-Compete Covenant is in effect.
(c) If any of the covenants contained in this section of any part
thereof is held by a court of competent jurisdiction to be unenforceable
because of the duration of such provision, the activity limited by or the
subject of such provision and/or the area covered thereby, then the court
making such determination shall construe such restriction so as to thereafter
be limited or reduced to be enforceable to the greatest extent permissible by
applicable law.
In no event shall the Non-Compete Covenant become or remain
effective if the Employer fails to make a Parachute Payment or payment of Base
Salary as provided for in this Section.
11. TRADE SECRETS, ETC. The Executive agrees that he shall not, during
or after the termination of this Agreement, divulge, furnish or make accessible
to any person, firm, corporation or other business entity, any information,
trade secrets, technical data or know-how relating to the business, business
practices, methods, products, processes, equipment, clients' prices or other
confidential or secret aspect of the business of the Employer and/or any
subsidiary or affiliate, except as may be required in good faith in the course
of his employment with the Employer or by law, without the prior written
consent of the Employer, unless such information shall become public knowledge
(other than by reason of the Executive's breach of the provisions hereof). Upon
termination of the term of this Agreement, the Executive shall return to the
Employer all tangible embodiments of any trade secrets of the Employer.
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<PAGE> 12
12. ACCEPTANCE BY THE EXECUTIVE. The Executive accepts all of the
terms and provisions of this Agreement and agrees to perform all of the
covenants on his part to be performed hereunder.
13. EQUITABLE REMEDIES. The Executive acknowledges that he has been
employed for his unique talents and that his leaving the employ of the Employer
would seriously hamper the business of the Employer and the parties acknowledge
that any violation or breach of this Agreement will cause the non-breaching
party to suffer irreparable damage. The parties hereby expressly agree that the
non-breaching party shall be entitled as a matter of right to injunctive or
other equitable relief, in addition to all other remedies permitted by law, to
prevent a breach or violation by the other party and to secure enforcement of
the provisions of this Agreement. Resort to such equitable relief, however,
shall not constitute a waiver of any other rights or remedies which the
non-breaching party may have.
14. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties hereto and there are no terms other than those contained
herein. No variation hereof shall be deemed valid unless in writing and signed
by the parties hereto and no discharge of the terms hereof shall be deemed
valid unless by full performance of the parties hereto or by a writing signed
by the parties hereto. No waiver by any party of any breach by the other party
of any provision or condition of this Agreement by it to be performed shall be
deemed a waiver of a breach of a similar or dissimilar provision or condition
at the same time or any prior or subsequent time.
15. SEVERABILITY. In case any provision in this Agreement shall be
declared invalid, illegal or unenforceable by any court of competent
jurisdiction, the validity and enforceability of the remaining provisions shall
not in any way be affected or impaired thereby.
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<PAGE> 13
16. NOTICES. All notices, requests, demands and other communications
provided for by this Agreement ("Notices") shall be in writing and shall be
deemed to have been given and to have been effective at the time when hand
delivered or delivered by Federal Express or other recognized overnight courier
delivery service, such Notices to be addressed to the addresses of the
respective parties stated below or to such changed addresses as such parties
may fix by Notice given as aforesaid:
To the Employer: Access Health Alternatives, Inc.
2016 Orange Drive
Orlando, Florida 32806
To the Executive: Donald Metchick
2016 South Orange Ave.
Orlando, Florida 32806
provided, however, that any Notice of change of address shall be effective only
upon receipt.
17. SUCCESSORS AND ASSIGNS. This Agreement is personal in its nature
and neither of the parties hereto shall, without the consent of the other,
assign or transfer this Agreement or any rights or obligations hereunder
(except for an assignment or transfer by the Employer to a successor as
contemplated by the following proviso); provided, however, that the provisions
hereof shall inure to the benefit of, and be binding upon, any successor of the
Employer, whether by merger, consolidation, transfer of all or substantially
all of the assets of the Employer or otherwise, and upon the Executive, his
heirs, executors, administrators and legal representatives.
18. GOVERNING LAW. This Agreement and its validity, construction and
performance shall be governed in all respects by the internal laws of the State
of Florida without giving effect to any principles of conflict of laws.
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19. HEADINGS. The headings in this Agreement are for convenience of
reference only and shall not control or affect the meaning or construction of
this Agreement.
20. NUMBER AND GENDER. All words in this Agreement refer to whatever
number or gender the context requires; if more than one party or person is
referred to, their obligations and liabilities shall be joint and several. All
of the terms and words used in this Agreement, regardless of the number and
gender in which they are used, shall be deemed and construed to include any
other number (singular or plural) or any other gender (masculine, feminine or
neuter) as the context or sense of this Agreement, or any section or clause
hereof, may require. The locative adverbs "herein," "hereunder," "hereto,"
"hereinafter" and the like words wherever the same appear herein mean and refer
to this Agreement in its entirety and not to any specific paragraph section or
subsection hereof unless otherwise expressly designated in context.
21. FURTHER ASSURANCES. Subsequent to the execution of this Agreement
from time to time, as and when reasonably requested by any of the parties, each
party shall execute and deliver, or cause to be executed and delivered, all
such documents and instruments and shall take, or cause to be taken all such
further or other actions as the requesting party may reasonably deem necessary
or desirable to carry out the intent and purpose of this Agreement.
THE REST OF THIS PAGE LEFT INTENTIONALLY BLANK
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed and delivered as of the date first written above.
ACCESS HEALTH ALTERNATIVES, INC.
By: /s/ Daniel J. Pavlik
-----------------------------------
Daniel J. Pavlik
President
EXECUTIVE:
/s/ Donald Metchick
---------------------------------------
Donald Metchick
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<PAGE> 1
Exhibit 10.3
OPERATING AGREEMENT
FOR
ACCESS HEALTHMAX LLC II
<PAGE> 2
OPERATING AGREEMENT
FOR
ACCESS HEALTHMAX LLC II
A Florida Limited Liability Company
This Operating Agreement ("Agreement") of Access HealthMax LLC II is
entered into effective as of May, 1997 by those persons executing the signature
pages hereof as Members (hereafter, the "MEMBERS"), and Access HealthMax, Inc.,
a Florida corporation (hereafter, the "MANAGER") for the purpose of setting up
the regulations for operating Access HealthMax LLC II as a Florida limited
liability company, pursuant to Chapter 608 of the Florida Revised Statutes (the
"FLORIDA ACT"). In this Agreement, the Manager and the Members may be referred
to individually as a "Member" or collectively as the "Members."
Daniel J. Pavlik is the Initial Member, whose Economic Interest shall
be retired upon the admission of the Members. The Manager also is a Member.
Pursuant to the Florida Act, management of the LLC is vested in the
Manager. The Manager also is a Member, as provided herein.
RECITALS
A. Articles of Organization for Access HealthMax LLC II (the "LLC")
were filed with the Florida Department of State on or about May 7, 1997.
B. The LLC is or may be authorized to do business in the following
state(s): Florida, Minnesota, and other states in the Midwestern United States.
C. The parties hereto desire to set forth the terms and conditions of
the admission of Members to the LLC and their agreement of the regulations by
which the LLC is to be operated.
D. This Operating Agreement is attached as an exhibit to the Private
Placement Memorandum dated May 12, 1997 (the "Memorandum") prepared by the LLC
in connection with the offer and sale of Economic Interests for a total of up
to $1,000,000, consisting in the aggregate of cash proceeds and up to $500,000
in face value of indebtedness owed by the Manager which is exchanged by the
investor for Economic Interests herein.
