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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
Alliance HealthCard, Inc.
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(Name of Small Business Issuer in its charter)
GEORGIA 58-2445301
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(State of other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
3500 Parkway Lane, Suite 310, Norcross, GA 30092
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(Address of principal executive offices) (zip code)
Issuer's telephone number: (770) 734-9255
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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 -
------------------- ------------------------------
Securities to be registered under Section 12(g) of the Act:
Common Stock, $.001 Par Value
-----------------------------
(Title of class)
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ITEM 1. DESCRIPTION OF BUSINESS
BUSINESS DEVELOPMENT
Alliance HealthCard, Inc. (hereinafter, the "Company", "Alliance" or
"Alliance HealthCard") was founded in September of 1998 and was originally
formed as a limited liability company. The Company was reorganized into a
Georgia corporation in February 1999. The business of the Company is to sell
membership cards to individuals through a membership organization that receives
discounts for health-related products and services from a network of providers
and vendors in the United States.
In General
The Company is in the business of sales of membership cards to individuals
through agents, brokers, third party administrators, associations, employers and
direct sales. The card enables individuals to receive discounts from a network
of providers for a wide range of services in seven major categories: dental,
vision, pharmacy, cosmetic surgery, chiropractic, alternative medicine/health
life style and hearing. The Company believes that Americans who access the
multi-billion dollar healthcare industry through employer sponsored health plans
or individual health plans are finding that health care costs are escalating,
especially in those areas not covered by their primary health insurance. The
opportunity for the Company may grow as employers, in an effort to manage health
benefit expenses, may elect to reduce health benefits, increase deductibles, or
exclude coverage for certain healthcare services and as individuals, who do not
have access to employer sponsored plans or may be underinsured, may choose a
health services discount membership card as an alternative to insurance
coverage.
Alliance HealthCard discounts are not to be related in any way to medical
insurance or other coverage provided by Medicare or Medicaid. Cardholders and
their families will not be subject to preexisting conditions or any other
restrictions. The cardholder is simply being provided discounts on quality
health-related products and services.
The Network
The Company contracts with providers who are willing to offer discounts to
cardholders. Currently, the Company has 343,000 alternative, supplemental and
health care providers, including both national and local service providers in
the United States. Providers who join the network may experience an increased
level of market exposure that could not otherwise be achieved without
significant effort or expense. By being a part of a network offering a wide
range of services, the provider may receive exposure to consumers who are not
looking for different health care services at present but may need the
provider's services in the future. Unlike many other health services programs,
providers in the Alliance HealthCard network are not required to complete
benefit forms, file reports or manage accounts receivable.
An in-depth analysis of the health care needs and demographics of potential
plan
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members guides the recruitment process of providers. The Company utilizes this
analysis in order to provide plan members with readily accessible services.
Membership Group
The Company is currently developing a clientele of cardholders by selling
the membership cards to individuals through agents, brokers, third party
administrators, associations, employers and direct sales. The annual base
membership is $120 and $192 per family per year for the Alliance Health Gold
Card (hereinafter, the "Gold Card") and the Alliance Health Platinum Card
(hereinafter, the "Platinum Card"), respectively.
The Company endeavors to make it convenient and cost effective for its
cardholders to locate and access quality providers. To accomplish this goal,
the Company carefully selects providers for its network and also distributes a
directory of such providers to its cardholders. In addition to the printed
directory given to cardholders upon enrollment, an updated provider directory is
also available through a toll free number and on the Company's internet site.
PRODUCTS
The Company offers consumers access to the provider network through the
sale of two products, the Gold Card and the Platinum Card (hereinafter referred
to collectively as the "Alliance HealthCards").
The Gold Card
For consumers who access the healthcare industry through employer sponsored
health plans or individual health plans, the Company offers the Gold Card for an
annual membership fee of $120. For services not generally covered by health
insurance plans, the Gold Card offers discounts through the Company's provider
network.
The Company offers Gold Card holders up to twenty service classifications
that are often excluded from or limited by other types of health care coverage.
The twenty one provider services and their discounts are:
<TABLE>
<S> <C> <C> <C>
Dental Care 15-40% Orthodontics 23-35%
Vision Care Massage Therapy 25-35%
Prescription eyeglasses 10-60% Electrolysis 10-30%
Lasik (vision correction) 10-30% Acupuncture 25-40%
Contact Lenses 10-60% Diagnostic Centers 25-35%
Sunglasses 20-50% Alternative Medicine 20-30%
Hearing Aids 15-40% Pain Management 10-30%
Prescription Drugs 10-50% Weight Loss Centers 10-30%
Chiropractic Care 30-50% Nutritionist 10-30%
Cosmetic Surgery 10-30% Personal Training 10-30%
Mental Health/Life Care 10-30% Health Clubs 20-30%
</TABLE>
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The Platinum Card
For underinsured and uninsured individuals, the Company offers the
Platinum Card at an annual membership fee of $192. The Platinum Card provides
all the services of the Gold Card and, in addition, it provides its holders with
access to primary care physicians and specialists at a discount from their usual
and customary rates. Some of these specialties will include: cardiology,
orthopedics, obstetrics, pediatrics, surgical, and internal medicine. The
Company believes that the Platinum Card will be of particular interest to
consumers who are not covered by group health or individual benefit plans.
These include: food service, agriculture, construction, self employed and semi-
retired workers and similar non-salaried employees.
SALES AND MARKETING
The Company currently employs two full-time sales professionals at its
headquarters in Atlanta, Georgia. The Company is currently developing a
clientele of cardholders by selling the Alliance HealthCards through
broker/agents, insurance companies, associations, the internet, distributing
partners and direct sales in the United States.
Broker/Agents
Brokers and agents who sell health care benefits programs to employers and
individuals may use the Alliance HealthCards as a "value added" offering. The
Alliance HealthCards are not competitive with the plans they sell, but instead
are viewed as complementary product offerings. The Company offers commission
programs for sales made through this channel.
Insurance Companies
The Company is in the process of developing strategic partnerships with
small to medium size health insurance companies. The Company believes that the
Alliance HealthCards will add value to the traditional insurance plan by
offering discounts for services not traditionally covered by most insurance
policies without any potential risks to an increase in claims.
Associations
Sales of the Alliance HealthCards are being offered to various associations
and organizations that represent large numbers of consumers not traditionally
covered by health benefit plans. The Company can tailor the membership cards to
identify the sponsoring association or organization. The Company provides
rebates to the associations and organizations based upon first time purchases.
The Internet
The Company plans to launch a major e-commerce initiative to distribute
customized, co-branded discount health cards over the internet through alliances
with branded internet
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companies. By co-branding Alliance HealthCards with the internet consumer sites,
the Company plans to increase its access to a broad range of consumers who may
be seeking alternative and general health services.
Distributing Partners
The Company is in the process of developing a Distributing Partner Program
with several members of its provider network. The Distributing Partner Program
will encourage providers to display Alliance HealthCard enrollment information
in their places of business. Under this program, an administrative processing
fee will be paid for each cardholder enrolled through a provider location.
Direct Sales
The Company will market cards directly through value packs mailed to
consumers' homes, infomercials, newspaper inserts, and strategic use of life
style oriented publications.
COMPETITION
The market for strategic health service discount programs, while new, is
already highly competitive. The Company believes that competition will
intensify and increase in the future. The Company views its primary direct
competitors as Memberworks, First Access, JC Penney and Universal Health
Systems. It is possible that some of the Company's competitors have greater
financial, managerial or marketing resources than the Company. In addition,
these competitors may have pre-existing relationships with providers and
consumers.
The Company has no significant proprietary technology, intellectual
property or other competitive advantage that would preclude or inhibit
competitors from providing services comparable or superior to the services
provided by the Company. In addition, the capital costs associated with
starting a health service discount program can be relatively low.
GOVERNMENT REGULATION
The Company believes that its business is not subject to material
regulation under the insurance laws of the United States or any of the states,
excluding the state of California. The Company is currently offering its
services in the United States, excluding the state of California. Licensing
laws and regulations often differ materially between states and within
individual states and are subject to amendment and reinterpretation by the
agencies charged with their enforcement. The state of California has
implemented laws and regulations that may prevent the sale of the health
services discount cards. If the Company becomes subject to any licensing or
regulatory requirements, the failure to comply with any such requirements could
lead to a revocation, suspension or loss of licensing status, termination of
contracts and legal and administrative enforcement actions. In addition, the
use of the internet in the marketing and distribution of the Company's services
is relatively new and presents issues, such as the
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limitations on an insurance regulator's jurisdiction and whether internet
service providers, gateways or cybermalls are (a) engaged in the solicitation or
sale of insurance policies or (b) otherwise transacting business requiring
licensure under the laws of one or more states. Accordingly, the insurance laws
and regulations and interpretations thereof are subject to uncertainty and
change.
The Company cannot be sure that a review of its current and proposed
operations will not result in a determination that could materially and
adversely affect its business, results of operations and financial condition.
Moreover, regulatory requirements are subject to change from time to time and
may become more restrictive in the future, thereby making compliance more
difficult or expensive or otherwise affecting or restricting the Company's
ability to conduct its business as now conducted or proposed to be conducted.
EMPLOYEES
As of February 29, 2000, Alliance HealthCard, Inc. had eight full-time
employees including six administrative and executive employees and two sales and
marketing employees.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
General
The Company is a development stage corporation, which commenced operations
in September 1998. The Company is currently engaged in the business of sales of
membership cards to individuals through agents, brokers, third party
administrators, associations, employers, and direct sales. Card members pay $120
per year per family for the Gold Card and $192 per year per family for the
Platinum Card. The Company has financed its operations to date through the sale
of its securities. See Item 10, "Recent Sales of Unregistered Securities."
Plan of Operations
During the period from inception (September 30, 1998) through September 30,
1999, the Company primarily concentrated on and completed four major activities
which were critical to the success of the business. The four activities were:
i) the development, recruitment and implementation of the provider network; ii)
the development and implementation of the infrastructure for the back office
administration of card member services which will be managed by a third party
administrator; iii) the development of a sales and marketing plan; and iv) the
development and completion of the Company's internet site to be utilized for
both sales and card member services. The Company began sales of the Gold Card
and Platinum Card in December 1999 and February 2000, respectively in Georgia
and North Carolina. The Company plans to sell the Alliance HealthCards
throughout the United States.
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Since the Company only recently began its operations, it can only focus on
its plans for the future, which are summarized below. There can be no assurance
that these plans will be realized by the Company.
The Company's plan of operations over the next twelve months include the
implementation of its sales and marketing plan by promoting card sales through
agents/brokers, insurance companies, associations, the internet and direct sales
in the United States.
The Company also plans to launch a major e-commerce initiative to
distribute customized, co-branded discount health cards over the internet
through alliances with branded internet companies over the next six to nine
months. An example of a branded internet company would include full service
portals that offer content, commerce, and community, all targeted toward women
and women's issues. The Company plans to utilize an internet business
development company for the implementation of the co-branded discount health
cards.
The Company will also continue to expand its provider network. The next
phase of development over the next twelve months will be to try to obtain
additional services that are not currently included in other competitors'
service offerings. In addition to obtaining additional services for its
provider network, the Company will also be developing customized networks for
the markets that are more rural in nature.
Results of Operations For The Period From Inception (September 30, 1998) Through
December 31, 1999.
Alliance HealthCard, Inc. is a developmental stage company. The financial
results of operations reflect the primary activities of the Company directed
toward provider network development, provider implementation and relations,
development and implementation of a sales and marketing plan and implementation
of the infrastructure for cardholder administration. The Company had a net loss
of $725,481 for the period from inception (September 30, 1998) through December
31, 1999 due to the expenses incurred to develop and implement the
infrastructure of the Company for network development, card administration, and
sales and marketing.
As of February 29, 2000, the Company had 172 cardholders.
Liquidity and Capital Resources
The Company's future liquidity and capital requirements will depend upon
numerous factors, including the success of its product offerings and competing
market developments. The Company is a development stage business and has not
yet achieved profitable operations. The Company intends to fund its ongoing
development and operations through a combination of sales and borrowings for the
next twelve months. The Company has a commitment from Suntrust Bank in Atlanta,
Georgia for a line of credit of $500,000 to be secured by personal guaranties by
certain members of the board of directors.
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FORWARD LOOKING STATEMENTS
This registration statement contains forward-looking statements. The
Company's expectation of results and other forward-looking statements contained
in this registration statement involve a number of risks and uncertainties.
Among the factors that could cause actual results to differ materially from
those expected are the following: business conditions and general economic
conditions; competitive factors, such as pricing and marketing efforts; and, the
pace and success of member card sales. These and other factors may cause
expectations to differ.
YEAR 2000 IMPACT STATEMENT
The Company experienced no significant disruptions in mission critical
information technology and non-information technology systems and believes those
systems successfully responded to the Year 2000 date change. The Company is not
aware of any material problems resulting from Year 2000 issues, either with its
products, its internal systems, or the products and services of third parties.
The Company will continue to monitor its mission critical computer applications
and those of its suppliers and vendors throughout the year 2000 to ensure that
any latent Year 2000 matters that may arise are addressed promptly.
ITEM 3. DESCRIPTION OF PROPERTY
The Company's executive offices are located in Norcross, Georgia,
consisting of approximately 2,000 square feet of space subleased from
SpecialNet, Inc., a company which Robert D. Garces, the Chairman of the Board of
the Company, has a 25% ownership. The sublease is a month to month tenancy at
approximately $4,300 per month, which includes the use of reception, office
furniture, telephone system, copying and other office equipment. While the
sublease was not negotiated at arms-length, the Company believes the terms of
the sublease are comparable to what it would pay for such space, services, and
other office equipment on the open market. (See Item 7, "Certain Relationships
and Related Transactions").
The Company believes that it has adequate office space for its current
operations. However, as the staffing of the Company increases, the Company
plans to lease additional space as needed.
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ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth certain information regarding the beneficial
ownership of the shares of the Company's outstanding Common Stock as of February
29, 2000 by (i) each person who is known by the Company to be the beneficial
owner of more than five percent (5%) of the issued and outstanding shares of
common stock, (ii) each of the Company's directors and executive officers, and
(iii) all directors and executive officers as a group.