AGREEMENT
In consideration of the mutual promises and covenants contained
herein, the parties agree as follows:
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ARTICLE I
NAMES, ADDRESSES, AND DEFINITIONS
1.1 NAME. The name of this limited liability company is Access
HealthMax LLC II, a Florida limited liability company.
1.2 PURPOSE AND ADDRESS FOR LLC RECORDS. The business purpose of the
LLC is to sell, primarily to health care providers, a comprehensive lifestyle
management system and related nutritional supplement program, which is
proprietary to the Manager. The system and program is to be sold to clinical
support centers, through regional offices to be set up by the LLC in the states
to be serviced by the LLC. No other purpose will be pursued by the LLC without
the approval of the Members holding a majority of the Capital Interests held by
all of the Members.
The address within Florida where the books and records of the LLC will
be kept is 2012 South Orange Avenue, Orlando, Florida 32806, or at such other
location within Florida as may be designated by the Manager. The business
activities of the LLC will be conducted initially through a clinical support
center to be opened in Minnesota, and thereafter in additional states as
warranted, which states may include Ohio, Pennsylvania, Virginia, West
Virginia, Delaware, and the District of Columbia.
1.3 REGISTERED OFFICE AND REGISTERED AGENT. The LLC's initial
registered office shall be at the office of its registered agent, Access
HealthMax, Inc., 2012 South Orange Avenue, Orlando, Florida 32806.
1.4 NAMES AND ADDRESSES OF THE MEMBERS.
MANAGER:
Access HealthMax, Inc.
2012 South Orange Avenue
Orlando, Florida 32806
INITIAL MEMBER:
Daniel J. Pavlik
2102 South Orange Avenue
Orlando, Florida 32806
MEMBERS:
Access HealthMax, Inc.
2012 South Orange Avenue
Orlando, Florida 32806
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The Economic Members, as set forth on the counterpart
signature pages of this Agreement.
1.5 TERM. Except as provided herein, the term of the LLC shall
continue from the date of the filing of the Articles of Organization with the
Florida Secretary of State until the first to occur of (i) the dissolution of
the LLC in accordance with either the provisions of this Operating Agreement or
the Florida Act; or (ii) the 10th anniversary of the date of the filing of the
Articles of Organization with the Florida Secretary of State.
1.6 LLC PROPERTY. LLC Property shall include all of the property owned
and acquired by the LLC, whether real or personal or tangible or intangible. No
Member, as such, shall have any owner- ship interest in any such LLC Property.
All property paid or brought into, or transferred to, the LLC as a Capital
Contribution of a Member, or subsequently acquired by purchase, trade or
otherwise, on account of the LLC, shall be LLC Property.
1.7 OTHER QUALIFICATION FILINGS. In addition to the Articles of
Organization, the Manager shall file and publish all other instruments and
notices for the operation, qualification under the laws of other states, and
continuation of a limited liability company as necessary.
1.8 DEFINITIONS. The following terms shall have the following meanings
in this Agreement:
a. "ARTICLES OF ORGANIZATION" shall mean the Articles of
Organization of the LLC.
b. "CAPITAL ACCOUNT" as of any given date shall mean the
Capital Contribution to the LLC by a Member as adjusted up to a given date
pursuant to Articles III and IV. "DEFICIT CAPITAL ACCOUNT" shall mean with
respect to any Member, the deficit balance, if any, in such Member's Capital
Account as of the end of the taxable year.
c. "CAPITAL CONTRIBUTION" shall mean any contribution to the
capital of the LLC in cash or property by a Member whenever made. "INITIAL
CAPITAL CONTRIBUTION" shall mean the initial contribution to the capital of the
LLC pursuant to this Operating Agreement, consisting of cash or the exchange of
an Economic Interest for the cancellation of indebtedness owed to the investor
by the Manager, which indebtedness was incurred by the Manager prior to the
formation of this LLC. Upon issuance by the LLC of an Interest in exchange for
the cancellation of any such indebtedness, all of such indebtedness shall be
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extinguished and canceled, and none of such indebtedness shall be owed to the
investor by the LLC or by the Manager. Initial Capital Contributions, whether
consisting of cash or the cancellation of indebtedness or a combination of
both, shall be treated equally under this Agreement.
d. "CAPITAL INTEREST" shall mean the proportion that a
Member's positive Capital Account bears to the aggregate positive Capital
Accounts of all Members whose Capital Accounts have positive balances, as
adjusted from time to time.
e. "CODE" shall mean the Internal Revenue Code of 1986, as
amended, or corresponding provisions of subsequent superseding federal revenue
laws.
f. "FLORIDA ACT" shall mean the Florida Revised Code,
Sections 1705.01 - 17.05.58, as in effect as of the filing of the Articles of
Organization, and as may be amended in the future.
g. "LLC" refers to Access HealthMax LLC II.
h. "DISTRIBUTABLE CASH" shall mean all cash, revenues, and
funds received by the LLC from LLC operations or activities, after deduction of
the sum of the following to the extent paid or set aside by the LLC:
(i) all principal and interest payments on indebtedness of
the LLC;
(ii) all expenses which have been incurred incident to the
normal operation of the LLC's business, including: (a) general and
administrative expense related to the LLC's office in Florida and to
the additional clinical support centers, but not including general and
administrative expense of the Manager; (b) promotional and marketing
expense, including travel expense of the Manager related to marketing
of the LLC services and products; and (c) all amounts owed or payable
to the Manager under Section 6.8 of this Agreement (for the
reimbursement of expenses, for management fees, and for regional
office opening expense, and the other items specified under Section
6.8); and
(iii) such Reserves as the Manager deems reasonably necessary
for the proper operation of the LLC's business, including without
limitation working capital requirements for inventory and other items,
capital replacements, improvements and any contingencies as determined
by the Manager.
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i. "ECONOMIC INTEREST" shall mean a Manager's or Member's
share of the LLC's Net Profits, Net Losses, and distributions of the LLC's
assets pursuant to this Operating Agreement and the Florida Act. Except as
provided herein, an Economic Interest does not entitle the holder to any right
to participate in the management of the LLC, or any right to vote on, consent
to, or otherwise participate in any decision of the Manager relating to the
LLC. An Economic Interest may only be transferred in accordance with this
Operating Agreement.
j. "MEMBER" shall mean the owner of an Economic Interest in
the LLC. A Member shall be entitled to inspect the books and records of the
LLC. The LLC shall provide regular reports to the Members concerning the LLC
business, and to provide to the Members the tax returns and other information
necessary to enable the Members to include information about the LLC in their
tax returns on a timely basis.
k. "ENTITY" shall mean any general partnership, limited
partnership, limited liability company, limited liability partnership, limited
liability limited partnership, corporation, joint venture, trust, business
trust, cooperative, or association or any foreign trust or foreign business
organization, or any other entity through which business may be lawfully
conducted.
l. "FISCAL YEAR" shall mean the LLC's fiscal year, which
shall be the calendar year.
m. "MANAGER" shall mean Access HealthMax, Inc. and its
successors in interest, and any further or additional Managers appointed under
this Agreement. References to the Manager in the singular shall also, where the
context so requires, be deemed to include the plural.
n. "MANAGER'S INTEREST" shall mean a Manager's entire
interest in the LLC including any Economic Interest held as a Member and such
other rights and privileges as the Manager may possess under this Agreement,
including the right to manage the business and affairs of the LLC and the
rights to Net Profits and Net Losses and to receive Distributable Cash.
o. "LIQUIDATING EVENT" shall mean a sale, condemnation,
exchange, foreclosure or other transaction which results in the disposition of
all or substantially all of the assets of the LLC, or any other event which
effects the dissolution of the LLC.
p. "NET PROFITS" and "NET LOSSES" shall mean the income,
gain, loss, deductions, and credits of the LLC in the aggregate or separately
stated, as appropriate, determined in accordance with Article IV herein.
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q. "PERSON" means any individual or Entity and the heirs,
executors, administrators, legal representatives, successors, and assigns of
the "Person" where the context so permits.
r. "PREFERENCE" means the right of the Members to receive an
annual, non-guaranteed, cumulative, non-compounding, priority cash payment from
Distributable Cash equal to 10.5% per year of 100% of the Initial Capital
Contributions of the Members, until such time as the Members have received cash
distributions from the LLC equal to 125% of their Initial Capital
Contributions. The Members have a priority over distributions to the Manager as
set forth in Article IV of this Agreement.
The Preference shall start to accrue upon the LLC's acceptance of the
last subscription from a Member in establishing the LLC, irrespective of when
any individual Member subscribes for an interest in the LLC and irrespective of
when any individual Member delivers his or its Capital Contribution to the LLC.
If available, the Preference shall be paid to each Member quarterly. Any monies
returned to the Members in any one year period in an amount in excess of a
cumulative 10.5% return on the invested and unreturned Capital Contributions of
the Members shall be deemed to constitute a partial or complete return (as the
case may be) of the Members' Initial Capital Contributions.
s. "RESERVES" shall mean, with respect to any fiscal period,
funds of the LLC (from whatever source) which are set aside or allocated to
reserves maintained in amounts deemed sufficient by the Manager for working
capital, and to pay taxes, insurance, debt service, or other costs or expenses,
incident to the operation of the LLC business, including amounts owed to the
Manager under Section 6.8
t. "SUBSCRIPTION AGREEMENT" means the Subscription Agreement
to be executed by each Member in connection with the purchase of an Economic
Interest in the LLC for cash or for the cancellation of indebtedness owed to
the investor by the Manager.
u. "TREASURY REGULATIONS" and "REGULATIONS" shall include
proposed, temporary, and final regulations promulgated under the Code in effect
as of the date of filing the Articles of Organization and the corresponding
sections of any regulations subsequently issued that amend or supersede such
regulations.
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ARTICLE II
POWERS OF THE LLC
2.1 POWERS. The LLC shall have and exercise all powers necessary or
appropriate, in the determination of the Manager, to operate the business of
the LLC.
ARTICLE III
CAPITAL
3.1 INITIAL CAPITAL CONTRIBUTIONS AND LOANS FROM MEMBERS. Each of the
Members shall contribute to the LLC the amount of cash set forth as follows:
a. CAPITAL:
i. INITIAL MEMBER'S CASH CONTRIBUTION: The Initial
Member shall contribute $100 to the LLC for an Economic Interest. Upon the
admission of the additional Members to the LLC, the Economic Interest of the
Initial Member shall be retired and canceled and the $100 shall be paid to the
Initial Member.
ii. MEMBERS' CONTRIBUTIONS: The original Members
admitted to the LLC shall contribute, in the aggregate, a minimum of $275,000
and a maximum of $1,000,000 to the capital of the LLC, at a price of $25,000
per Interest. All contributions shall be paid in cash, or by the cancellation
of indebtedness owed to the investor by the Manager, upon admission into the
LLC, as set forth in the Memorandum and the Subscription Agreement. Not more
than 20 Interests shall be issued in exchange for the cancellation of $500,000
of indebtedness owed by the Manager to the investor.
iii. MANAGER'S CASH CONTRIBUTION: The Manager, as a
Member, will make an Initial Capital Contribution of $10,000 cash to the
capital of the LLC.
iv. MANAGER'S NON-CASH CONTRIBUTIONS: The Manager
shall contribute such time, skill, experience and expertise as are necessary to
the business of the LLC. The Manager's non-cash contributions shall include the
use, license, assignment or other transfer of technology, patents,
developments, know-how, trade secrets, copyrights, formulas, information and
other proprietary information owned or licensed by the Manager and necessary
for the LLC to conduct its business as contemplated herein, as determined in
the sole discretion of the Manager.
v. NO WITHDRAWALS OR INTEREST: No Member shall be
entitled to receive any interest on contributions to the capital of the LLC
(except as provided herein). No Member shall have the right to withdraw and
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demand the return of the Member's Capital Contribution (except as provided
herein upon the dissolution of the LLC or following a decision of the Manager
to distribute the capital of the LLC).
vi. NO PRIORITY: No Member shall have any priority
over any other Member with respect to any distribution of LLC property or cash
which may be made by the LLC, except that the Members shall be entitled to the
priorities of distribution as set forth in Section 3.2
vii. ADDITIONAL CAPITAL CONTRIBUTIONS: No additional
Capital Contributions other than the Initial Capital Contributions shall be
required pursuant to this Agreement.
b. LOANS FROM MEMBERS: Loans may be obtained from Members on
the following terms:
i. MEMBERS: Following the request of the Manager,
each Member, in his or its discretion, may lend money to the LLC on terms
determined by the Manager. If a request for loans is made by the Manager and
the offers to loan from the Members are greater than the amount needed, the
Manager may, in its discretion, accept the first offers until the amount
required is subscribed or may divide the loans among the offering Members pro
rata, based on the amount of each Member's Initial Capital Contribution.
ii. MANAGER: Should the Members not loan all funds
needed, or if the timing of the LLC's need for funds does not permit requesting
loans from the Members, the Manager may make one or more loans to the LLC on
terms no more favorable than those offered to the Members, or if not offered,
then on such terms and conditions as are commercially reasonable at that time
under prevailing market conditions, which shall not be greater than the Prime
Rate of Interest published in The Wall Street Journal plus two points. Any loan
by the Manager shall be due and payable at any time when the repayment thereof,
in whole or in part, would, in the opinion of the Manager, not reduce the
operating cash reserves necessary for the proper operation of the LLC's
business.
3.2 CASH DISTRIBUTIONS. The Manager shall make distributions as
follows:
a. OPERATING DISTRIBUTIONS: Distributable Cash available from
the operating business of the LLC shall be distributed, when deemed appropriate
by the Manager, who shall make a determination as to any such distribution, in
no event less than quarterly, as follows:
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i. First, such amounts shall be paid to the Members
(including the Manager to the extent it may have invested cash capital as a
Member, but not with respect to the $10,000 initially invested by the Manager)
until such time as the Members have received cash equal to their Preference;
ii. Second, such amounts to the Manager as may be
required for the Manager to pay any federal or state income tax liability
incurred by the Manager as a result of distributions to the Members in
Paragraph 3.2(a)(iii) below;
iii. Third, such amounts to the Members (including
the Manager to the extent it has invested capital as an Member, but not with
respect to the $10,000 initially invested by the Manager) until such time as
the Members have received total cash equal to one hundred twenty-five percent
(125%) of their Initial Capital Contributions;
iv. Fourth, such amounts to the Manager (for its
investment as a Member, including its $10,000 initially invested) until such
time as the Manager has received total cash disburse- ments equal to its
Capital Contributions; and
v. Fifth, 25% of the remaining Distributable Cash
from LLC operations to the Members and 75% to the Manager.
b. LIQUIDATING DISTRIBUTIONS: Distributable Cash available
from Liquidating Events shall be made as follows:
i. First, to the extent that the Members have not
received disbursements equal to the Preference, such amounts shall be paid to
the Members (including the Manager to the extent it has invested cash capital
as an Member, but not with respect to the $10,000 initially invested by the
Manager) until such time as the Members have received total cash disbursements
equal to the Preference.
ii. Second, such amounts to the Manager (for its
investment as a Manager) as may be required for the Manager to pay any federal
or state income tax liability incurred by the Manager as a result of any
distributions to the Members in Paragraph 3.2(b)(iii) below.