Common Stock
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Shares of Percent of
Common Stock Common Stock
Name and Address Beneficially Owned (1) Beneficially Owned
- ------------------------------ ----------------------- -------------------
Robert Garces 263,100 (2) 23.9%
3500 Parkway Lane, Suite 310
Norcross, Georgia 30092
Thomas Kiser 222,350 20.2%
3500 Parkway Lane, Suite 310
Norcross, Georgia 30092
Robert Goodyear 2,000 0.2%
3500 Parkway Lane, Suite 310
Norcross, Georgia 30092
Howard Chandler, Jr. 170,550 (3) 15.5%
3500 Parkway Lane, Suite 310
Norcross, Georgia 30092
James Stewart 34,350 3.1%
3500 Parkway Lane, Suite 310
Norcross, Georgia 30092
Ronald McDaniel 10,000 0.9%
3500 Parkway Lane, Suite 310
Norcross, Georgia 30092
Richard Jackson 40,000 (4) 3.6%
3500 Parkway Lane, Suite 310
Norcross, Georgia 30092
Officers and Directors
as a group 742,350 (5) 67.5%
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(1) "Beneficial Ownership" includes shares for which an individual, directly or
indirectly, has or shares voting or investment power or both and also
includes shares of Common Stock underlying options and warrants to purchase
Common Stock which are exercisable within sixty days of the date hereof.
Beneficial ownership as reported in the above table has been determined in
accordance with Rule 13d-3 of the Securities Exchange Act of 1934. The
percentages are based upon 1,099,800 shares outstanding as of February 29,
2000. Unless otherwise indicated, each person has sole voting and
dispositive power with respect to all shares listed opposite his name.
(2) Includes 400 shares held by Mr. Garces' minor children and 350 shares held
by Mr. Garces' spouse.
(3) Includes 1,200 shares held by Mr. Chandler's minor children.
(4) Includes 20,000 shares held by Jackson Investment Group of which Mr.
Jackson is a general partner and 20,000 shares held by Mr. Jackson's
spouse. Does not include 20,000 options granted to Mr. Jackson at an
exercise price of $2.50 per share.
(5) Does not include options for up to 24,000 shares to be granted to Robert
Goodyear, Officer, at exercise prices varying from $.70 to $5.00 per share
and does not include warrants granted to Jack Flowers, Director to purchase
33,444 shares of Common Stock at $.70 per share.
This space intentionally left blank.
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ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
The following table sets forth the name, age and position of the executive
officers, key employees and directors of the Company as of February 29, 2000.
<TABLE>
<CAPTION>
Name Age Position
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<S> <C> <C>
Robert D. Garces 50 Chairman of the Board of Directors &
Chief Executive Officer
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Thomas Kiser 37 Director & President
- -------------------------------------------------------------------------------------------------------------
Robert Goodyear 52 Chief Operating Officer & Secretary/Treasurer
- -------------------------------------------------------------------------------------------------------------
Rita McKeown 46 Chief Financial Officer
- -------------------------------------------------------------------------------------------------------------
Howard C. Chandler, Jr. M.D. 38 Director
- -------------------------------------------------------------------------------------------------------------
Ronald McDaniel 61 Director
- -------------------------------------------------------------------------------------------------------------
Jack Flowers 54 Director
- -------------------------------------------------------------------------------------------------------------
James Stewart, O.D. 50 Director
- -------------------------------------------------------------------------------------------------------------
Richard Jackson 48 Director
- -------------------------------------------------------------------------------------------------------------
</TABLE>
Robert D. Garces, Chairman of the Board of Directors & Chief Executive Officer
Mr. Garces is a co-founder of the Company and has served as the Chairman of
the Board of Directors and Chief Executive Officer since the Company was
organized. Mr. Garces also serves as Chairman and Chief Executive Officer of
SpecialNet, Inc., a company he founded in 1994 that provides a network of
physicians, hospitals and other ancillary health services to self-
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insured employers and insurance companies throughout the state of Georgia. In
1996, Mr. Garces co-founded Better Image, Inc. a consolidation of Plastic
Surgeons around the United States. Prior to 1994, Mr. Garces started the Atlanta
company of Southeastern Medical Consultants, a physician billing and management
company which was later sold. During this same period he also founded three
companies, all of which were later sold: (i) ARTAC, a software and systems
development company for hospital business offices; (ii) Southern Medical
Imaging; and (iii) Morgan Health Group. Mr. Garces holds a Bachelor of Arts
degree in accounting and economics from Clemson University in Clemson, South
Carolina and is a Fellow in the Clemson Alumni Association.
Thomas Kiser, Director & President
Mr. Kiser is a co-founder of the Company with Mr. Garces and has served as
its President since the Company was organized. In 1996, Mr. Kiser founded TWK
Enterprises, Inc., a real estate acquisition and development company in Atlanta,
Georgia. Mr. Kiser also serves as President of TWK Enterprises, Inc., however,
operations are handled by outside property management, reporting to Mr. Kiser.
In 1994, Mr. Kiser formed and was president of two regional franchise companies,
TC Concepts, Inc. in Orlando, Florida and MKM, Inc. in Atlanta, Georgia, which
sold in 1996. From 1989 through 1991, Mr. Kiser held retail and institutional
sales positions with Bear Stearns Company and Shapiro Carter and Company. In
1988, Mr. Kiser joined Marshall and Company, an Atlanta based regional
investment banking firm specializing in the private placement and underwriting
of securities of small-capitalization southeastern companies. From 1986 through
1988, Mr. Kiser was an assistant manager with Stuart James Co, an investment
banking and brokerage company. Mr. Kiser holds a Bachelor of Science degree in
economics from Vanderbilt University in Nashville, Tennessee.
Robert Goodyear, Chief Operating Officer & Secretary/Treasurer
Mr. Goodyear joined the Company in 1999 and is the chief operating
officer. In 1997 and 1998, Mr. Goodyear served as president and chief executive
officer of Lumen, a Marietta, Georgia healthcare consulting firm specializing in
process re-design and re-engineering, management transformation and leadership
development services. From 1991 through 1996, Mr. Goodyear was senior vice-
president of the Marietta based healthcare division of First Data Corp. Mr.
Goodyear has also held senior marketing and sales positions with other
healthcare companies such as Inforum, Inc. in Nashville, Tennessee and HBO & Co.
in Atlanta. From 1981 through 1986, he served as the chief executive officer of
Community Memorial Hospital in Monmouth, Illinois and during four years prior
thereto was the assistant administrator and chief financial officer of St.
Joseph Medical Center in Ponca City, Oklahoma. Mr. Goodyear received his
Bachelor of Science degree in business administration from the University of
Arkansas in Fayetteville, Arkansas and received an MBA from the University of
Evansville in Evansville, Indiana. Among other activities, Mr. Goodyear is a
Fellow of the Healthcare Financial Management Association and a member of the
American College of Healthcare Executives.
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Rita McKeown, Chief Financial Officer
Ms. McKeown is the Company's chief financial officer. From 1994 to
1999, Ms. McKeown served as director of finance of Transcend Services, Inc., an
Atlanta Georgia healthcare company specializing in patient information
management solutions for hospitals and other associated healthcare providers.
From 1991 to 1994, Ms. McKeown served as director of accounting of Premier
Anesthesia, Inc. From 1981 to 1991, Ms. McKeown held multiple senior
accounting positions with HBO & Co in Atlanta. Ms. McKeown is a Certified
Public Accountant and received her Bachelor of Business Administration from
Kennesaw State University in Kennesaw, Georgia.
Howard C. Chandler, Jr. M.D., Director
Dr. Chandler is a Board Certified practicing neurosurgeon and is the
President and Chief Executive Officer of the Montana Neuroscience Institute,
located in Missoula, Montana. He is also founder and Chairman of Interwest
Health, LLC, a managed care organization that develops and maintains networks of
physicians, hospitals and ancillary health services used by insurance companies
and self-insured employers. He has been the program director of the Montana
Neurosurgery Symposium since 1995. Dr. Chandler holds a Bachelor of Science
degree in chemistry from the University of the South in Sewanee, Tennessee where
he graduated cum laude. He completed medical school at Bowman Gray School of
Medicine of Wake Forest University in Winston - Salem, North Carolina. Dr.
Chandler holds licenses in the states of Montana and Florida. He is a member in
good standing of the American Medical Association, Montana Medical Association
and the Congress of Neurological Surgeons.
Ronald J. McDaniel, Director
Mr. McDaniel is currently an independent sales and marketing consultant.
From 1998 to 1999, Mr. McDaniel was Vice President of Corporate Development of
Orthalliance, Inc., an orthodontic and pediatric dental management services
organization. From 1995 to 1998, he was vice president of development for TEAM
HEALTH, a division of Medpartners - PPM. Prior to 1995, Mr. McDaniel was
executive vice president of sales and marketing of Premier Anesthesia. He has
also held senior sales positions with American Medical International and
American Hospital Supply. Mr. McDaniel has also served as corporate vice
president of United Western Medical Centers, a small multi-hospital system. Mr.
McDaniel holds a Bachelor of Science in economics from California State
University at Los Angeles and an Associate in Arts from Pasadena City College,
Pasadena, California. Mr. McDaniel is a member of the National Association of
Medical Marketers.
Jack Flowers, Director
Mr. Flowers has been an independent financial consultant for approximately
ten years and has over twenty-five years experience in brokerage, investment
banking, and venture capital. Currently, Mr. Flowers serves as the Managing
Member of the California Diversified Fund, a
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venture capital fund in Santa Monica, California. In 1986, Mr. Flowers joined
American Film Technologies, a Wayne, Pennsylvania start-up company which had
developed colorization technology for the film industry. Prior to 1986, Mr.
Flowers was employed as a stockbroker by Paine Webber Jackson & Curtis in Palm
Beach, Florida, Oppenheimer & Company in New York, City, and Merrill Lynch in
Philadelphia, Pennsylvania. Mr. Flowers began his financial career in 1972 when
he joined the brokerage firm of DuPont Glore Forgan. Mr. Flowers holds a
Bachelor of Science degree in mathematics and economics from Rose Hulman
Institute of Technology in Terre Haute, Indiana and is a graduate of the
Scandinavian Seminar in Copenhagen, Denmark.
James Stewart, O.D., Director
Dr. Stewart is a Doctor of Optometry and has had a private practice in
Atlanta, Georgia since 1997. In 1990, Dr. Stewart was a co-founder of two
Atlanta based companies, Eyecare Leasing, Inc., an optometry management and
consulting company and National Vision Associates, Ltd., a retail optical
concern. Dr. Stewart served as President of Eyecare Leasing, Inc. from 1990 to
1997. Eyecare Leasing, Inc. was sold to National Vision Associates, Ltd. in
1997, whose name recently was changed to VISTA Eyecare, Inc. Dr. Stewart also
founded Opticare Associates, Inc., an Atlanta company specializing in the
recruitment of optometrists and the management of optometry offices. Prior to
1990, Dr. Stewart was in private practice in Shelby County, Alabama and
participated in a group practice at the Shelby Medical Center in Alabaster,
Alabama. Dr. Stewart is a graduate of the School of Optometry at the University
of Alabama at Birmingham Medical Center and received his undergraduate degree
from Birmingham Southern College. Dr. Stewart holds several certifications and
licenses from various agencies and boards including certification from the
therapeutic Management for Optometrists and the National Board of examiners in
Optometry. Dr. Stewart serves on the Board of the Georgia Society to Prevent
Blindness and is an active member of several associations including the Better
Vision Institute and the American Optometric Association.
Richard M. Jackson, Director
Mr. Jackson is currently the President of Surgical Information Systems.
Mr. Jackson founded the company in 1997. In 1992, Mr. Jackson co-founded
Premier Ambulatory Surgery Center out of Pasadena, CA, which became the 3rd
largest surgery center company in America and recently became a part of
HealthSouth. In 1987, Mr. Jackson founded and served as chairman of the board
of a hospital staffing firm that subsequently became Premier Anesthesia, one of
the largest anesthesia contract management firms in the industry. In 1978, Mr.
Jackson founded Jackson & Coker, a physician recruiting firm.
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ITEM 6. EXECUTIVE COMPENSATION
The following table sets forth the cash and non-cash compensation paid
by the Company to its Chief Executive Officer and all other executive officers
for services rendered during the fiscal year ended September 30, 1999.
Name & Position Year Salary
- --------------- ---- -------
Robert D. Garces, Chairman & Chief
Executive Officer 1999 $34,615
Thomas W. Kiser, Director & President 1999 $40,385
Robert Goodyear, Chief Operating Officer
& Secretary/Treasurer 1999 $52,250
Stock Warrant Grants
The Company granted Mr. Flowers, a board member, warrants to purchase
33,444 shares of Common Stock at $.70 per share in return for certain advisory
and consulting services. The Company has recognized approximately $60,200 of
consulting fees in connection with these warrants during the period from
inception (September 30, 1998) through September 30, 1999.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Management Relationships
Robert D. Garces and Howard Chandler, Jr. are brothers-in-law.
Related Transactions
Robert Garces is a stockholder in SpecialNet, Inc., the corporation from
which the Company subleases its executive offices and is obtaining an access to
providers of healthcare services in the State of Georgia. While the terms of
these transactions have not been negotiated at arms-length, the Company believes
that the terms are or will be comparable to what it could obtain in arms-length
transactions.
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ITEM 8. DESCRIPTION OF SECURITIES
Common Stock
The Company is authorized to issue 10,000,000 shares of Common Stock, $.001
par value per share, of which, 1,099,800 were outstanding as of February 29,
2000. The Company has reserved 400,000 shares of the Common Stock in connection
with a stock option plan. Options under the plan will be issued to directors,
executives, employees and consultants providing valuable services to the Company
(See footnote 5 to the table under "Security Ownership of Certain Beneficial
Owners and Management" on page 12). The options may be incentive stock options
or non-qualified stock options. The Company believes that the plan will
encourage individuals associated with the Company to invest in shares of the
Company's Common Stock, thereby acquiring a proprietary interest in its business
and an increased personal interest in its success and progress. If any change
is made in the stock subject to any options granted under the plan (through
merger, consolidation, reorganization, re-capitalization, stock dividend, split-
up, combination shares, change in corporate structure or otherwise), it is
anticipated that the plan will provide that appropriate adjustments will be made
to the maximum number of shares subject to the plan and the number of shares and
exercise price per share of stock subject to any outstanding options.