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iii. Third, to the extent that the Members have not
received total cash disbursements equal to one hundred twenty-five percent
(125%) of their Initial Capital Contributions, then any remaining amounts shall
be paid to the Manager until such time as the Manager has received total cash
disbursements equal to its Capital Contribution (including the $10,000
initially invested by the Manager) if the same has not already been paid; and
iv. Then, any remaining Distributable Cash from a
Liquidating Event shall be distributed twenty-five percent (25%) to the Members
and seventy-five percent (75%) to the Manager.
c. PRIORITY OF DISTRIBUTIONS: No Member shall have any
priority to distributions over any other Member.
3.3 ADDITIONAL BORROWINGS. At the determination of the Manager, the
LLC may borrow from banks, lending institutions, or other third parties and may
pledge LLC assets to secure and provide for the repayment of such loans.
3.4 LIMITATIONS ON DISTRIBUTIONS. No Member may receive a distribution
from the LLC if after the distribution, the LLC would not be able to pay its
debts as they become due in the usual course of business, or the LLC's total
assets would be less than the sum of its total liabilities (except liabilities
to Members on account of their Capital Contributions).
Distributions shall be made in the manner stated in this Agreement.
Pursuant to Section 428(1)(a) of the Florida Act, each Member
acknowledges that if the Members receives the return of any part of the
Member's Capital Contribution, even without violation of the Articles of
Organization or this Agreement or the Florida Act, the member is liable to the
LLC for a period of one year thereafter for the amount of the returned
contribution, but only to the extent necessary to discharge the LLC's
liabilities to creditors who extended credit to the LLC during the period when
the contribution was held by the LLC.
Pursuant to Section 428(1)(b) of the Florida Act, if a Member receives
the return of all or any part of the Member's Capital Contribution in violation
of the Articles of Organization, this Agreement or the Florida Act, the Member
is liable to the LLC for a period of six years thereafter for the amount of the
contribution wrongfully returned.
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3.5 DISTRIBUTIONS. All distributions of Distributable Cash and
property shall be made at such time as determined by the Manager pursuant to
this Agreement. All amounts withheld pursuant to the Code or any provisions of
state or local tax law with respect to any payment or distribution to the
Members from the LLC shall be treated as amounts distributed to such Members
pursuant to this Section 3.
ARTICLE IV
ALLOCATIONS OF PROFITS AND LOSSES
4.1 DETERMINATION. Net Profits and Net Losses shall mean the amounts
which are reportable by the LLC for federal income tax purposes generally
determined in accordance with Code Section 703 and following sections. Net
Profits and Net Losses from operations shall be determined and allocated at the
end of each fiscal year with respect to that year. Net profits and Net Losses
from a Liquidating Event shall be determined and allocated as of the date of
such event.
4.2 NET PROFITS AND NET LOSSES FROM OPERATIONS. Subject to Paragraph
4.5, Net Profits and Net Losses from Operations shall be allocated as follows:
a. Net Profits from Operations shall be allocated:
i. First, one hundred percent (100%) to the Members
until the cumulative Net Profits allocated under this Agreement equals the
cumulative cash paid to them as their Preference;
ii. Second, ninety-nine percent (99%) to the Members
and one percent (1%) to the Manager to the extent of all Net Losses previously
allocated to them on a ninety-nine percent (99%) - one percent (1%) basis; and
iii. Then, twenty-five percent (25%) to the Members
and seventy-five percent (75%) to the Manager.
4.3 NET PROFITS AND NET LOSSES FROM A LIQUIDATING EVENT. Net Profits
and Net Losses from a Liquidating Event shall be allocated as follows:
a. Net Profits from a Liquidating Event shall be allocated:
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i. First, one hundred percent (100%) to the Members
until the cumulative Net Profits allocated under this Agreement equals the
cumulative cash paid to them as their Preference;
ii. Second, ninety-nine percent (99%) to the Members
and one percent (1%) to the Manager to the extent of all Net Losses previously
allocated to them on a ninety-nine percent (99%) - one percent (1%) basis; and
iii. Then, twenty-five percent (25%) to the Members
and seventy-five percent (75%) to the Manager.
b. Net Losses arising from a Liquidating Event shall be
allocated ninety-nine percent (99%) to the Members and one percent (1%) to the
Manager.
4.4 ALLOCATIONS AMONG MEMBERS.
a. Amounts allocated to the Members collectively shall be
allocated pro rata among the Members. No Member shall be allocated an amount of
Net Losses that would reduce his Capital Account below zero or which would
require him to contribute additional funds to the LLC if it were dissolved. To
the extent consistent with federal tax law, it is intended that allocations of
Net Profits shall be made first to the Members to the extent of and in
accordance with actual distributions of cash made to them.
b. All allocations of Net Profits and Net Losses from
Operations shall be made to the persons who were Members during the fiscal
period for which such allocation is made based upon the number of days in such
period during which the person was a Member.
c. All allocations of Net Profits and Net Losses from a
Liquidating Event shall be made to the persons who are Members as of the date
of such event.
d. If Net Profits from a Liquidating Event allocated to the
Members are less than the deficit amounts of the Capital Accounts of all
Members whose Capital Accounts are negative, if any, such Net Profits shall be
allocated among such Members in the ratio which the deficit amount of each such
Member's Capital Account bears to the deficit amounts of the Capital Accounts
of all such Members whose Capital Accounts have a deficit balance. Nothing
contained in this Section 4.4(d) shall be deemed to defeat or alter the
Preference which is owed to Members, as provided elsewhere in this Agreement.
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e. If the character of any Net Profit or Net Loss is in part
capital and in part ordinary in the hands of the LLC or is in part governed by
Internal Revenue Code Section 1231 and in part not governed thereby, then all
allocations of any such Net Profit or Net Loss shall be made among the Members
in a manner such that each Member to whom such Net Profit or Net Loss is
allocated, is allocated the same proportion of each such separate class of Net
Profit or Net Loss as such Member is allocated to the total amount of such Net
Profit or Net Loss.
f. Any recognition of taxable income or loss arising from the
recharacterization of the status or treatment of any item, or any recapture of
any tax credit on audit or by an amended tax return, shall be allocated in the
same manner and ratio as said item or credit was previously allocated to the
Members, or as close thereto as the Manager may determine, in its sole
discretion.
g. For the purposes of the allocations set forth herein, the
balance in a Member's Capital Account shall be determined as if the LLC's year
had closed immediately prior to the date as of which such allocations are made.
4.5 OVERRIDING AND SPECIAL ALLOCATIONS TO CAPITAL ACCOUNTS.
Notwithstanding any other provision of this Agreement, the following
allocations shall be made prior to any other allocations under this Agreement
and in the following order of priority:
a. No allocations of loss, deduction, and/or expenditures
described in Section 705(a)(2)(B) of the Code shall be charged to the Capital
Accounts of any Member if such allocation would cause such Member to have a
Deficit Capital Account. The amount of the loss, deduction, and/or Code Section
705(a)(2)(b) expenditure which wold have caused a Member to have a Deficit
Capital Account shall instead be charged to the Capital Account of any Members
which would not have a Deficit Capital Account as a result of the allocations,
in proportion to their respective Capital Contributions, or, if no such Members
exist, then to the Members in accordance with their respective Membership
Interests.
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b. In the event any Member unexpectedly receives any
adjustments, allocations, or distributions described in Sections
1.704-1(b)(2)(ii)(d)(4), (5), or (6) of the Treasury Regulations which create
or increase a Deficit Capital Account of such Member, then items of LLC income
and gain (consisting of a pro rata portion of each item of LLC income,
including gross income and gain for each year and, if necessary, for subsequent
years) shall be specially credited to the Capital Account of such Member in an
amount and manner sufficient to eliminate, to the extent required by the
Treasury Regulations, the deficit Capital Account so created as quickly as
possible. It is the intent that this Section 4.5(b) be interpreted to comply
with the alternate test for economic effect ("Qualified Income Offset") set
forth in Section 1.704-1(b)(2)(ii)(d) of the Treasury Regulations.
c. In the event any Member would have a Deficit Capital
Account at the end of any LLC taxable year which is in excess of the sum of any
amount that such Member is obligated to restore to the LLC under Treasury
Regulations Section 1.704-1(b)(2)(ii)(c) and such Member's share of minimum
gain as defined in Section 1.704-2(g)(1) of the Treasury Regulations (which is
also treated as an obligation to restore under with Section
1.704-1(b)(2)(ii)(d) of the Treasury Regulations), the Capital Account of such
Member shall be specially credited with items of LLC income (including gross
income) and gain in the amount of such excess as quickly as possible.
d. Notwithstanding any other provision of this Section 4.5,
if there is a net decrease in the LLC's minimum gain as defined in Treasury
Regulation Section 1.704-2(d) during a taxable year of the LLC, then the
Capital Accounts of each Member shall be allocated items of income (including
gross income) and gain for such year (and, if necessary, for subsequent years)
equal to that Member's share of the net decrease in LLC minimum gain. This
Section 4.5(d) is intended to comply with the minimum gain charge back
requirement of Section 1.704-2 of the Treasury Regulations and shall be
interpreted consistently therewith. If in any taxable year that the LLC has a
net decrease in the LLC's minimum gain, if the minimum gain charge back
requirement would cause a distortion in the economic arrangement among the
Members and it is not expected that the LLC will have sufficient other income
to correct that distortion, the Manager may, in its discretion (and shall, if
requested to do so by the Manager) seek to have the Internal Revenue Service
waive the minimum gain charge back requirement in accordance with Treasury
Regulation Section 1.704-2(f)(4).
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e. Items of LLC loss, deduction, and expenditures described
in Section 705(a)(2)(B) which are attributable to any nonrecourse debt of the
LLC and are characterized as partner (Member) nonrecourse deductions under
Section 1.704-2(i) of the Treasury Regulations shall be allocated to the
Members' Capital Accounts in accordance with said Section 1.704-2(i) of the
Treasury Regulations.
f. Beginning in the first taxable year in which there are
allocations of "nonrecourse deductions" (as described in Section 1.704-2(b) of
the Treasury Regulations), such deductions shall be allocated to the Members in
accordance with, and as a part of the allocations of LLC Net Profits or Net
Losses for such period.
g. Any credit or charge to the Capital Accounts of the
Members pursuant to Section 4.5(b), (c), and/or (d) hereof shall be taken into
account in computing subsequent allocations of LLC Net Profit and Net Losses so
that the net amount of any items charged or credited to Capital Accounts
pursuant to Sections 4.2, 4.3, and 4.4 shall, to the extent possible, be equal
to the net amount that would have been allocated to the Capital Account of each
Member pursuant to the provisions of this Article IV if the special allocations
required by Sections 4.5(b), (c), and/or (d) hereof had not occurred.
h. In connection with the contribution of any property other
than cash by a Member to the LLC, the Manager shall make such allocations as
are necessary under Section 704 of the Code.
4.6 CAPITAL ACCOUNTS. The LLC, with respect to each Member, shall
maintain Capital Accounts in accordance with the following provisions:
a. Each Member's Capital Account shall be increased by (1)
the amount of money contributed by such Member to the LLC, or the face amount
of indebtedness owed to the Manager which is canceled in exchange for the
Interest issued to the Member; (2) the fair market value of property
contributed by the Member to the LLC (net of liabilities secured by such
contributed property that the LLC is considered to assume or take subject to
under Section 752 of the Code); (3) allocations to such Member of such Net
Profits; (4) any items in the nature of income or gain which are specially
allocated to such Member pursuant to Section 4.5; and (5) allocations to such
Member of income described in Section 705(a)(1)(B) of the Code.
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b. Each Member's Capital Account will be decreased by (1) the
amount of money distributed to such Member by the LLC; (2) the fair market
value of property distributed to such Member by the LLC (net of liabilities
secured by such distributed property that such Member is considered to assume
or take subject to under Section 752 of the Code); (3) allocations to such
Member of Net Losses; (4) any items in the nature of deduction and loss that
are specifically allocated to such Member pursuant to Section 4.5; and (5)
allocations to such Member of expenditures described in Section 705(a)(2)(B) of
the Code.
The foregoing provisions of this Agreement relating to the maintenance
of Capital Accounts are intended to comply with Treasury Regulations Section
1.704-1(b), and shall be interpreted and applied in a manner consistent with
such Regulations. In the event the Manager shall determine that it is prudent
to modify the manner in which the Capital Accounts, or any debits or credits
thereto are computed in order to comply with such Regulations, the Manager may
make such modification, provided that it is not likely to have a material
effect on the amounts distributable to any Member upon the dissolution of the
LLC. The Manager also shall (i) make any adjustments that are necessary or
appropriate to maintain equality between the Capital Accounts of the Members
and the amount of LLC capital reflected on the LLC's balance sheet, as computed
for book purposes in accordance with Treasury Regulations Section
1.704-1(b)(2)(iv)(q), and (ii) make any appropriate modifications in the event
unanticipated events might otherwise cause this Agreement not to comply with
Treasury Regulations Section 1.704-1(b).
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ARTICLE V
ACCOUNTING AND REPORTING
5.1 BOOKS OF ACCOUNT. The LLC shall maintain complete books of account
of the LLC business at the principal office of the LLC in Florida as specified
in Section 1.2 of this Agreement. Every Member shall have access at all
reasonable times to the LLC's books of account and may inspect and copy any of
them. The LLC's books of account shall be closed promptly after the end of each
accounting and tax year, and, as soon as practicable thereafter, the LLC's
accountant shall prepare unaudited financial statements which are in accordance
with generally accepted accounting principles ("GAAP"). Copies of such
financial statements shall be furnished to each Member. By March 31 of each
calendar year starting in 1998, the LLC shall furnish to every Member who owned
an interest in the LLC during such year such tax information regarding the LLC
and its operations as shall be reasonably necessary for the preparation of each
Member's federal, state and other tax returns.
5.2 FISCAL YEAR. The fiscal year of the LLC shall be the calendar
year.
5.3 ACCOUNTING METHODS; TRANSFERS DURING YEAR. LLC Net Profits and Net
Losses shall be determined as of the end of each fiscal year by the LLC's
accountant in accordance with Article IV hereof.
5.4 TAX MATTERS MEMBER. Dr. Daniel J. Pavlik is designated the "tax
matters member" for purposes of the Code.
ARTICLE VI
RIGHTS AND DUTIES OF THE MANAGER
6.1 MANAGEMENT. The business and affairs of the LLC shall be managed
by the Manager, who shall direct and control the business of the LLC to the
best of its ability, and to make all decisions regarding those matters and to
perform any and all other acts incidental to the management of the LLC's
business. At any time when there is more than one Manager, any one Manager may
take any action permitted to be taken by one Manager, unless the approval of
the Members or more than one of the Managers is expressly required pursuant to
this Agreement or the Florida Act. No person shall be required to determine or
question the Manager's authority to undertake any act or execute any contract
on behalf of the LLC or to see to the application or distribution of revenues
or proceeds paid to the Manager as a representative of the LLC.