The holders of Common Stock are entitled to one vote per share on all
matters submitted to a vote of the shareholders of the Company. In addition,
such holders are entitled to receive ratably such dividends, if any, as may be
declared from time to time by the Board of Directors out of funds legally
available. In the event of the dissolution, liquidation or winding-up of the
Company, the holders of Common Stock are entitled to share ratably in all assets
remaining after payment of all liabilities of the Company. Shareholders are not
entitled to accumulate their votes in any election. Holders of Common Stock
have no preemptive rights or other rights to subscribe or convert shares of
Common Stock into other securities. All shares of Common Stock outstanding are
fully paid and non-assessable.
PART II.
ITEM 1. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Currently, there is no public trading market for the Company's Common
Stock. The Company intends to apply through a National Association of
Securities Dealers (NASD) market maker to have the Common Stock traded on the
NASDAQ Over-The-Counter Electronic Bulletin Board after meeting the filing
requirements with the Securities and Exchange Commission. However, no assurance
can be given that such application will be approved or, if approved, it is
uncertain that an active public trading market will develop. A public market
for the Company's Common Stock may not develop or be sustained in the future
even if the Company issues equity securities publicly. As of February 29, 2000,
there were 135 record holders of the Company's Common Stock. The Company has
not paid any cash dividends since
16
<PAGE>
its inception and does not contemplate paying dividends in the foreseeable
future. It is anticipated that earnings, if any, will be retained for the
operation of the Company's business.
ITEM 2. LEGAL PROCEEDINGS
The Company is not currently involved in any litigation or legal
proceedings and is not aware of any litigation or legal proceeding threatened
against it.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
None.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
The Company sold a total of 359,800 shares of its common stock at $2.50 per
share to individual investors for an aggregate of $900,000, pursuant to the
exemption set forth in Regulation D, Rule 504 detailed in the table below.
- --------------------------------------------------------------------------
Date Title Shares of Common Stock
- ---------------------------------------------------------------------------
May 13, 1999 Common Stock 109,000
- ---------------------------------------------------------------------------
May 24, 1999 Common Stock 103,600
- ---------------------------------------------------------------------------
July 22, 1999 Common Stock 80,000
- ---------------------------------------------------------------------------
August 20, 1999 Common Stock 5,000
- ---------------------------------------------------------------------------
August 23, 1999 Common Stock 39,500
- ---------------------------------------------------------------------------
September 30, 1999 Common Stock 22,700
- ---------------------------------------------------------------------------
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Sections 14-2-851 through 14-2-859 of the Official Code of Georgia
Annotated (effective July 1, 1989) authorize the Company to indemnify its
directors, officers, employees and agents in certain circumstances. The Bylaws
of the Company require the Company to indemnify each person to the fullest
extent permitted by Georgia law who was or is a party or is threatened to be
made a party to or is involved in any action, suit or proceeding (hereinafter a
"proceeding"), by reason of the fact that he or she, or a person of whom he or
she is the legal representative, is or was a director or officer of the Company
or is or was serving at the request of the Company as a director, officer,
employee or agent of another person or entity, whether the basis of such
proceeding is alleged action or inaction in an official capacity or in any other
capacity while serving as a director, officer, employee or agent, except that
any such person seeking indemnification in connection with a proceeding (or part
thereof) initiated by such person only shall only be indemnified if such
proceeding (or part thereof) was authorized by the Board of
17
<PAGE>
Directors. Notwithstanding the foregoing, if a claim for indemnification is not
paid in full by the Company within thirty days after a written claim has been
received by the Company, the claimant may sue the Company to recover the unpaid
amount of the claim and, if successful in whole or in part, the claimant shall
be entitled to be paid also the expense of prosecuting such claim.
The right to indemnification conferred by the Company's Bylaws constitutes
a contract right and includes the right to be paid by the Company the expenses
incurred in defending any such proceeding in advance of its final disposition;
provided, however, that, if Georgia law so requires, the payment of such
expenses incurred by a director or officer solely in his or her capacity as a
director or officer in advance of the final disposition of a proceeding, shall
be made only upon delivery to the Company of an undertaking, by or on behalf of
such director or officer, to repay all amounts so advanced if it shall
ultimately be determined that such director or officer is not entitled to be
indemnified.
The Company's Bylaws also permit the Company to maintain insurance, at its
expense, to protect itself and any director, officer, employee or agent of the
Company or any other person or enterprise against any expense, liability or
loss, whether or not the Company would have the power to indemnify such person
against such expense, liability or loss under Georgia law.
The Company's Articles of Incorporation provide that a Director of this
Corporation shall not be personally liable to the Corporation or its
Shareholders for monetary damages for breach of fiduciary duty as a Director,
except for liability (i) for any appropriation, in violation of his duties, of
any business opportunity of the Corporation, (ii) for acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law, (iii) for the type of liability set forth under Section 14-2-832 of the
Georgia Business Corporation Code, or (iv) for any transaction from which the
Director received an improper personal benefit.
18
<PAGE>
INDEX TO FINANCIAL STATEMENTS
The following financial statements are filed with this report:
Report of Ernst & Young LLP, Independent Auditors.............21
Balance Sheets................................................22
Statements of Operations......................................23
Statements of Stockholders' Equity............................24
Statements of Cash Flows......................................25
Notes to Financial Statements.................................26
19
<PAGE>
ALLIANCE HEALTHCARD, INC.
FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED DECEMBER 31, 1999 (UNAUDITED)
AND
FOR THE PERIOD FROM INCEPTION (SEPTEMBER 30, 1998) THROUGH
SEPTEMBER 30, 1999 (AUDITED)
AND
FOR THE PERIOD FROM INCEPTION (SEPTEMBER 30, 1998) THROUGH
DECEMBER 31, 1999 (UNAUDITED)
AND
FOR THE PERIOD FROM INCEPTION (SEPTEMBER 30, 1998) THROUGH
DECEMBER 31, 1998 (AUDITED)
WITH
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT THEREON
20
<PAGE>
Report of Independent Auditors
The Board of Directors and Stockholders
Alliance HealthCard, Inc.
We have audited the accompanying balance sheets of Alliance HealthCard, Inc. (a
Development Stage Company) as of September 30, 1999 and the related statements
of operations, stockholders' equity and cash flows for the period from inception
(September 30, 1998) through September 30, 1999 and for the period from
inception (September 30, 1998) through December 31, 1998. These 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 auditing standards generally accepted
in the United States. Those standards require that we plan and perform the
audits 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 financial statements referred to above present fairly, in
all material respects, the financial position of Alliance HealthCard, Inc. at
September 30, 1999 and the results of its operations and its cash flows for the
period from inception (September 30, 1998) through September 30, 1999 and for
the period from inception (September 30, 1998) through December 31, 1998 in
conformity with accounting principles generally accepted in the United States.
Ernst & Young LLP
Atlanta, Georgia
March 20, 2000
21
<PAGE>
Alliance HealthCard, Inc.
(A Development Stage Company)
Balance Sheets
<TABLE>
<CAPTION>
September 30, December 31,
1999 1999
------------ -----------
(Unaudited)
Assets
Current assets:
<S> <C> <C>
Cash and cash equivalents $ 532,782 $ 339,343
Other current assets 2,277 16,598
---------- ----------
Total current assets 535,059 355,941
---------- ----------
Furniture and equipment, net 9,176 12,612
Other assets - 6,358
---------- ----------
Total assets $ 544,235 $ 374,911
========== ==========
Liabilities and stockholders' equity
Accounts payable $ 27,259 $ 31,676
Accrued salaries and benefits 51,436 44,634
Current portion of capital lease obligations 3,132 2,957
Other accrued liabilities - 1,620
---------- ----------
Total current liabilities 81,827 80,887
Capital lease obligation 4,523 4,395
Commitments
Stockholders' equity:
Common stock, $.001 par value; 10,000,000
shares authorized; 1,099,800 shares issued
and outstanding at September 30, 1999 and
December 31, 1999 1,100 1,100
Additional paid-in-capital 1,014,010 1,014,010
Deficit accumulated during development stage (557,225) (725,481)
---------- ----------
Total stockholders' equity 457,885 289,629
---------- ----------
Total liabilities and stockholders' equity $ 544,235 $ 374,911
========== ==========
</TABLE>
See accompanying notes.
22
<PAGE>
Alliance HealthCard, Inc.
(A Development Stage Company)
Statements of Operations
<TABLE>
<CAPTION>
Period Period
From From Period
Inception Inception From Inception
(September 30, (September 30, Three Months (September 30,
1998) Through 1998) Through Ended 1998) Through
September 30, December 31, December 31, December 31,
1999 1998 1999 1999
-------------------------------------------------------------------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Net revenue $ - $ - $ - $ -
Expenses:
Personnel 275,660 7,400 120,823 396,483
Provider network
development 15,240 - 2,886 18,126
Sales and marketing 15,869 - 3,517 19,386
General and
administrative 255,244 2,101 44,857 300,101
------------------------------------------------------------------------
Operating loss (562,013) (9,501) (172,083) (734,096)
Interest income 4,788 - 3,827 8,615
------------------------------------------------------------------------
Net loss $(557,225) $(9,501) $(168,256) $(725,481)
========================================================================
</TABLE>
See accompanying notes
23
<PAGE>
Alliance HealthCard, Inc.
(A Development Stage Company)
Statements of Stockholders' Equity
<TABLE>
<CAPTION>
Deficit
Accumulated
Membership Units Common Stock Additional During Total
------------------------------------------ Paid-In Development Stockholders'
Units Amount Shares Amount Capital Stage Equity
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at September 30, 1998 (inception) - $ - - $ - $ - $ - $ -
Issuance of membership units to
founders on September 30, 1998 580,000 - - - - - -
Issuance of membership units on
December 8, 1998 ($.50 per unit) 60,000 30,000 - - - - 30,000
Issuance of membership units
on December 15, 1998 ($.70 per unit) 32,000 22,500 - - - - 22,500
Issuance of membership units
on February 26, 1999 ($.70 per unit) 68,000 47,500 - - - - 47,500
Transfer of membership units to
common stock and change in
corporate tax status (740,000) (100,000) 740,000 740 99,260 - -
Sale of stock ($2.50 per share), net
of offering costs - - 359,800 360 854,550 - 854,910
Stock warrants granted on September 30,
1999 ($.70 per unit) - - - - 60,200 - 60,200
Net loss - - - - - (557,225) (557,225)
-------------------------------------------------------------------------------
Balance at September 30, 1999 - - 1,099,800 1,100 1,014,010 (557,225) 457,885
Net loss (unaudited) - - - - - (168,256) (168,256)
-------------------------------------------------------------------------------
Balance at December 31, 1999 (unaudited) - $ - 1,099,800 $1,100 $1,014,010 $(725,481) $ 289,629
===============================================================================
</TABLE>
See accompanying notes.
24
<PAGE>
Alliance HealthCard, Inc.
(A Development Stage Company)
Statements of Cash Flows
<TABLE>
<CAPTION>
Period From
Inception Period From Inception Period From Inception
(September 30, (September 30, 1998) Three Months (September 30, 1998)
1998) Through Through Ended Through
September 30, 1999 December 31, 1998 December 31, 1999 December 31, 1999
-------------------------------------------------------------------------------------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Cash flows from operating activities
Net loss $ (557,225) $(9,501) $(168,256) $ (725,481)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 2,109 - 1,022 3,131
Warrants issued in connection
with consulting services 60,200 - - 60,200
Change in operating assets and
liabilities:
Prepaid expenses - (720) (16,598) (16,598)
Deposits (2,277) - (4,080) (6,357)
Accounts payable 26,859 4,814 4,417 31,276
Accrued wages 51,836 - - 51,836
Other accrued expenses - - (5,182) (5,182)
---------------------------------------------------------------------------------------
Net cash used in operating activities (418,498) (5,407) (188,677) (607,175)
---------------------------------------------------------------------------------------
Cash flows from investing activities
Purchase of equipment (1,894) (473) (4,458) (6,352)
---------------------------------------------------------------------------------------
Net cash used in investing activities (1,894) (473) (4,458) (6,352)
---------------------------------------------------------------------------------------
Cash flows from financing activities
Sale of membership units 100,000 52,500 - 100,000
Sale of stock and other issuances 854,910 - - 854,910
Repayment of capital lease obligation (1,736) - (303) (2,039)
---------------------------------------------------------------------------------------
Net cash provided by (used in)
financing activities 953,174 52,500 (303) 952,871
---------------------------------------------------------------------------------------
Net increase (decrease) in cash 532,782 46,620 (193,438) 339,344
Cash at beginning of period - - 532,782 -
---------------------------------------------------------------------------------------
Cash at end of period $ 532,782 $46,620 $ 339,344 $ 339,344
=======================================================================================
</TABLE>
See accompanying notes.
25
<PAGE>
Alliance HealthCard, Inc.
(A Development Stage Company)
Notes to Financial Statements
September 30, 1999 and December 31, 1999
(Information pertaining to December 31, 1999 and the period from inception
(September 30, 1998) through December 31, 1999 and the three months ended
December 31, 1999 is unaudited)
1. Description of the Business
Alliance HealthCard, Inc. (the "Company") was organized on September 30, 1998 to
provide comprehensive health care services through provider networks at
discounts to patients for services not covered by their primary health
insurance. The Company was originally formed as a limited liability corporation
and was reorganized into a Georgia corporation in February 1999. The Company's
operations to date have been focused on organizational and market development
activities; therefore, the Company is considered a development stage company for
financial reporting purposes.
2. Summary of Significant Accounting Policies
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 amounts reported in the financial statements and the accompanying
notes. Actual results inevitably will differ from those estimates and such
differences may be material to the financial statements.
Cash and Cash Equivalents
For the purposes of the balance sheets and statements of cash flows, the Company
considers investments purchased with a maturity of three months or less to be
cash equivalents.
Furniture and Equipment
Furniture and equipment are recorded at cost. Depreciation (which includes
amortization of assets under capital leases) is computed on a straight-line
basis based on management's estimates of the useful lives of the assets (or the
term of the related lease, if less), which range from three to five years.