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6.2 CERTAIN POWERS OF THE MANAGER OR MANAGER. Without limiting the
generality of Section 6.1, the Manager shall have the power and authority on
behalf of the LLC:
a. To negotiate laboratory processing agreements for the
clinical support centers signed up with the LLC, such agreements to be on such
terms as the Manager may determine.
b. As provided for in this Agreement, to borrow money for the
LLC from banks, other lending institutions, the Manager, the Members, or
affiliates thereof, on such terms as the Manager deems appropriate, and in
connection therewith, to grant security interests in the assets of the LLC.
c. To purchase insurance to protect the LLC's assets and
business.
d. If necessary, to hold property of the LLC in the name of
the Manager, for the express benefit of the LLC.
e. To invest any LLC funds temporarily in highly liquid time
deposits, short-term governmental obligations, money market accounts or high
grade commercial paper.
f. Upon the affirmative vote of a Majority Interest of the
Managers, to sell or otherwise dispose of all or substantially all of the
assets of the LLC as part of a single transaction or plan so long as such
disposition is not in violation of or a cause of a default under this Agreement
or any other agreement to which the LLC may be bound.
g. To execute on behalf of the LLC all instruments and
documents, including, without limitation, contracts, checks, drafts, notes and
other negotiable instruments, mortgages or deeds of trust, security agreements
and financing statements.
h. To employ accountants, legal counsel and others to perform
services for the LLC and to compensate them from LLC funds.
6.3 LIABILITY FOR CERTAIN ACTS. Pursuant to Section 1705.29(D) of the
Florida Act, the Manager is liable in damages for any action that it takes or
fails to take as a manager of the limited liability company, but only if it is
proved, by clear and convincing evidence, in a court with jurisdiction, that
its action or failure to act involved an act or omission undertaken with
deliberate intent to cause injury to the LLC or undertaken with reckless
disregard for the best interests of the LLC.
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6.4 MANAGER HAS NO EXCLUSIVE DUTY TO LLC. The Members acknowledge that
the Manager is the manager of another limited liability company with business
activities similar to the LLC, and that the Manager may serve as the manager of
additional limited liability companies to be formed in the future. Such other
limited liability companies are or will be located in market areas of the
United States outside the market area to be served by the LLC. The Members
acknowledge that the Manager is not required to devote all of its personnel and
resources to the business of the LLC. The Manager shall devote such time to the
conduct of the business of the LLC as shall be reasonably necessary.
6.5 MEMBERS NOT ENTITLED TO PARTICIPATE IN OTHER LIMITED LIABILITY
COMPANIES. The Economic Members understand and acknowledge that the Manager
serves as the manager of another limited liability company, with business
activities which are similar to the business of the LLC, and that the Manager
may serve as the manager of additional limited liability companies to be formed
in the future. Such other limited liability companies are or will be located in
market areas of the United States outside the market area to be served by the
LLC. Neither the LLC nor any Economic Member shall have any right, by virtue of
this Agreement, to share or participate in the business or profits of such
other limited liability companies, or in the business activities of the
Manager.
6.6 BANK ACCOUNTS. The Manager shall from time to time open bank and
other accounts in the name of the LLC. The Manager shall be the sole signatory
thereon. The funds of the LLC shall not be commingled with funds of any other
entity.
6.7 INSURANCE. The Manager shall obtain general liability insurance
for the LLC, however, product liability insurance shall not be required if not
available at reasonable cost. In addition, the Manager is authorized to obtain
insurance to protect the Manager against liability resulting from its good
faith actions or omissions as Manager or Managers (for example, officers and
directors insurance). Such insurance shall only protect the Manager from
liability to the extent that such liability could be indemnified pursuant to
the Florida Act.
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6.8 COMPENSATION AND REIMBURSEMENTS OF MANAGER. The Members
acknowledge and approve the payments and transactions between the LLC and the
Manager set forth below. Payments pursuant to (a) and (b) shall be from the
Initial Capital Contributions to the LLC; payments pursuant to (c) and (d)
shall be from funds provided by the Initial Capital Contributions to the LLC,
or from operating revenues of the LLC, depending upon the time when such
payments are made; payments pursuant to (e) shall be from the LLC's cash flow
from operations; payments pursuant to (f) shall be from Distributable Cash.
(a) The LLC shall pay the Manager $65,000 for each regional office
opened by the LLC in Minnesota and in the other states in the market area to be
served by the LLC, such payment being for the right to use the computer systems
software and clinic marketing data base of the Manager, for startup accounting
and other office administration services performed for the LLC, and for the
payroll cost to the Manager of providing personnel for training and marketing
sessions for healthcare providers who purchase services and products from the
LLC. The first $65,000 shall be paid on the admission of the first Members
pursuant to the Memorandum. Subsequent payments shall be due as the LLC opens
additional regional offices.
(b) The LLC shall pay the Manager $75,000 on a one time
non-accountable basis for legal, accounting and other costs paid or incurred by
the Manager, in connection with the formation of the LLC, development of its
business plan, and legal, accounting and other costs incurred in connection
with the offer and sale of Economic Interests pursuant to the Memorandum.
(c) The LLC shall pay the Manager $10,000 per month for each regional
office opened by the LLC, to reimburse a portion of the Manager's ongoing
administrative overhead expenses.
(d) The Manager is entitled to make and retain for its own account an
amount equal to __ % of the amount invoiced to the LLC for the cost of clinical
workstations (diagnostic equipment) and nutrition supplements to the LLC.
(e) The Manager is entitled to receive and retain for its own account
an amount equal to 10% of all payments by healthcare provider clients of the
LLC, for laboratory tests performed by private label "core reference
laboratories" for patients of such healthcare providers.
(f) The Manager is entitled to its share of Distributable Cash and
Profits as provided in this Agreement.
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ARTICLE VII
RIGHTS OF THE MEMBERS
7.1 GENERAL RIGHTS.
a. The Economic Members shall have only those rights as set
forth in this Agreement or as otherwise may be provided by the Florida Act.
b. The Economic Members shall have no right to vote on any
LLC matter or decision except for those set forth in Section 7.2.
7.2 VOTING RIGHTS.
a. There shall be a regular annual LLC meeting, which shall
be held in April of each year starting in 1998, on not less than 30 nor more
than 90 days notice from the Manager to the Economic Members stating the date,
time and location of the annual meeting. In lieu of an actual meeting, a
request for consent and vote without an actual meeting may be circulated among
the Economic Members by the Manager. At the annual meeting, the Economic
Members shall vote upon the re-election of Access HealthMax, Inc. as the
Manager of the LLC, or the election of another person or entity as Manager of
the LLC. Upon the affirmative vote of the holders of 60% of the Capital
Interests present at the annual meeting, or by the holders of 60% of the total
Capital Interests if a vote is taken without a meeting, Access HealthMax, Inc.
shall be re-elected as Manager of the LLC for a one year term, or a replacement
person or entity shall be elected Manager of the LLC for a one year term, as
the case may be. If Access HealthMax, Inc. is not re-elected as Manager, its
interest in the LLC's Net Profits and Losses, and in Distributable Cash,
pursuant to this Agreement, shall not be affected, however, Access HealthMax,
Inc. shall have the sole right to require the new Manager to purchase (for
cash) such Interest from Access HealthMax, Inc. at fair value, to be determined
by a qualified business appraiser acceptable to Access HealthMax, Inc. Such
purchase price shall be paid in cash at closing, or 25% at closing and the
balance over two years, secured by the Interest in LLC Net Profits and Losses,
and Distributable Cash, held by Access HealthMax, Inc. as a Member, such
balance to be evidenced by a promissory note bearing interest at the prime rate
published by The Wall Street Journal, plus 2% per annum, as of the business day
prior to the closing.