Stock Options
Statement of Financial Accounting Standards No. 123 (SFAS 123), "Accounting for
Stock-Based Compensation", encourages but does not require companies to record
compensation cost for their employee stock compensation plans at the fair value
of the options granted. The Company has elected to measure compensation costs
for stock-based compensation plans using the intrinsic value-based method of
accounting prescribed by Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees" ("APB 25").
26
<PAGE>
2. Summary of Significant Accounting Policies (continued)
Income Taxes
Prior to February 1999, the Company was a limited liability corporation and
therefore, the owners assumed responsibility for the income taxes of the
Company. Deferred taxes arise primarily from the recognition of revenues and
expenses in different periods for income tax and financial reporting purposes.
3. Furniture and Equipment
Furniture and equipment consists of the following at December 31, 1999 and
September 30, 1999:
<TABLE>
<CAPTION>
September 30, December 31,
1999 1999
------------------------------------------
<S> <C> <C>
Furniture $ 804 $ 5,262
Equipment 1,090 1,090
Equipment under capital leases 9,391 9,391
------------------------------------------
11,285 15,743
Less: accumulated depreciation and amortization (2,109) (3,131)
------------------------------------------
$ 9,176 $12,612
==========================================
</TABLE>
4. Stockholders' Equity
On April 19, 1999, the Company filed an Offering Memorandum under Regulation D
of the Securities Act of 1933. The Company sold 360,000 shares of its common
stock for an offering price of $900,000 less $45,090 of related expenses.
The Company granted a certain board member warrants to purchase 33,444 shares of
Common Stock at $.70 per share in return for certain advisory and consulting
services. The Company has recognized approximately $60,200 of consulting fees
in connection with these warrants during the period from inception (September
30, 1998) through September 30, 1999.
5. Stock Options
In conjunction with certain employment agreements, the Company granted stock
options relating to 51,500 shares of common stock during the period from
inception (September 30, 1998) through September 30, 1999. The Company granted a
certain board member stock options relating to 20,000 shares of Common Stock
during the period October 1, 1999 through December 31, 1999. The Company has
reserved 400,000 shares of the Common Stock in connection with a stock option
plan. At December 31, 1999, there were 328,500 shares available for future
issuance, in connection with the Company stock option plan. The vesting
schedules relating to these options range from immediate vesting to a three year
vesting period. The Company has no formal plan relating to its options.
The Company has elected to follow APB 25 and related interpretations in
accounting for its employee stock options because, as discussed below, the
alternative fair value accounting provided for under SFAS 123 requires use of
option valuation models that were not developed for use in valuing employee
stock options. Under APB 25, because the exercise price of the Company's
employee stock options equals the market price of the underlying stock on the
grant date, no compensation expense is recognized.
27
<PAGE>
5. Stock Options (continued)
Pro forma information regarding net income and earnings per share is required by
SFAS 123, which also requires that the information be determined as if the
Company has accounted for its employee stock options granted under the fair
value method.
The fair value of each option is estimated on the date of grant using the
minimum value method with the following weighted average assumptions used for
grants in the period from inception (September 30, 1998) through September 30,
1999 and the three months ended December 31, 1999:
<TABLE>
<CAPTION>
September 30, October 1,
1998 through 1999 through
September 30, December 31,
1999 1999
-------------------------------------
<S> <C> <C>
Expected volatility .01 .01
Dividend yield 0% 0%
Risk free interest rate 6% 6%
Expected lives 5 years 5 years
</TABLE>
For purposes of fair value disclosures, the estimated fair values of the options
are amortized to expense over the options' vesting periods. The Company's pro
forma net loss for the period from inception (September 30, 1998) through
September 30, 1999, as determined using the fair value method of accounting of
Statement 123, was $502,828. The Company's pro forma net loss for the three
months ended December 31, 1999 as determined using the fair value method of
accounting of Statement 123, was $169,869.
Information regarding the options is as follows:
<TABLE>
<CAPTION>
Weighted Average Options Options
Exercise Price Outstanding Exercisable
----------------------------------------------------------
<S> <C> <C> <C>
Balance, at inception (September 30,
1998) $ - - -
Granted 2.58 51,500 -
Became exercisable 2.50 - 15,000
------------------------------------
Balance, September 30, 1999 2.58 51,500 15,000
Granted 2.50 20,000 -
------------------------------------
Balance, December 31, 1999 2.56 71,500 15,000
====================================
</TABLE>
28
<PAGE>
5. Stock Options (continued)
The aggregate fair value of options granted from inception (September 30, 1998)
through September 30, 1999 and during the three months ended December 31, 1999
is $8,655 and $13,000, respectively. The following table summarizes
information about stock options outstanding at September 30, 1999 and December
31, 1999:
<TABLE>
<CAPTION>
September 30, 1999 December 31, 1999
------------------------------------------------
<S> <C> <C>
Range of exercise price $2.50 - $5.00 $2.50 - $5.00
Number outstanding 51,500 71,500
Weighted average remaining contractual life 5 years 5 years
Weighted average exercise price $2.58 $2.56
</TABLE>
6. Income Taxes
Effective February 1999, the Company changed its corporate tax status from a
limited liability corporation to a C corporation. As a result of this change,
the Company became liable for income taxes. Accordingly, as required by
generally accepted accounting principles, the Company recorded deferred tax
assets and liabilities on temporary differences between the income tax basis and
book basis of certain assets and liabilities as of the date of change. The
effect of recording these net deferred tax assets has been accounted for as a
cumulative effect adjustment upon the results of operations for the period from
inception (September 30, 1998) through September 30, 1999. The impact on net
loss was zero due to the establishment of a valuation allowance relating to the
net deferred tax assets.
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
and income tax purposes. Significant components of the Company's deferred tax
assets and liabilities as of September 30, 1999 and December 31, 1999 are as
follows:
<TABLE>
<CAPTION>
September 30, 1999 December 31, 1999
---------------------------------------
Deferred tax assets:
<S> <C> <C>
Net operating loss carryforwards $ 168,876 $ 234,396
Other 4,303 -
---------------------------------------
Gross deferred tax asset 173,179 234,496
Less valuation allowance (173,179) (234,496)
---------------------------------------
Net deferred tax assets $ - $ -
=======================================
</TABLE>
29
<PAGE>
6. Income Taxes (continued)
Significant components of the provision for income taxes are as follows:
<TABLE>
<CAPTION>
Period from
September 30, 1998 Three months ended
through -------------------------------------
September 30, December 31, December 31,
1999 1998 1999
-----------------------------------------------------------------
<S> <C> <C> <C>
Deferred
Federal $ 150,976 $ - $ 53,456
State 22,203 - 7,861
-----------------------------------------------------------------
Total income tax benefit 173,179 - 61,317
Less valuation allowance (173,179) - (61,317)
-----------------------------------------------------------------
$ - $ - $ -
=================================================================
</TABLE>
A valuation allowance has been provided because realization of the deferred tax
assets is uncertain. The effective tax rate varied from the statutory federal
rate due to the impact of changes in the valuation allowance.
The Company has net operating loss carryforwards available to offset future
taxable income of approximately $601,000 and $433,000 at December 31, 1999 and
September 30, 1999 respectively, which expire in 2019.
7. Related Party Transactions
Alliance HealthCard, Inc. subleases its office space on a month to month basis
from an affiliated company. The Company expensed approximately $18,000 for the
period from inception (September 30, 1998) through September 30, 1999 and
$11,555 for the three months ended December 31, 1999 and relating to office rent
and related equipment usage.
During the period from inception (September 30, 1998) through September 30, 1999
and for the three months ended December 31, 1999, the Company expensed
approximately $15,000 and $370, respectively, relating to printing, graphic
design, trademark fee and contract services provided by an affiliated company.
30
<PAGE>
8. Equipment Leases
The Company leases certain equipment under capital leases and non-cancelable
operating lease agreements which expire on various dates through 2002. At
September 30, 1999 and December 31, 1999, minimum annual rental commitments
under capital leases and non-cancelable operating leases with terms in excess of
one year are as follows:
<TABLE>
<CAPTION>
September 30, 1999 December 30, 1999
-----------------------------------------------------
Capital Operating Capital Operating
Leases Leases Leases Leases
-----------------------------------------------------
<S> <C> <C> <C> <C>
2000 $ 4,282 $ 924 $3,212 $ 693
2001 4,282 924 4,282 924
2002 1,910 308 1,910 308
---------------------------------------------------
Total minimum lease payments 10,474 $2,156 9,404 $1,925
====== ======
Less: amounts representing interest 2,819 2,052
------- ------
Present value of net minimum lease payments $ 7,655 $7,352
======= ======
</TABLE>
Assets acquired under non-cancelable capital leases consist of computer
equipment with an aggregate cost of $9,391 at September 30, 1999 and December
31, 1999 and accumulated amortization of $1,827 at September 30, 1999 and $2,610
at December 31, 1999. Amortization of leased assets is included in depreciation
expense.
Rent expense related to operating leases amounted to $693 for the period from
inception (September 30, 1998) through September 30, 1999 and $0 and $231 for
the period from inception through December 31, 1998 and the three months ended
December 31, 1999, respectively.
31
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
ALLIANCE HEALTHCARD, INC.
Dated: March 17, 2000
By /s/ Robert D. Garces
----------------------------
Robert D. Garces
Chairman of the Board and
Chief Executive Officer
2
<PAGE>
PART III.
EXHIBIT INDEX
Item 1. Index to Exhibits
Exhibit No. Description
---------- -----------
2.1 Articles of Incorporation of the Company
2.2 Bylaws of the Company
3.2 Specimen Certificate of Common Stock
6.1 Form of Broker Agreement
6.2 Form of Network Agreement
6.3 Form of Provider Agreement
27 Financial Data Schedule
1
<PAGE>
Exhibit 2.1 ARTICLES OF INCORPORATION
FILED IN THE OFFICE OF THE SECRETARY
OF STATE OF THE STATE OF GEORGIA
FEBRUARY 23, 1999
ARTICLE ONE
NAME
The name of the Corporation is ALLIANCE HEALTHCARD, INC.
ARTICLE TWO
REGISTERED OFFICE
The address of the registered office of the Corporation in the State of
Georgia is 3343 Peachtree Road, Suite 610, Atlanta, Georgia 30326n the
County of Fulton. The name of the Corporation's registered agent in the
State of Georgia at such address is Michael W. Broadbear, Esq.
ARTICLE THREE
PURPOSES
The purpose of the Corporation is to engage in any lawful act or activity
for which corporations may now or hereafter be organized under the Georgia
Business Corporation Code.
ARTICLE FOUR
CAPITAL STOCK
The aggregate number of shares of stock which the Corporation shall have
authority to issue is ten million (10,000,000) shares of $.001 par value
Common Stock.
ARTICLE FIVE
BYLAWS
In furtherance and not in limitation of the powers conferred by statute,
the Board of Directors is expressly authorized to adopt, repeal, rescind,
alter or amend in any respect the Bylaws of the Corporation.
ARTICLE SIX
INITIAL PRINCIPAL OFFICE
The address of the initial principal office of the Corporation is 3500
Parkway Lane, Suite 310, Norcross, Georgia 30092.
3
<PAGE>
ARTICLE SEVEN
SHAREHOLDER ACTION BY WRITTEN CONSENT
To the extent allowed by law, any action that is required to be or may be
taken at a meeting of the Shareholders of the Corporation may be taken
without a meeting if written consent, setting forth the action, shall be
signed by persons who would be entitled to vote at a meeting those shares
having voting power to cast no less than the minimum number (or numbers, in
the case of voting by classes) of votes that would be necessary to
authorize or take such action at a meeting at which all shares entitled to
vote were present and voted. Notice shall be given within ten (10) days of
the taking of corporate action without a meeting by less than unanimous
written consent to those Shareholders on the record date whose shares were
not represented on the written consent.
ARTICLE EIGHT
PLACE OF MEETINGS AND RECORDS
Meetings of Shareholders of the Corporation may be held within or without
the State of Georgia, as the Bylaws may provide. The books of the
Corporation may be kept (subject to any provision of applicable law) within
or without the State of Georgia at such place or places as may be
designated from time to time by the Board of Directors or in the Bylaws.
ARTICLE NINE
LIMITATION ON DIRECTORS' LIABILITY
A Director of this Corporation shall not be personally liable to the
Corporation or its Shareholders for monetary damages for breach of
fiduciary duty as a Director, except for liability (i) for any
appropriation, in violation of his duties, of any business opportunity of
the Corporation, (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (iii) for the
type of liability set forth under Section 14-2-832 of the Georgia Business
Corporation Code, or (iv) for any transaction from which the Director
received an improper personal benefit.
If the Georgia Business Corporation Code is hereafter amended to authorize
the further elimination or limitation of the liability of a Director, then
the liability of a Director of the Corporation shall be eliminated or
limited to the fullest extent permitted by the Georgia Business Corporation
Code, as so amended.
Any repeal or modification of the foregoing provisions of this Article Nine
by the Shareholders of the Corporation shall not adversely affect any right
or protection of a Director of the Corporation existing at the time of such
repeal or modification.
The provisions of this Article Nine shall not be deemed to limit or
preclude indemnification of a Director by the Corporation for any liability
of a Director which has not been eliminated by the provisions of this
Article Nine.
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ARTICLE TEN
INCORPORATOR
The name and address of the incorporator is as follows:
David M. Pedley, Esq.
Minkin & Snyder
A Professional Corporation
One Buckhead Plaza
3060 Peachtree Road, Suite 1100
Atlanta, Georgia 30305
IN WITNESS WHEREOF, the undersigned, being the incorporator hereinbefore
named, has executed, signed and acknowledged these Articles of Incorporation
this 22nd day of February, 1999.