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b. A meeting of the Members for any of the purposes specified
in Section 7.2(c) below may be called at any time by the Manager or by the
Members holding at least 30% of the Capital Interests by giving at least 30 but
not more than 90 days written notice of the time, date and place to each
Member. Meetings shall be held at the offices of the LLC, or at such other
reasonable place as may be designated by the Manager.
c. At any meeting of the Members duly called, or if no
meeting is called then by a request for consent and vote circulated among the
Members by the Manager, the Members may vote only upon the following matters,
which for approval shall require the affirmative vote or written consent of the
holders of 60% or more of the Capital Interests present at such meeting, or of
the holders of 60% or more of all of the Capital Interests in the event of
written consent without a meeting.
i. A material change in the LLC's purpose or term.
ii. Early dissolution and winding up of the LLC.
iii. An election to continue the business of the LLC after
the resignation of the Manager where there is no other Manager remaining.
iv. Any reorganization or merger of the LLC, which shall not,
however, include the Manager's exercise of its right to early buy-out of the
Members as set forth in this Agreement.
ARTICLE VIII
ADMISSION OF NEW MEMBERS
8.1 CONSENT REQUIRED. No Person may become a Member of the LLC without
the prior written consent of the Manager and execution of this Agreement.
ARTICLE IX
TRANSFER OF INTEREST IN LLC
9.1 RESTRICTION. Except as permitted under Section 9.2, no Member
shall transfer or encumber his or its Interest in the LLC without the written
consent of the Manager. Any attempted transfer or encumbrance not in compliance
with this Section 9.1 shall be null and void and of no legal effect upon the
LLC, and the LLC will not be required to accept, recognize or be bound by such
transfer or encumbrance.
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9.2 PERMITTED TRANSFERS. A Member may transfer all or part of his or
its Economic Interest in the LLC, without consent of the Manager, to: (i) a
trust for the immediate family of the Member or of the beneficial owners of the
Member; (ii) a family partnership in which the Member is general partner; or
(iii) the members of the immediate family of the Member or of the beneficial
owners of the Member. The transferee shall thereafter be an Member, subject to
the transferee's execution of this Agreement.
ARTICLE X
BANKRUPTCY, WITHDRAWAL OR RESIGNATION
OF THE MANAGER OR ANOTHER MEMBER
10.1 BANKRUPTCY, WITHDRAWAL OR RESIGNATION OF MANAGER. Upon the
bankruptcy, withdrawal or resignation of the Manager, the LLC shall dissolve;
provided, however, that within 90 days after the filing of the bankruptcy
petition, or the date that the LLC is notified in writing of the withdrawal or
resignation, as may be applicable, the remaining Members may by vote of a
Majority in Interest of the Remaining Members (as defined below in Section
10.5) elect to continue the business of the LLC. In the event that the
remaining Members elect to continue the business of the LLC, the remaining
Members shall have the option to purchase the Interest of the Manager in the
LLC for a 90 day period after the date of filing of the bankruptcy petition,
the date of withdrawal or resignation, as applicable. Each remaining Member's
right to purchase shall be on a pro rata basis according to their Interests in
the LLC. The Interest purchased shall have the rights to participate in
Distributable Cash as are in effect for the Manager as of the date of the
bankruptcy, withdrawal or resignation of the Manager.
If a Member decides not to participate in the purchase of the Interest
of the Manager, the Members electing to purchase may acquire the Interest of
the Manager on a pro rata basis according to the ratio which each participating
Member's Capital Interest bears to the aggregate Capital Interests of all
participating Members, for an additional 20 days after the expiration of the
initial 90 day period.
10.2 PURCHASE PRICE. Unless otherwise agreed, the purchase price shall
equal the fair price as determined by an independent business appraiser
acceptable to the Manager and to the representative of the Members who elect to
purchase.
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10.3 PAYMENT OF PURCHASE PRICE. Payment of the purchase price shall be
made in certified funds at time of closing if the purchase price is less than
$5,000. If the purchase price is $5,000 or more, payment shall be made by (i)
the cash payment of the greater of $5,000 or 25% of the purchase price at
closing; and (ii) delivery of the purchaser's promissory note for the balance
of the purchase price, payable in equal quarterly installments, including
principal and interest on unpaid balances at the rate hereinafter specified
over 2 years from date of closing. Such note shall contain provisions for
acceleration on default and payment of collection costs (including reasonable
attorneys' fees) on default and shall provide that prepayment may be made at
any time with penalty. The promissory note shall be secured by a pledge of the
Manager's Interest, pursuant to a commercially reasonable security agreement
and related documents. The interest rate for such note shall be the prime rate
published by The Wall Street Journal, plus 2% per annum.
10.4 MISCELLANEOUS. Nothing in this Article X shall prohibit the
Members or the LLC from structuring the purchase or retirement of a Member's
Interest (other than the Manager's Interest) in the LLC in the event of the
death or bankruptcy of a Member (other than the Manager) in such manner as is
agreed among the parties.
10.5 DEFINITION OF "MAJORITY IN INTEREST OF THE REMAINING MEMBERS."
"Majority in Interest of the Remaining Members" shall mean, as of the date of
the bankruptcy, withdrawal, or resignation of the Manager, the Members holding
a majority of the Capital Interests.
ARTICLE XI
DISSOLUTION AND TERMINATION
11.1 DISSOLUTION. The LLC shall terminate, dissolve and liquidate its
affairs on the earlier of the following:
a. Expiration of its term;
b. The decision of a Majority in Interest of the Members
(defined as the decision of the holders of a majority of the Capital Interests)
to terminate the LLC; or
c. The occurrence of any event, including, but not limited
to, the enactment of any law which makes it impossible to continue the business
of the LLC or to operate the business as a limited liability company; and
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11.2 EFFECTIVE DATE. Dissolution of the LLC shall be effective on the
day on which the event occurs giving rise to the dissolution, but the LLC shall
not terminate until Articles of Dissolution have been issued and the assets of
the LLC shall have been distributed as provided herein. Notwithstanding the
dissolution of the LLC, the business and affairs of the Members shall continue
to be governed by this Agreement until termination of the LLC.
11.3 WINDING UP UPON DISSOLUTION. In the event of a dissolution of the
LLC, the Manager shall immediately commence to liquidate the LLC and its
property and to convert the same to cash or cash equivalents and to wind up the
LLC's affairs. During liquidating and winding up, the Members shall continue to
share LLC Net Profits and Net Loses and all LLC income, gain, loss, deductions
and credits and all items thereof in accordance with their respective
Membership Interests as provided in Article 4 hereof. The proceeds from
liquidation of the LLC Property shall be applied in the following order of
priority:
a. To debts and liabilities of the LLC, including debts owed
to Members who are creditors of the LLC;
b. To the reasonable debts and expenses of liquidating the
LLC and its property and winding up the LLC's affairs, including reasonable
compensation to be paid to the Members who participate and assist in
liquidating the LLC and its property or winding up the LLC's affairs.
c. To the setting up of Reserves as may be necessary to pay
contingent liabilities of the LLC, with the amount of such Reserves to be
determined by the Manager in its discretion.
d. To the Members in accordance with the positive balance (if
any) of each Member's Capital Account (as determined after taking into account
all Capital Account adjustments for the LLC's taxable year during which the
liquidation occurs). Any such distributions to the Members in respect of their
Capital Accounts shall be made in accordance with the timing requirements in
Section 1.704-1(b)(2)(ii)(B)(2) of the Treasury Regulations.
11.4 RETURN OF CONTRIBUTION NONRECOURSE TO OTHER MEMBERS. Except as
provided by law or as expressly provided in this Agreement, upon dissolution,
each Member shall look solely to the assets of the LLC for the return of his or
its Capital Contribution.
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<PAGE> 27
ARTICLE XII
MANAGER'S RIGHT TO AN EARLY BUY-OUT
OF MEMBERS
12.1 OPTION. The Manager shall have the option, which shall be
irrevocable, to purchase some or all of the Members' Economic Interests in the
LLC at a purchase price equal to 125% of the Capital Contribution made by a
Member, less any prior returns of Capital Contributions to the Member, plus any
amount necessary to pay the Preference to such Member. If the purchase is for
part of the Interests, the purchase shall be applied pro rata among all
Members.
For example, if a Member invests $100,000 into the LLC, is paid his or
its Preference for the first three years of the LLC, and $25,000 of such
Member's Initial Capital Contribution has been returned, the purchase price of
such Member's Interest in the LLC at the end of year 4 shall be $110,500,
computed as follows:
125% of Initial Capital Contribution $125,000.00
Less: Return of Initial Capital Contribution $ 25,000.00
-----------
Balance $100,000.00
Unpaid Preference for Year 4
($100,000 x 10.5%) $ 10,500.00
-----------
Buy-Out Price = $110,500.00
12.2 NOTICE. The Manager shall provide 15 days written notice to each
Member of its election to purchase the Members' Interests.
12.3 TERMS. The purchase price of each Member's Interest shall be in
cash or securities of the Manager (at the option of the Member) to be delivered
to each Economic Member within 10 days after the expiration of the 15 day
notice period.
12.4 EVIDENCE OF OWNERSHIP OF ECONOMIC INTEREST. Each Member shall
return any evidence of ownership in the LLC upon receipt of payment and shall
sign any documentation required by the Manager to evidence the termination of
the Member's Interests in the LLC.
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<PAGE> 28
ARTICLE XIII
ADMISSION OF ADDITIONAL MEMBERS
13.1 MANAGER'S RIGHT TO ADMIT ADDITIONAL MEMBERS. If, after the
expenditure by the LLC of the funds from proceeds of sale of the Economic
Interests pursuant to the Memorandum, the Manager determines that the LLC
requires additional capital to complete its business plan and sustain
operations, then the Manager shall have the right to cause the LLC to sell up
to an additional 40 Interests and admit the purchasers as Members, on the same
terms as the Interests sold pursuant to the Memorandum, provided, that the
return of capital invested to the new Members shall be subordinate to the
return of capital to the first Members. The first Members shall have a 10 day
right of first refusal, pro rata in the nature of a preemptive right, to
acquire such additional Economic Interests in the LLC when offered to third
parties, on the same terms and conditions as offered to such third parties.
ARTICLE XIV
GENERAL PROVISIONS
14.1 ENTIRE AGREEMENT. This Operating Agreement contains the entire
agreement among the Members concerning the LLC and supersedes all prior
negotiations, understandings or agreements in regard thereto.
14.2 APPLICABLE LAW. This Operating Agreement shall be construed in
accordance with and governed by the laws of the State of Florida.
14.3 SUCCESSORS AND ASSIGNS. Except as set forth herein, this
Operating Agreement shall be binding upon and shall inure to the benefit of the
heirs, personal representatives, successors and assigns of the Members.
14.4 NOTICES. All notices and other communications under this
Operating Agreement shall be in writing and shall be sufficiently given if
personally delivered to the addressee or, if mailed, postage prepaid, to the
addressee at his, her or its address as stated in the books and records of the
LLC. The address of a Member may be changed in the manner required in this
Section for the giving of notice.
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<PAGE> 29
14.5 SEVERABILITY. If any clause or provision of this Operating
Agreement is determined by a court of competent jurisdiction to be illegal,
invalid or unenforceable, then it is the intention of the Members that the
remainder of this Operating Agreement shall not be affected thereby, and that
in lieu of each clause or provision of this Operating Agreement that is so
determined to be illegal, invalid or unenforceable, there be added as a part of
this Operating Agreement a clause or provision as similar in terms to such
illegal, invalid or unenforceable clause or provision as may be possible and
yet be legal, valid and enforceable.
14.6 SECTION HEADINGS. The Section headings herein are for the
convenience of reference and shall not be deemed to affect or alter any
provision herein.
14.7 NO WAIVER. The failure at any time to require performance of any
provision hereof shall not affect in any way the full right to require such
performance at any time thereafter, nor shall the waiver by any party hereto of
a breach of any provision hereof be held to be a waiver of such provision.
14.8 REPORTS TO THE MEMBERS. At least quarterly, starting after close
of the private offering of Economic Interests pursuant to the Memorandum, the
Manager shall send to the Members unaudited financial statements and other
written information about the status and operations of the LLC. On or before
March 31 of each year, starting in 1998, the Manager shall send to the Members
an annual report, including unaudited financial statements for the previous
calendar year (or portion thereof for the year when operations commenced).
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<PAGE> 30
IN WITNESS WHEREOF, the parties hereto have executed this Operating
Agreement effective as of the day and year first above written.
MANAGER AND MEMBER:
ACCESS HEALTHMAX, INC.
A FLORIDA CORPORATION
--------------------------------------
Daniel J. Pavlik, President
INITIAL MEMBER:
DANIEL J. PAVLIK
--------------------------------------
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<PAGE> 31
MEMBERS
The Members and the amounts of their respective Initial Capital
Contributions are stated on the attached list "Access HealthMax LLC II Members"
marked as Exhibit A and attached hereto and incorporated herein.
Each Member shall execute and return to the Manager the attached
Acknowledgement and Agreement and return same to the Manager.
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<PAGE> 32
ACKNOWLEDGMENT AND AGREEMENT
I, ________________________________________, do hereby acknowledge and
agree that I have read and understand the foregoing Operating Agreement of
Access HealthMax LLC II, and agree to be bound by its terms.
- --------------------------------
Signature of Member
- --------------------------------
Print Name (and title if Member
is an entity)
Please print the name and address of the Member executing the Acknowledgment
and Agreement:
- --------------------------------
- --------------------------------
- --------------------------------
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<PAGE> 1
Exhibit 11
ACCESS HEALTH ALTERNATIVES, INC.
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS (LOSS)
<TABLE>
<CAPTION>
<S> <C>
Year ended December 31, 1997:
Net loss $ 747,440
-----------------
Shares considered to be outstanding for the entire
year to reflect the reverse acquisition in 1998 1,003,350
-----------------
Basic loss per share $ 0.74
=================
Year ended December 31, 1998:
Net loss $ 714,598
-----------------
Shares considered to be outstanding at the
beginning of the year 1,003,350
Weighted average outstanding of 20,000 shares
issued in 1998 for services 4,231
-----------------
Weighted average shares outstanding 1,007,581
-----------------
Basic loss per share $ 0.71
=================
</TABLE>
<PAGE> 1
Exhibit 21
LIST OF SUBSIDIARIES
Access HealthMax, Inc., a Florida corporation
Access Health Assurance Plans, Inc., a Florida corporation