David M. Pedley, Incorporator
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Exhibit 2.2 Bylaws of the Company
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I - Offices....................................................................... 1
Section 1. Registered Office.......................................................... 1
Section 2. Principal Office........................................................... 1
Section 3. Other Offices.............................................................. 1
ARTICLE II - Meetings of Shareholders..................................................... 1
Section 1. Place of Meetings.......................................................... 1
Section 2. Annual Meetings............................................................ 1
Section 3. Special Meetings........................................................... 1
Section 4. Shareholder Lists.......................................................... 2
Section 5. Notice of Meetings......................................................... 2
Section 6 Quorum and Adjournment..................................................... 2
Section 7 Voting..................................................................... 3
Section 8. Proxies.................................................................... 3
Section 9. Judges of Election......................................................... 3
Section 10. Written Consent............................................................ 3
Section 11. Voting Trust............................................................... 4
Section 12. Shareholder Agreement...................................................... 4
ARTICLE III - Directors................................................................... 4
Section 1. Powers..................................................................... 4
Section 2. Number..................................................................... 4
Section 3. Vacancies and Newly Created Directorships.................................. 4
Section 4. Meetings................................................................... 5
Section 5. Annual Meetings............................................................ 5
Section 6. Regular Meetings........................................................... 5
Section 7. Special Meetings........................................................... 5
Section 8. Quorum..................................................................... 5
Section 9. Fees and Compensation...................................................... 5
Section 10. Meetings by Telephonic Communication....................................... 5
Section 11. Committees................................................................. 6
Section 12. Action Without Meetings.................................................... 6
Section 13. Removal.................................................................... 6
Section 14. Resignations............................................................... 6
ARTICLE IV - Officers..................................................................... 6
Section 1. Appointment and Salaries................................................... 6
</TABLE>
6
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<TABLE>
<S> <C>
Section 2. Removal and Resignation................................................... 7
Section 3. Chairman of the Board..................................................... 7
Section 4. Chief Executive Officer................................................... 7
Section 5. President................................................................. 7
Section 6. Vice President............................................................ 7
Section 7. Secretary and Assistant Secretary......................................... 7
Section 8. Treasurer................................................................. 8
Section 9. Assistant Officers........................................................ 8
ARTICLE V - Seal......................................................................... 8
ARTICLE VI - Form of Stock Certificate................................................... 9
ARTICLE VII - Representation of Shares of Other Corporations............................. 9
ARTICLE VIII - Transfer of Stock......................................................... 10
ARTICLE IX - Lost, Stolen or Destroyed Certificates...................................... 10
ARTICLE X - Record Date.................................................................. 10
ARTICLE XI - Registered Shareholders..................................................... 10
ARTICLE XII - Fiscal Year................................................................ 10
ARTICLE XIII - Amendments................................................................ 10
ARTICLE XIV - Dividends.................................................................. 11
Section 1. Declaration............................................................... 11
Section 2. Set Aside Funds........................................................... 11
ARTICLE XV - Indemnification and Insurance............................................... 11
Section 1. Right to Indemnification.................................................. 11
Section 2. Right of Claimant to Bring Suit........................................... 12
Section 3. Non-Exclusivity of Rights................................................. 12
Section 4. Insurance................................................................. 12
Section 5. Expenses as a Witness..................................................... 12
Section 6. Indemnity Agreements...................................................... 13
</TABLE>
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CERTIFICATE OF SECRETARY
OF
ALLIANCE HEALTHCARD, INC.
A Georgia Corporation
I hereby certify that I am the duly elected and acting Secretary of said
corporation and that the foregoing Bylaws, comprising 13 pages, constitute the
Bylaws of said corporation as duly adopted by the Board of Directors as of the
23/rd/ day of February, 1999.
___________________________
Robert Goodyear, Secretary
BYLAWS
OF
ALLIANCE HEALTHCARD, INC.
(A Georgia Corporation)
ARTICLE I
OFFICES
Section 1. Registered Office. The registered office of the Corporation
shall be in the State of Georgia, and the name of the Resident Agent in charge
thereof is the agent named in the Articles of Incorporation until changed by the
Board of Directors (the "Board").
Section 2. Principal Office. The principal office for the transaction of
the business of the Corporation shall be at such place as may be established by
the Board. The Board is granted full power and authority to change said
principal office from one location to another.
Section 3. Other Offices. The Corporation may also have an office or
offices at such other places, either within or without the State of Georgia, as
the Board may from time to time designate or the business of the Corporation may
require.
ARTICLE II
MEETINGS OF SHAREHOLDERS
Section 1. Place of Meetings. Meetings of Shareholders shall be held at
such time and place, within or without the State of Georgia, as shall be stated
in the notice of the meeting or in a duly executed waiver of notice thereof.
Section 2. Annual Meetings. Annual meetings of the Shareholders of the
Corporation for the purpose of electing directors and for the transaction of
such other proper
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business as may come before such meetings may be held at such time, date and
place as the Board shall determine by resolution.
Section 3. Special Meetings. Special meetings of the Shareholders of the
Corporation for any purpose or purposes may be called at any time by the Board,
or by a committee of the Board that has been duly designated by the Board and
whose powers and authority, as provided in a resolution of the Board or in the
Bylaws of the Corporation, include the power to call such meetings, and shall be
called by the Chief Executive Officer or Secretary at the request in writing of
a majority of the Board, or at the request in writing (including a statement of
the purpose or purposes of the proposed meeting) of Shareholders owning at least
twenty-five percent (25%) of the entire capital stock of the Corporation issued
and outstanding and entitled to vote, but such special meetings may not be
called by any other person or persons; provided, however, that if and to the
extent that any special meeting of Shareholders may be called by any other
person or persons specified in any provisions of the Articles of Incorporation
or any amendment thereto, then such special meeting may also be called by the
person or persons in the manner, at the times and for the purposes so specified.
Business transacted at any special meeting of Shareholders shall be limited to
the purposes stated in the notice.
Section 4. Shareholder Lists. The officer who has charge of the stock
ledger of the Corporation shall prepare and make, at least ten days before every
meeting of Shareholders, a complete list of Shareholders entitled to vote at the
meeting, arranged in alphabetical order and showing the address of each
Shareholder and the number of shares registered in the name of each Shareholder.
Such list shall be open to the examination of any Shareholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting or at the place of the meeting, and the list shall also be available at
the meeting during the whole time thereof, and may be inspected by any
Shareholder who is present.
Section 5. Notice of Meetings. Notice of each meeting of Shareholders,
whether annual or special, stating the place, date and hour of the meeting and,
in the case of a special meeting, the purpose or purposes for which such meeting
has been called, shall be given to each Shareholder of record entitled to vote
at such meeting not less than ten nor more than sixty days before the date of
the meeting. Such notice shall be given to the Shareholders by the Secretary, or
in the case of the Secretary's absence or refusal or inability to act, by any
other officer of the Corporation, and may be given by mail, by telecopy, by
telephone or by personal service, or by any combination thereof as to different
Shareholders. If mailed, such notice shall be deemed to have been given when
deposited in the United States mail, addressed to the Shareholder at his address
as it appears in the stock record books of the Corporation, with postage thereon
prepaid. Notice by other permitted methods shall be deemed to have been given
when personally delivered or when transmitted to the telephone or telecopy
number previously supplied to the Secretary by the Shareholder. Except as
otherwise expressly required by law, notice of any adjourned meeting of the
Shareholders need not be given if the time and place thereof are announced at
the meeting at which the adjournment is taken.
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Whenever any notice is required to be given under the provisions of any
applicable law or of the Articles of Incorporation or of these Bylaws, a waiver
thereof in writing, signed by the person or persons entitled to said notice,
whether before or after the time stated therein, shall be deemed equivalent
thereto. Notice of any meeting of Shareholders shall be deemed waived by any
Shareholder who shall attend such meeting in person or by proxy, except a
Shareholder who shall attend such meeting for the express purpose of objecting,
at the beginning of the meeting, to the transaction of any business because the
meeting is not lawfully called or convened.
Section 6. Quorum and Adjournment. The holders of a majority of the stock
issued and outstanding and entitled to vote thereat, present in person or
represented by proxy, shall constitute a quorum for holding all meetings of
Shareholders, except as otherwise provided by applicable law or by the Articles
of Incorporation; provided, however, that the Shareholders present at a duly
called or held meeting at which a quorum is present may continue to transact
business until adjournment notwithstanding the withdrawal of enough Shareholders
to leave less than a quorum, if any action taken (other than adjournment) is
approved by at least a majority in voting power of the shares required to
constitute a quorum. If it shall appear that such quorum is not present or
represented at any meeting of Shareholders, the Chairman of the meeting shall
have power to adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present or represented. At
such adjourned meeting at which a quorum shall be present or represented, any
business may be transacted which might have been transacted at the meeting as
originally noticed. If the adjournment is for more than thirty days, or if after
the adjournment a new record date is fixed for the adjourned meeting, a notice
of the adjourned meeting shall be given to each Shareholder of record entitled
to vote at the meeting. The Chairman of the meeting may determine that a quorum
is present based upon any reasonable evidence of the presence in person or by
proxy of Shareholders holding a majority of the outstanding votes, including
without limitation, evidence from any record of Shareholders who have signed a
register indicating their presence at the meeting.
Section 7. Voting. In all matters, when a quorum is present at any meeting,
the vote of the holders of a majority of the capital stock having voting power
present in person or represented by proxy shall decide any question brought
before such meeting, unless the question is one upon which by express provision
of applicable law or of the Articles of Incorporation, a different vote is
required, in which case such express provision shall govern and control the
decision of such question. Such vote may be viva voce or by written ballot;
provided, however, that the Board may, in its discretion, require a written
ballot for any vote, and further provided that all elections for Directors must
be by written ballot upon demand made by a Shareholder at any election and
before the voting begins.
Unless otherwise provided in the Articles of Incorporation each Shareholder
shall at every meeting of the Shareholders be entitled to one vote in person or
by proxy for each share of the capital stock having voting power held by such
Shareholder.
Section 8. Proxies. Each Shareholder entitled to vote at a meeting of
Shareholders may authorize in writing another person or persons to act for such
holder by proxy, but no proxy shall be voted or acted upon after eleven months
from its date, unless the person executing the proxy specifies therein the
period of time for which it is to continue in force.
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Section 9. Judges of Election. The Board may appoint a Judge or Judges of
Election for any meeting of Shareholders. Such Judge shall decide upon the
qualification of the voters and report the number of shares represented at the
meeting and entitled to vote, shall conduct the voting and accept the votes and
when the voting is completed shall ascertain and report the number of shares
voted respectively for and against each position upon which a vote is taken by
ballot. The Judges need not be Shareholders, and any officer of the corporation
may be a Judge on any position other than a vote for or against a proposal in
which such person shall have a material interest.
Section 10. Written Consent. Any action required to be taken at a meeting
of the Shareholders, or any action which may be taken at a meeting of the
Shareholders, may be taken without a meeting if written consent, setting forth
the action so taken shall be signed by all the Shareholders entitled to vote
with respect to the subject matter thereof or, if so provided in the
Shareholders entitled to vote with respect to the subject matter thereof or, if
so provided in the Articles of Incorporation, by Shareholders who would be
entitled to vote at a meeting holding shares having voting power to cast not
less than the minimum number (or numbers, in the case of voting by groups) of
votes that would be necessary to authorize or take the action at a meeting at
which all Shareholders entitled to vote were present and voted.
Section 11. Voting Trust. Shareholders may create a Voting Trust, as
permitted by law, pursuant to which the Shareholders will transfer their shares
of voting stock of the Corporation to the Trustee of such Voting Trust. Such
Voting Trust may provide that the Trustee shall exercise its voting rights of
all shares of stock of the Corporation transferred to the Trustee thereunder.
When such Voting Trust agreement is executed, the Trustee shall prepare a list
of the names and addresses of all owners of beneficial interests in the Trust,
and deliver a copy of the list and agreement, and any amendments and extensions
thereof, to the Corporation's principal office.
Section 12. Shareholder Agreement. Subject to the provisions of O.C.G.A.
Section 14-2-731, two or more Shareholders may enter into a written agreement
which provides that in exercising any voting rights, the shares held by them
shall be voted as therein provided, or as they may agree, or as determined in
accordance with a procedure agreed upon by them. Notwithstanding the foregoing,
no such agreement shall impair the right of the Corporation to treat the
Shareholders of record as entitled to vote the shares standing in their names.
ARTICLE III
DIRECTORS
Section 1. Powers. The Board shall have the power to manage or direct the
management of the property, business and affairs of the Corporation, and except
as expressly limited by law, to exercise all of its corporate powers. The Board
may establish procedures and rules, or may authorize the Chairman of any meeting
of Shareholders to establish procedures and rules, for the fair and orderly
conduct of any meeting including, without limitation, registration of the
Shareholders attending the meeting, adoption of an agenda, establishing the
order of business at the meeting, recessing and adjourning the meeting for the
purposes of tabulating any
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votes and receiving the result thereof, the timing of the opening and closing of
the polls, and the physical layout of the facilities for the meeting.
Section 2. Number. The Board shall consist of one or more members in such
number as shall be determined from time to time by resolution of the Board or by
the Shareholders at the annual meeting. Directors need not be shareholders. Each
Director shall be elected or re-elected by the Shareholders at an annual meeting
and shall serve until such person's successor is elected and qualified or until
such person's death, retirement, resignation or removal.
Section 3. Vacancies and Newly Created Directorships. Any newly created
directorship resulting from an increase in the number of Directors may be filled
by vote of a majority of the Board of Directors then in office, provided that a
quorum is present, and any other vacancy on the Board of Directors may be filled
by a vote of a majority of the Directors then in office, even if less than a
quorum, or by a sole remaining Director.
Section 4. Meetings. The Board may hold meetings, both regular and special,
either within or outside the State of Georgia.
Section 5. Annual Meeting. The Board shall meet as soon as practicable
after each annual election of directions.
Section 6. Regular Meetings. Regular meetings of the Board shall be held
without call or notice at such time and place as shall from time to time be
determined by resolution of the Board.
Section 7. Special Meetings. Special meetings of the Board may be called at
any time, and for any purpose permitted by law, by the Chairman of the board
(or, if the Board does not appoint a Chairman of the Board, the Chief Executive
Officer), or by the Secretary on the written request of any two members of the
Board unless the Board consists of only one director in which case the special
meeting shall be called on the written request of the sole Director, which
meetings shall be held at the time and place designated by the person or persons
calling the meeting. Notice of the time, place and purpose of any such meeting
shall be given to the Directors by the Secretary, or in case of the Secretary's
absence, refusal or inability to act, by any other officer. Any such notice may
be given by mail, by telecopy, by telephone, by personal service, or by any
combination thereof as to different Directors. If the notice is by mail, then it
shall be deposited in a United States Post Office at least five days before the
time of the meeting; if by telephone, by telecopy or by personal service, at
least two days before the time of the meeting.
Section 8. Quorum. At all meetings of the Board a majority of the whole
Board shall be necessary and sufficient to constitute a quorum for the
transaction of business. The act of a majority of the Directors present at any
meeting at which there is a quorum shall be the act of the Board, except as may
be otherwise specifically provided by applicable law, by the Articles of
Incorporation or by these Bylaws. Any meeting of the Board may be adjourned to
meet again at a stated day and hour. Even though no quorum is present, as
required in this Section, a majority
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of the Directors present at any meeting of the Board, either regular or special,
may adjourn from time to time until a quorum be had. Notice of any adjourned
meeting need not be given.
Section 9. Fees and Compensation. Each Director and each member of a
committee of the Board shall receive such fees and reimbursement of expenses
incurred on behalf of the Corporation or in attending meetings as the Board may
from time to time determine. No such payment shall preclude any Director from
serving the Corporation in any other capacity and receiving compensation
therefor.
Section 10. Meetings by Telephonic Communication. Members of the Board or
any committee thereof may participate in a regular or special meeting of such
Board or committee by any means of communication equipment by which all persons
participating in the meeting can hear each other. Participation in a meeting
pursuant to this Section shall constitute presence in person at such meeting.
Section 11. Committees. The Board may designate committees, each committee
to consist of one or more of the Directors of the Corporation. The Board may
designate one or more Directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of the committee. Upon
the absence or disqualification of a member of a committee, if the Board has not
designated one or more alternates (or if such alternate(s) are then absent or
disqualified), the member or members thereof present at any meeting and not
disqualified from voting, whether or not such member or members constitute a
quorum, may unanimously appoint another member of the Board to act at the
meeting in the place of any such absent or disqualified member or alternate. Any
such committee, to the extent provided in the resolution of the Board, shall
have and may exercise all the powers and authority of the Board in the
management of the business and affairs of the Corporation, and may authorize the
seal of the Corporation to be affixed to all papers that may require it; but no
such committee shall have the power or authority in reference to: (a) approving
or proposing to Shareholders action that is required to be approved by
Shareholders; (b) adopting an agreement of merger or consolidation not requiring
Shareholder approval; (c) adopting, repealing or amending the Bylaws of the
Corporation; (d) filling vacancies on the Board; or (e) taking any other action
prohibited by law. Each committee shall have such name as may be determined from
time to time by resolution adopted by the Board. Each committee shall keep
minutes of its meetings and report to the Board when required.
Section 12. Action Without Meetings. Unless otherwise restricted by
applicable law or by the Articles of Incorporation or by these Bylaws, any
action required or permitted to be taken at any meeting of the Board or of any
committee thereof may be taken without a meeting if all members of the Board or
of such committee, as the case may be, consent thereto in writing, and the
writing or writings are filed with the minutes of the proceedings of the Board
or committee.
Section 13. Removal. Unless otherwise restricted by the Articles of
Incorporation or by law, any Director or the entire Board may be removed, with
or without cause, by the holders of a majority of shares entitled to vote at a
meeting called for the purpose of removing such
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Director(s) and the meeting notice must state that one of the purposes of such
meeting is the removal of such Director(s).
Section 14. Resignations. Any Director may resign at any time by giving
written notice to the Board of Directors or the Chairman of the Board. Any such
resignation shall take effect at the time specified therein, or if not
specified, upon its acceptance by the Board of Directors.
ARTICLE IV
OFFICERS
Section 1. Appointment and Salaries. The officers of the Corporation shall
be appointed by the Board and shall include a Chief Executive Officer,
President, a Secretary and a Treasurer. The Board may also appoint a Chairman of
the Board and the Board or the Chief Executive Officer or, if none, the
President may appoint such other officers (including Assistant Secretaries,
Assistant Treasurers, Vice President, etc.) as the Board or the Chief Executive
Officer or, if none, the President may deem necessary or desirable. The officers
shall hold their offices for such terms and shall exercise such powers and
perform such duties as shall be determined from time to time by the Board. The
Board shall fix the salaries of all officers appointed by it. Unless prohibited
by applicable law or by the Articles of Incorporation or by these Bylaws, one
person may be elected or appointed to serve in more than one official capacity.
Any vacancy occurring in any office of the Corporation shall be filled by the
Board.
Section 2. Removal and Resignation. Any officer may be removed, either
with or without cause, by the Board or, in the case of an officer not appointed
by the Board, by the Chairman of the Board, if any, or the Chief Executive
Officer or President. Any officer may resign at any time by giving notice to the
Board, the Chief Executive Officer, President or Secretary. Any such resignation
shall take effect at the date of receipt of such notice or at any later time
specified therein and, unless otherwise specified in such notice, the acceptance
of the resignation shall not be necessary to make it effective.
Section 3. Chairman of the Board. The Board may, at its election, appoint
a Chairman of the Board. If such an officer be elected, he shall, if present,
preside at all meetings of the Shareholders and of the Board of Directors and
shall have such other powers and duties as may from time to time be assigned to
him by the Board of Directors.
Section 4. Chief Executive Officer. Subject to such powers, if any, as may
be given by the Board to the Chairman of the Board (if there is such officer),
the Chief Executive Officer shall have supervision over and may exercise general
executive powers concerning all of the operations and business of the
Corporation, with the authority from time to time to delegate to other officers
such executive and other powers and duties as he may deem advisable. If there be
no Chairman of the Board, or in his absence, the Chief Executive Officer shall
preside at all meetings of the Shareholders and of the Board, unless the Board
appoints another person who need not be a shareholder, officer or director of
the Corporation, to preside at a meeting of Shareholders.
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Section 5. President. The President shall assist the Chief Executive
Officer with the general daily administration and operation of the Corporation,
and if there shall be no separately appointed Chief Executive Officer of the
Corporation, the President shall be the chief executive officer of the
Corporation.
Section 6. Vice President. In the absence of the President, or in the
event of the President's inability or refusal to act, the Vice President, if any
(or if there be more than one Vice President, the Vice Presidents in the order
of their rank or, if of equal rank, then in the order designated by the Board or
the President or, in the absence of any designation, then in the order of their
appointment) shall perform the duties of the President and when so acting, shall
have all the powers of and be subject to all the restrictions upon the
President. The Vice President shall perform such other duties and have such
other powers as the Board may from time to time prescribe.
Section 7. Secretary and Assistant Secretary. The Secretary shall attend
all meetings of the Board (unless the Board shall otherwise determine) and all
meetings of the Shareholders and record all the proceedings of the meetings of
the Corporation and of the Board in a book to be kept for that purpose and shall
perform like duties for the committees when required. The Secretary shall give,
or cause to be given, notice of all meetings of Shareholders and special
meetings of the Board. The Secretary shall have custody of the corporate seal of
the Corporation and shall (as well as any Assistant Secretary) have authority to
affix the same to any instrument requiring it and to attest it. The Secretary
shall perform such other duties and have such other powers as the Board, the
Chief Executive Officer or the President may from time to time prescribe.
Section 8. Treasurer. The Treasurer shall have custody of the corporate
funds and securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the Corporation and shall deposit all monies
and other valuable effects in the name and to the credit of the Corporation in
such depositories as may be designated by the Board. The Treasurer may disburse
the funds of the Corporation as may be ordered by the Board, the Chief Executive
Officer or the President, taking proper vouchers for such disbursements, and
shall render to the Board at its regular meetings, or when the Board so
requires, an account of transactions and of the financial condition of the
Corporation. The Treasurer shall perform such other duties and have such other
powers as the Board, the Chief Executive Officer or the President may from time
to time prescribe.
If required by the Board, the Treasurer and Assistant Treasurers, if any,
shall give the Corporation a bond (which shall be renewed at such times as
specified by the Board) in such sum and with such surety or sureties as shall be
satisfactory to the Board for the faithful performance of the duties of such
person's office and for the restoration to the Corporation, in case of such
person's death, resignation, retirement or removal from office, of all books,
papers, vouchers, money and other property of whatever kind in such person's
possession or under such person's control belonging to the Corporation.
Section 9. Assistant Officers. An assistant officer shall, in the absence
of the officer to whom such person is an assistant or in the event of such
officer's inability or refusal to act (or,
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if there be more than one such assistant officer, the assistant officers in the
order designated by the Board or the President or, in the absence of any
designation, then in the order of their appointment), perform the duties and
exercise the powers of such officer. An assistant officer shall perform such
other duties and have such other powers as the Board, the Chief Executive
Officer or the President may from time to time prescribe.
ARTICLE V
SEAL
It shall not be necessary to the validity of any instrument executed by any
authorized officer or officers of the Corporation that the execution of such
instrument be evidenced by the corporate seal, and all documents, instruments,
contracts and writings of all kinds signed on behalf of the Corporation by any
authorized officer or officers shall be as effectual and binding on the
Corporation without the corporate seal, as if the execution of the same had been
evidenced by affixing the corporate seal thereto. The Board may give general
authority to any officer to affix the seal of the Corporation and to attest the
affixing by signature.
ARTICLE VI
FORM OF STOCK CERTIFICATES
Every holder of stock in the Corporation shall be entitled to have a
certificate signed by, or in the name of, the Corporation by the Chairman or
Vice-Chairman of the Board, if any, or by the Chief Executive Officer, if any,
the President or a Vice-President, if any, and by the Treasurer or an Assistant
Treasurer, or the Secretary or an Assistant Secretary certifying the number of
shares owned in the Corporation. Any or all of the signatures on the certificate
may be a facsimile. If any officer, transfer agent, or registrar who has signed
or whose facsimile signature has been placed upon a certificate shall have
ceased to be such officer, transfer agent, or registrar before such certificate
is issued, it may be issued by the Corporation with the same effect as if such
person were such officer, transfer agent, or registrar at the date of issue.
If the Corporation shall be authorized to issue more than one class of
stock or more than one series of any class, a reference on the certificate to
the state of incorporation shall be deemed a reference to the Articles of
Incorporation and the provisions thereof governing the powers, designations,
preferences and relative, participating, optional or other special rights of
each class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights. Alternatively, such powers,
designations, preferences and relative, participating, optional or other special
rights and such qualifications, limitations or restrictions shall be set forth
in full or summarized on the face or back of the certificate that the
Corporation shall issue to represent such class or series of stock. Except as
otherwise provided in section 14-2-625 of the Georgia Business Corporation Code,
in lieu of the foregoing requirements, there may be set forth on the face or
back of the certificate that the Corporation will furnish without charge to each
Shareholder who so requests the powers, designations, preferences and relative,
participating, optional or other special rights of each class of stock or series
thereof and the qualifications, limitations or restrictions of such preferences
and/or rights.
16
<PAGE>
ARTICLES VII
REPRESENTATION OF SHARES OF OTHER CORPORATIONS
Subject to any restriction on transfer noted thereon, upon surrender of a
certificate for shares duly endorsed or accompanied by proper evidence of
succession, assignment or authority to transfer, it shall be the duty of the
Corporation to issue a new certificate to the person entitled thereto, cancel
the cold certificate and record the transaction upon its books.
ARTICLE VIII
TRANSFERS OF STOCK
Subject to any restriction on transfer noted thereon, upon surrender of a
certificate for shares duly endorsed or accompanied by proper evidence of
succession, assignment or authority to transfer, it shall be the duty of the
Corporation to issue a new certificate to the person entitled thereto, cancel
the old certificate and record the transaction upon its books.
ARTICLE IX
LOST, STOLEN OR DESTROYED CERTIFICATES
The Board may direct a new certificate or certificates to be issued in
place of any certificates theretofore issued alleged to have been lost, stolen
or destroyed, upon the making of an affidavit of the fact by the person claiming
the certificate to be lost, stolen or destroyed. When authorizing such issue of
a new certificate, the Board may, in its discretion and as a condition precedent
to the issuance, require the owner of such certificate or certificates, or such
person's legal representative, to give the Corporation a bond in such sum as it
may direct as indemnity against any claim that may be made against the
Corporation with respect to the certificate.
ARTICLE X
RECORD DATE
The Board may fix in advance a date, which shall not be more than sixty
(60) days nor less than ten (10) days preceding the date of any meeting of
Shareholders, nor more than sixty (60) days prior to any other action, as a
record date for the determination of Shareholders entitled to notice of or to
vote at any such meeting and any adjournment thereof, or to express consent to
corporate action in writing without a meeting, or entitled to receive payment of
any dividend or other distribution or allotment of any rights, or entitled to
exercise the rights in respect of any change, conversion or exchange of stock,
and in such case such Shareholders, and only such Shareholders as shall be
shareholders of record on the date so fixed shall be entitled to such notice of,
and to vote at, such meeting and any adjournment thereof, or to receive payment
of such dividend, or to receive such allotment of rights, or to exercise such
rights, or to give such consent, as the case may be, notwithstanding any
transfer of any stock on the books of the Corporation after any such record date
fixed as aforesaid.
17
<PAGE>
ARTICLE XI
REGISTERED SHAREHOLDERS
The Corporation shall be entitled to treat the holder of record of any
share or shares of stock as the holder in fact thereof and shall not be bound to
recognize any equitable or other claim to or interest in such share on the part
of any other person, whether or not it shall have express or other notice
thereof, except as expressly provided by applicable law.
ARTICLE XII
FISCAL YEAR
The fiscal year of the Corporation shall be fixed by resolution of the
Board.
ARTICLE XIII
AMENDMENTS
Subject to any contrary or limiting provisions contained in the Articles of
Incorporation, these Bylaws may be amended or repealed, or new Bylaws may be
adopted, (a) by the Shareholders of the Corporation, or (b) by the affirmative
vote of a majority of the full Board at any regular or special meeting. Any
Bylaws adopted or amended by the Shareholders may be amended or repealed by the
Board or the Shareholders, unless the Shareholders in amending or repealing a
particular Bylaw provide expressly that the Board may not amend or repeal that
Bylaw.
ARTICLE XIV
DIVIDENDS
Section 1. Declaration. Dividends on the capital stock of the Corporation,
subject to the provisions of the Articles of Incorporation, if any, may be
declared by the Board at any regular or special meeting, pursuant to law, and
may be paid in cash, in property, or in shares of the capital stock of the
Corporation.
Section 2. Set Aside Funds. Before payment of any dividend, there may be
set aside out of any funds of the Corporation available for dividends such sums
as the Directors from time to time, in their absolute discretion, think proper
as a reserve or reserves to meet contingencies, or for equalizing dividends, or
for repairing or maintaining any property of the Corporation, or for such other
purpose as the Directors shall deem to be in the best interests of the
Corporation, and the Directors may modify or abolish any such reserve in the
manner in which it was created.
ARTICLE XV
INDEMNIFICATION AND INSURANCE
Section 1. Right to Indemnification. Except as otherwise provided in the
Articles of Incorporation or Bylaws, each person who was or is a party or is
threatened to be made a party to or is involved in any action, suit or
proceeding, whether civil, criminal, administrative or
18
<PAGE>
investigative (hereinafter a "proceeding"), by reason of the fact that he or
she, or a person of whom he or she is the legal representative, is or was a
director, officer, employee or agent of another corporation or of a partnership,
joint venture, trust or other enterprise, including service with respect to
employee benefit plans, whether the basis of such proceeding is alleged action
or inaction in an official capacity or in any other capacity while serving as a
director, officer, employee or agent, shall be indemnified and held harmless by
the Corporation to the fullest extent permitted by the laws of Georgia, as the
same exist or may hereafter be amended, against all costs, charges, expenses,
liabilities and losses (including attorneys' fees, judgments, fines, ERISA
excise taxes or penalties and amounts paid or to be paid in settlement)
reasonably incurred or suffered by such person in connection therewith, and such
indemnification shall continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of his or her heirs,
executors and administrators; provided, however, that, except as provided in
-------- -------
Section 2 hereof, the Corporation shall indemnify any such person seeking
indemnification in connection with a proceeding (or part thereof) initiated by
such person only if such proceeding (or part there) was authorized by the Board
of Directors of the Corporation. The right to indemnification conferred in this
Article shall be a contract right and shall include the right to be paid by the
Corporation the expenses incurred in defending any such proceeding in advance of
its final disposition; provided, however, that, if the Georgia Business
-------- -------
Corporation Code so requires, the payment of such expenses incurred by a
director or officer in his or her capacity as a Director or Officer (and not in
any other capacity in which service was or is rendered by such person while a
director or officer, including, without limitation, service to an employee
benefit plan) in advance of the final disposition of a proceeding, shall be made
only upon delivery to the Corporation of an undertaking, by or on behalf of such
Director or Officer, to repay all amounts so advanced if it shall ultimately be
determined that such Director or Officer is not entitled to be indemnified under
this Section or otherwise. The Corporation may, by action of its Board of
Directors, provide indemnification to employees and agents of the Corporation
with the same scope and effect as the foregoing indemnification of directors and
officers.
Section 2. Right of Claimant to Bring Suit. If a claim under Section 1 of
this Article is not paid in full by the Corporation within thirty (30) days
after a written claim has been received by the Corporation, the claimant may at
any time thereafter bring suit against the Corporation to recover the unpaid
amount of the claim and, if successful in whole or in part, the claimant shall
be entitled to be paid also the expense of prosecuting such claim. It shall be a
defense to any such action (other than an action brought to enforce a claim for
expenses incurred in defending any proceeding in advance of its final
disposition where the required undertaking, if any is required, has been
tendered to the Corporation) that the claimant has failed to meet a standard of
conduct which makes it permissible under Georgia law for the Corporation to
indemnify the claimant for the amount claimed. Neither the failure of the
Corporation (including its Board of Directors, independent legal counsel, or its
Shareholders) to have made a determination prior to the commencement of such
action that indemnification of the claimant is permissible in the circumstances
because he or she has met such standard of conduct, nor an actual determination
by the Corporation (including its Board of Directors, independent legal counsel,
or its Shareholders) that the claimant has not met such standard of conduct,
shall be a defense to the action or create a presumption that the claimant has
failed to meet such standard of conduct.
19
<PAGE>
Section 3. Non-Exclusivity of Rights. The right to indemnification and the
payment of expenses incurred in defending a proceeding in advance of its final
disposition conferred in this Article shall not be exclusive of any other right
which any person may have or hereafter acquire under any statute, provision of
the Articles of Incorporation, bylaw, agreement, vote of shareholders or
disinterested directors or otherwise.
Section 4. Insurance. The Corporation may maintain insurance, at its
expense, to protect itself and any director, officer, employee or agent of the
Corporation or another corporation, partnership, joint venture, trust or other
enterprise against any such expense, liability or loss, whether or not the
Corporation would have the power to indemnify such person against such expense,
liability or loss under Georgia law.
Section 5. Expenses as a Witness. To the extent that any director,
officer, employee or agent of the Corporation is by reason of such position, or
a position with another entity at the request of the Corporation, a witness in
any action, suit or proceeding, he shall be indemnified against all costs and
expenses actually and reasonably incurred by him or her or on his or her behalf
in connection therewith.
Section 6. Indemnity Agreements. The Corporation may enter into agreements
with any director, officer, employee or agent of the Corporation providing for
indemnification to the full extent permitted by Georgia law.
20
<PAGE>
Exhibit 3.1 (Description) Specimen of Common Stock Certificate
(______) NUMBER (______) SHARES
INCORPORATED UNDER THE LAWS OF THE STATE OF GEORGIA
ALLIANCE HEALTHCARD, INC.
TOTAL AUTHORIZED ISSUE
10,000,000 SHARES PAR VALUE $.001 EACH
COMMON STOCK
See Reverse for
CUSIP 01860f 10 3 Certain Definitions
THIS IS TO CERTIFY THAT _____________________________IS THE OWNER OF
___________________________________________________________FULLY PAID AND NON-
ASSESSABLE SHARES OF THE ABOVE CORPORATION TRANSFERABLE ONLY ON THE BOOKS OF THE
CORPORATION BY THE HOLDER HEREOF IN PERSON OR BY DULY AUTHORIZED ATTORNEY UPON
SURRENDER OF THIS CERTIFICATE PROPERLY ENDORSED.
WITNESS, THE SEAL OF THE CORPORATION AND THE SIGNATURES OF ITS DULY AUTHORIZED
OFFICERS.
DATED__________
_______________________________ CORPORATE SEAL _____________________
CHIEF EXECUTIVE OFFICER SECRETARY
THE FOLLOWING ABBREVIATIONS WHEN USED IN THE INSCRIPTION ON THE FACE OF THIS
CERTIFICATE, SHALL BE CONSTRUED AS THOUGH THEY WERE WRITTEN OUT IN FULL
ACCORDING TO APPLICABLE LAWS OR REGULATIONS:
TEN COM as tenants in common
TEN ENT as tenants by the entireties
JT TEN as joint tenants with right of survivorship and not
as tenants in common
UNIF GIFT MIN ACT Custodian
(Cust) (Minor)
under Uniform Gifts to Minors
Act...............................
(State)
Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED_________HEREBY SELL, ASSIGN AND TRANSFER UNTO
21
<PAGE>
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
______________________________
_______________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS INCLUDING POSTAL ZIP CODE OR
ASSIGNEE)
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
REPRESENTED BY THE WITHIN CERTIFICATE, AND DO HEREBY IRREVOCABLY CONSTITUTE AND
APPOINT
__________________________________________________ATTORNEY TO TRANSFER THE SAID
SHARES ON THE BOOKS OF THE WITHIN NAMED CORPORATION WITH FULL POWER OF
SUBSTITUTION IN THE PREMISES.
DATED__________________________
IN PRESENCE OF
___________________________________
_______________________________
22
<PAGE>
Exhibit 6.1 Form of Broker Agreement
This agreement made and entered into effective the _____ day of ______________,
_______ between Alliance HealthCard, Inc. whose principal offices are at 3500
Parkway Lane, Suite 310, Norcross, Georgia 30092, hereinafter referred to as
"Alliance" and:
__________________________________________
__________________________________________
__________________________________________
__________________________________________
herein referred to as "(BROKER)"
The parties to the Agreement agree as follows:
1. Authorization to Market
Alliance hereby grants (BROKER) a non-exclusive right to market and promote the
services and products of Alliance Healthcard to (BROKER)'s clients and prospects
in the States where Alliance currently conducts business and offers network
services.
2. Pricing
The Alliance Healthcard membership fees charged to clients of (BROKER) and/or
their clients' employees, will be in accordance with Alliance's current fee
structure as outlined in Exhibit B, and as modified by Alliance from time to
time. Any deviation from the established pricing levels must be approved, by
prior written notification, by Alliance.
3. Commission Payouts/Time Frame
(BROKER) will be paid a commission based on the schedule below for all
Healthcard Membership fees generated by clients of (BROKER).
Service Level Year 1 Year 2 Year 3
- --------------------------------------------------------------------------------
Independent Sale 15% 10% 8%
Joint Alliance/Broker involvement 10% 8% 5%
For programs with reduced benefits, commissions will be based on 12% for 1st
year membership revenue and 8% for 2nd year membership revenue. Accounts sold
jointly with Alliance will pay commissions equal to 60% of the rate defined
above for programs with reduced benefits. Commission payments will be calculated
on a quarterly basis for all membership fee revenue received during the quarter,
and will be processed within 30 days following the end of the calculation
period. Commissions are calculated on the basis of net membership fees retained
by
<PAGE>
Alliance. All commissions that have been paid on Membership
fees in the current membership year which must subsequently be refunded to the
member shall be debited against future commission payments due (BROKER).
4. Right to Audit
During the term of this Agreement and for a one (1) year period thereafter, both
parties shall be entitled to conduct an audit of the other party's files related
to this agreement solely to the extent necessary to ensure compliance with the
audited party's obligations hereunder. The parties shall make their files
available for audit for a maximum of one (1) week period each calendar year upon
thirty (30) days prior written notice by the auditing party. Should the audit
reveal potential violations, the auditing party shall document such violations
and provide such documentation to the other party. The party being audited shall
have thirty (30) days from the receipt of such documentation to respond to
and/or remedy any such violations that may exist. The auditing party shall have
the right, at its sole discretion to conduct a re-audit within sixty (60) days
of the initial audit to verify that the correction of any violation has been
made. All expenses incurred in conducting the audits outlined in this section
shall be the responsibility the auditing party.
5. Confidentiality/Non-Compete/Non-Exclusivity
Alliance agrees that all confidential information, specifically knowledge
acquired regarding customers or prospects of (BROKER) will not be shared with
competitors of (BROKER).
(BROKER) agrees that all confidential information, including but not limited to
knowledge acquired regarding Alliance's services, systems, protocols,
methodologies, procedures, trade secrets, provider directories and discount
rates, fees, customers and prospects, will not be shared with competitors of
Alliance. (BROKER) further agrees that it will not pursue the sale of Alliance
services to Alliance's existing clients or prospects. It is Alliance's
responsibility to provide (BROKER) with such customer/prospect information.
Failure of Alliance to provide such information in a timely manner shall relieve
(BROKER) of its restriction in this regard. Further (BROKER) agrees that it will
not on it's own or with others develop any program similar to the Alliance
HealthCard at any time during the existence of this agreement or for a period of
Twelve (12) months following its termination.
Nothing in this agreement establishes an exclusive arrangement between the
parties.
6. Acceptance Of Business
Alliance retains sole discretion as to the acceptance or rejection of business
produced by (BROKER). (BROKER) agrees to comply with the "New Account
Implementation Process" detailed in Exhibit D. Failure to comply with said
Process may result in the rejection of business and/or loss of commission
payments to (BROKER).
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<PAGE>
7. Notification
Notification required hereunder shall be deemed to have been given by the
notifying party's sending to the other party, by US Mail or any delivery service
offering proof of delivery, properly addressed as follows:
Alliance BROKER
Alliance HealthCard, Inc. _____________________
3500 Parkway Lane _____________________
Suite 310 _____________________
Norcross, GA 30092 _____________________
Term/Termination
This agreement shall run continuously unless terminated by either party.
Termination with or without cause may occur upon 30 days written notice to the
other party. Commissions earned by (BROKER) as of the date of termination will
continue to be paid in accordance with the terms outlined in paragraph 3.
Agreed To By Broker:
________________________________
Name (Print)
________________________________
Signature
________________________________
Title
________________________________
Date
Accepted By Alliance:
________________________________
Name (Print)
________________________________
Signature
________________________________
Title
________________________________
Date
25
<PAGE>
Exhibit A
[CHART OF STATES AND SERVICES OFFERED THEREIN]
Exhibit B
Membership Fees
GOLD CARD
The annual base membership fee for the Alliance HealthCard Gold Card is
$120 for the cardholder and includes access for all family dependents. The
Alliance HealthCard will offer but is not limited to the following services
under the Gold Card program:
Dental Orthodontics
Vision Cosmetic Surgery
Hearing Pharmacy
Chiropractic Mental Health/Life Care
Nutrition Massage Therapy
Physical Therapy Alternative Medicine
PLATINUM CARD
The annual base membership fee for the Alliance HealthCard Platinum Card is $192
for the cardholder and includes access for all family dependents. The Platinum
Card will provide national access to a network of Primary Care Physicians and
Specialists in addition to the core services described under the Gold Card.
26
<PAGE>
**ANY REDUCTION IN PRICING MUST BE APPROVED BY THE VICE PRESIDENT OF SALES OR
THE PRESIDENT OF THE ALLIANCE HEALTHCARD.
Agreed To By:
________________________________
Name (Print)
________________________________
Signature Date
Accepted By Alliance:
________________________________
Name (Print)
________________________________
Signature Date
27
<PAGE>
Exhibit C
[CLIENT LIST OF THE BROKER]
Exhibit D
New Account Implementation Process
1) Complete the enclosed "New Account Implementation Form" and fax it to the
Alliance Healthcard Customer Service Department at (770) 734-9253. We will
assign a group number to the account and advise you of this number. If you
also plan to market the Healthcard to individuals, list "individuals" as the
employer name. You do not need to complete the balance of the Customer
Information for this individual's account and will not need to complete "New
Account Implementation Forms" for each individual account.
2) If the employer is partially or fully funding the membership fees, written
confirmation of Alliance's ability to invoice the employer directly for these
fees must be received from the employer prior to Alliance processing any
member applications for the account.
3) Alliance will send you a supply of Enrollment kits as indicated on the New
Account Implementation Form. The initial supply of kits for each new account
will be provided to you at no charge. Additional kits in excess of the
initial supply will be billed to you.
4) Distribute Healthcard enrollment materials to employer/employees. The
enrollment kits must include the program summary, Membership Application, and
the postage paid return envelope addressed to Alliance for the application.
These items must be mailed/distributed utilizing the Alliance Healthcard 6" x
9" mailing envelope included with the kit. You must customize the Membership
Applications to include the Group Number we provide you for each customer or
to include the group number assigned to your individuals account.
5) Once a Membership Application is received by Alliance we will process the
application and bill the member or employer for their portions of the
membership fee. New Members will typically receive an Alliance Healthcard
Identification Card and a Member Handbook within two weeks of our receipt of
their application.
28
<PAGE>
Exhibit 6.2 Form of Network Agreement
THIS AGREEMENT is made and entered into by and between Alliance HealthCard
Inc., a Georgia corporation, (hereinafter called "Alliance") and the
contracting Provider Network identified in the Network Application
(hereinafter called "Network").
WHEREAS, Alliance wishes to develop and market a network of contracted
providers that HealthCard Members can use to access health care services
not covered by health or other insurance;
WHEREAS, Network desires to participate in such network so that its
services may be marketed to HealthCard Members;
NOW THEREFORE, in consideration of the mutual promises and covenants set
forth herein, the parties agree as follows:
I. OBLIGATIONS OF ALLIANCE
1.1 Alliance shall assume overall responsibility for the administration of
the Alliance HealthCard program including network development, marketing,
and other related activities.
1.2 Alliance shall maintain a current listing of all providers
participating in the Alliance network.
1.3 Alliance shall market the services of providers to HealthCard Members
through the issuance of directories and other materials identifying them as
participants in the Alliance network. Such directories will be made
available to HealthCard Members at the time of enrollment.
II. OBLIGATIONS OF NETWORK
2.1 Network will make best efforts to insure that its Providers shall
provide services and products to HealthCard Members that are standard and
customary to the practice or business in which its Providers are engaged.
2.2 Network agrees to accept as reimbursement for contracted services to
Alliance Members the reimbursement as outlined in
Attachment A. These rates shall be extended to all HealthCard Members who
provide full payment at time of service by cash, check or credit card. In
applying these rates, Provider agrees not to markup his or her usual fees
prior to applying the negotiated rate or to extend the rates to any
individual whose participation as an Alliance Member has expired.
2.3 Network shall make billing and other records relating to this
Agreement available to Alliance for inspection during normal working hours
for up to two (2) years after termination of this Agreement.
2.4 Network shall allow Alliance to use Network Provider names, addresses,
specialties and other relevant information in directories and other
marketing materials.
29
<PAGE>
2.5 Network shall promptly notify Alliance of any changes in its business
address or any other problem that will materially impair the ability of
Network Providers to carry out the duties and obligations of this
agreement.
III. WARRANTIES
3.1 Network warrants that the information contained in the Network
Application is accurate and complete and that Network is duly licensed,
certified, and authorized to deliver products and services in the state(s)
where it conducts business.
3.2 Network warrants that it is aware that the Alliance HealthCard program
is not a form of insurance and that Alliance is under no obligation to make
any payment to Provider for any services or products utilized by HealthCard
Members.
IV. TERM AND TERMINATION
4.1 This Agreement shall commence on the date executed by Alliance. It
shall remain in effect for a period of one (1) year and shall thereafter
automatically renew for successive one-year terms.
4.2 Either party may terminate this Agreement without cause with a 90 day
written notice or 60 day notice for a material breach. This Agreement shall
immediately terminate in the event that any license, certification or
authorization that is required for Network to engage in his or her usual
and customary business, is revoked, suspended or otherwise terminated.
Alliance reserves the right to terminate any individual Network Provider at
any time without cause.
V. MISCELLANEOUS PROVISIONS
5.1 This Agreement and any addenda constitute the entire Agreement between
Alliance and Provider with respect to matters contained herein and
supersede all prior Agreements or representations, written or oral,
relating to the subject matter hereof.
5.2 Any amendments to this Agreement shall be agreed to in writing by both
parties.
5.3 None of the provisions of this Agreement are intended to create, or
shall be deemed or construed to create, any relationship between the
parties hereto other than that of independent contractors. Neither of other
parties hereto, nor any of their respective directors, members, officers or
employees, shall act as or be construed to be the agent, employee or
representative of the other.
5.4 Either party may assign the Agreement in whole, or in part, with
written notification to the other party. Alliance retains the expressed
right to lease, sell, or assign its provider network under the terms of
this Agreement.
5.5 Each party hereto agrees to indemnify and hold each other (including
its directors, members, officers, and employees) harmless against any and
all claims, damages, demands, liabilities and costs incurred by the other
party, including attorney fees, resulting from any act or omission by
30
<PAGE>
or under the direction of the indemnifying party or its agents or employees
relating to the subject matter of this Agreement.
5.6 Both parties shall use their best reasonable efforts to resolve any
dispute arising under this Agreement before resorting to legal action
thereafter. Where a dispute cannot be resolved informally, the parties
agree to bring the dispute to the American Arbitration Association in
the Atlanta office for resolution in accordance with applicable rules
and procedures. Arbitration decisions will be considered binding and
final.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date and year indicated below.
PROVIDER ALLIANCE
_______________________ _________________________
Signature Signature
_______________________ _________________________
Title (if applicable) Title
_______________________ _________________________
Date Date
_______________________
Tax ID#
THIS AGREEMENT is made and entered into by and between Alliance HealthCard Inc.,
a Georgia corporation, (hereinafter called "Alliance") and the contracting
provider identified in the Provider Application (hereinafter called "Provider").
WHEREAS, Alliance wishes to develop and market a network of contracted providers
that HealthCard Members can use to access health care services not covered by
health or other insurance;
WHEREAS, Provider desires to participate in such network so that his or her
services may be marketed to HealthCard Members;
NOW THEREFORE, in consideration of the mutual promises and covenants set forth
herein, the parties agree as follows:
31
<PAGE>
I. OBLIGATIONS OF ALLIANCE
1.1 Alliance shall assume overall responsibility for the administration of
the Alliance HealthCard program including network development, marketing,
and other related activities.
1.2 Alliance shall maintain a current listing of all providers
participating in the Alliance network.
1.3 Alliance shall market the services of providers to HealthCard Members
through the issuance of directories and other materials identifying them as
participants in the Alliance network. Such directories will be made
available to HealthCard Members at the time of enrollment.
II. OBLIGATIONS OF PROVIDER
2.1 Provider shall provide services and products to HealthCard Members
that are standard and customary to the practice or business in which
Provider is engaged.
2.2 Provider agrees to discount his or her usual fees to HealthCard
Members by the percentage specified below. The discount shall be extended
to all HealthCard Members who provide full payment at time of service by
cash, check or credit card. In applying the discount, Provider agrees not
to markup his or her usual fees prior to applying the discount or extend
the discount to any individual whose participation as a HealthCard Member
has expired.
Discount: ___________%
2.3 Provider shall make billing and other records relating to this
Agreement available to Alliance for inspection during normal working hours
for up to two (2) years after termination of this Agreement.
2.4 Provider shall allow Alliance to use his or her name, address,
specialty and other relevant information in directories and other marketing
materials.
III. WARRANTIES
3.1 Provider warrants that the information contained in the Provider
Application is accurate and complete and that he or she is duly licensed,
certified, and authorized to deliver products and services in the state(s)
where he or she practices or does business.
3.2 Provider warrants that he or she is aware that the Alliance HealthCard
program is not a form of insurance and that Alliance is under no obligation
to make any payment to Provider for any services or products utilized by
HealthCard Members.
IV. TERM AND TERMINATION
4.1 This Agreement shall commence on the date executed by Alliance. It
shall remain in effect for a period of one (1) year and shall thereafter
automatically renew for successive one-year terms.
32
<PAGE>
4.2 Either party may terminate this Agreement without cause with a 90 day
written notice or 60 day notice for a material breach. This Agreement shall
immediately terminate in the event that any license, certification or
authorization that is required for Provider to engage in his or her usual
and customary business, is revoked, suspended or otherwise terminated.
V. MISCELLANEOUS PROVISIONS
5.1 This Agreement and any addenda constitute the entire Agreement between
Alliance and Provider with respect to matters contained herein and
supersede all prior Agreements or representations, written or oral,
relating to the subject matter hereof.
5.3 Any amendments to this Agreement shall be agreed to in writing by both
parties.
5.3 None of the provisions of this Agreement are intended to create, or
shall be deemed or construed to create, any relationship between the
parties hereto other than that of independent contractors. Neither of other
parties hereto, nor any of their respective directors, members, officers or
employees, shall act as or be construed to be the agent, employee or
representative of the other.
5.4 Either party may assign the Agreement in whole, or in part, with
written notification to the other party. Alliance retains the expressed
right to lease, sell, or assign its provider network under the terms of
this Agreement.
5.5 Each party hereto agrees to indemnify and hold each other (including
its directors, members, officers, and employees) harmless against any and
all claims, damages, demands, liabilities and costs incurred by the other
party, including attorney fees, resulting from any act or omission by or
under the direction of the indemnifying party or its agents or employees
relating to the subject matter of this Agreement.
5.6 Both parties shall use their best reasonable efforts to resolve any
dispute arising under this Agreement before resorting to legal action
thereafter. Where a dispute cannot be resolved informally, the parties
agree to bring the dispute to the American Arbitration Association in the
Atlanta office for resolution in accordance with applicable rules and
procedures. Arbitration decisions will be considered binding and final.
33
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date and year indicated below.
PROVIDER ALLIANCE
__________________________ ___________________________
Signature Signature
__________________________ ___________________________
Title (if applicable) Title
__________________________ ___________________________
Date Date
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<PAGE>
Exhibit 6.3 Form of Provider Agreement
THIS AGREEMENT is made and entered into by and between Alliance HealthCard Inc.,
a Georgia corporation, (hereinafter called "Alliance") and the contracting
provider identified in the Provider Application (hereinafter called "Provider").
WHEREAS, Alliance wishes to develop and market a network of contracted providers
that HealthCard Members can use to access health care services not covered by
health or other insurance;
WHEREAS, Provider desires to participate in such network so that his or her
services may be marketed to HealthCard Members;
NOW THEREFORE, in consideration of the mutual promises and covenants set forth
herein, the parties agree as follows:
I. OBLIGATIONS OF ALLIANCE
1.1 Alliance shall assume overall responsibility for the administration of
the Alliance HealthCard program including network development, marketing,
and other related activities.
1.2 Alliance shall maintain a current listing of all providers
participating in the Alliance network.
1.3 Alliance shall market the services of providers to HealthCard Members
through the issuance of directories and other materials identifying them as
participants in the Alliance network. Such directories will be made
available to HealthCard Members at the time of enrollment.
II. OBLIGATIONS OF PROVIDER
2.1 Provider shall provide services and products to HealthCard Members
that are standard and customary to the practice or business in which
Provider is engaged.
2.2 Provider agrees to discount his or her usual fees to HealthCard
Members by the percentage specified below. The discount shall be extended
to all HealthCard Members who provide full payment at time of service by
cash, check or credit card. In applying the discount, Provider agrees not
to markup his or her usual fees prior to applying the discount or extend
the discount to any individual whose participation as a HealthCard Member
has expired.
Discount: _________%
2.3 Provider shall make billing and other records relating to this
Agreement available to Alliance for inspection during normal working hours
for up to two (2) years after termination of this Agreement.
2.4 Provider shall allow Alliance to use his or her name, address,
specialty and other relevant information in directories and other marketing
materials.
35
<PAGE>
III. WARRANTIES
3.1 Provider warrants that the information contained in the Provider
Application is accurate and complete and that he or she is duly licensed,
certified, and authorized to deliver products and services in the state(s)
where he or she practices or does business.
3.2 Provider warrants that he or she is aware that the Alliance HealthCard
program is not a form of insurance and that Alliance is under no obligation
to make any payment to Provider for any services or products utilized by
HealthCard Members.
IV. TERM AND TERMINATION
4.1 This Agreement shall commence on the date executed by Alliance. It
shall remain in effect for a period of one (1) year and shall thereafter
automatically renew for successive one-year terms.
4.2 Either party may terminate this Agreement without cause with a 90 day
written notice or 60 day notice for a material breach. This Agreement shall
immediately terminate in the event that any license, certification or
authorization that is required for Provider to engage in his or her usual
and customary business, is revoked, suspended or otherwise terminated.
V. MISCELLANEOUS PROVISIONS
5.1 This Agreement and any addenda constitute the entire Agreement between
Alliance and Provider with respect to matters contained herein and
supersede all prior Agreements or representations, written or oral,
relating to the subject matter hereof.
5.4 Any amendments to this Agreement shall be agreed to in writing by both
parties.
5.3 None of the provisions of this Agreement are intended to create, or
shall be deemed or construed to create, any relationship between the
parties hereto other than that of independent contractors. Neither of other
parties hereto, nor any of their respective directors, members, officers or
employees, shall act as or be construed to be the agent, employee or
representative of the other.
5.4 Either party may assign the Agreement in whole, or in part, with
written notification to the other party. Alliance retains the expressed
right to lease, sell, or assign its provider network under the terms of
this Agreement.
5.5 Each party hereto agrees to indemnify and hold each other (including
its directors, members, officers, and employees) harmless against any and
all claims, damages, demands, liabilities and costs incurred by the other
party, including attorney fees, resulting from any act or omission by or
under the direction of the indemnifying party or its agents or employees
relating to the subject matter of this Agreement.
5.6 Both parties shall use their best reasonable efforts to resolve any
dispute arising under this Agreement before resorting to legal action
thereafter. Where a dispute cannot be resolved informally, the
36
<PAGE>
parties agree to bring the dispute to the American Arbitration Association
in the Atlanta office for resolution in accordance with applicable rules
and procedures. Arbitration decisions will be considered binding and final.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date and year indicated below.
PROVIDER ALLIANCE
_______________________ ______________________
Signature Signature
_______________________ ______________________
Title (if applicable) Title
_______________________ ______________________
Date Date
37
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<PERIOD-START> JAN-01-1999 OCT-01-1999
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