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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
___________
FORM 10-K
(Mark One)
[X] Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 [Fee Required]
For the fiscal year ended: September 30, 1996 OR
[ ] Transition Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 [No Fee Required]
For the transition period from to
Commission File Number 0-19758
___________
ACCESS HEALTH, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 68-0163589
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
11020 WHITE ROCK ROAD, RANCHO CORDOVA, CA 95670
(address of principal executive offices) (zip code)
Registrant's telephone number, including area code: (916) 851-4000
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: COMMON STOCK,
$.001 PAR VALUE
(Title of Class)
___________
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ].
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The aggregate market value of voting stock held by non-affiliates of the
registrant as of December 16, 1996 was approximately $603,071,775 based upon the
last sales price reported for such date on the NASDAQ National Market System.
For purposes of this disclosure, shares of Common Stock held by persons who hold
more than 5% of the outstanding shares of Common Stock and shares held by
officers and directors of the registrant, have been excluded in that such
persons may be deemed to be affiliates. This determination is not necessarily
conclusive.
At December 16, 1996 registrant had outstanding 17,572,859 shares of Common
Stock.
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DOCUMENTS INCORPORATED BY REFERENCE
The information called for by Part III of this Form 10-K is
incorporated by reference to the definitive proxy statement for the annual
meeting of stockholders of the Company which will be filed no later than 120
days after September 30, 1996.
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TABLE OF CONTENTS
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PAGE
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PART I
Item 1. Business.............................................. 4
Item 2. Properties............................................ 16
Item 3. Legal Proceedings..................................... 16
Item 4. Submission of Matters to a Vote of Security Holders... 16
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters................................... 16
Item 6. Selected Financial Data............................... 17
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations................... 18
Item 8. Financial Statements and Supplementary Data........... 26
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure................... 41
PART III
Item 10. Directors and Executive Officers of the Registrant.... 41
Item 11. Executive Compensation................................ 41
Item 12. Security Ownership of Certain Beneficial Owners and
Management............................................ 41
Item 13. Certain Relationships and Related Transactions........ 41
PART IV
Item 14. Financial Statement Schedules, Reports on Form 8-K
and Exhibits......................................... 42
SIGNATURES.............................................................. 44
INDEX TO FINANCIAL STATEMENTS........................................... 45
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PART I
ITEM 1. BUSINESS
THE BUSINESS SECTION CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS WHICH INVOLVE
RISKS AND UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY
FROM THE RESULTS ANTICIPATED IN THESE FORWARD-LOOKING STATEMENTS AS A RESULT OF
CERTAIN FACTORS SET FORTH IN "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS."
GENERAL
Access Health, Inc. ("Access Health" or the "Company") is a leading provider
of personal health management products and services to the health care industry.
The Company's clients include managed care organizations, health plans, military
managed health care providers, self-insured employers, and hospital and
physician delivery systems. Personal health management services are designed to
improve the quality and accessibility of health care by educating and empowering
consumers to make more informed decisions, thereby reducing inappropriate use of
the health care system and the cost of care while improving member satisfaction.
Access Health's personal health management services provide members with a broad
range of health care information, prevention and care management programs. The
Company believes that personal health management programs currently cover an
estimated 30 million lives and that the total potential market in the United
States could extend to include the more than 200 million persons covered by
medical insurance.*
The Company was founded in 1987 and until 1993 primarily provided consumer
health care information products and services designed to help hospitals and
other health care providers market their services. In response to opportunities
created by increasing pressure to provide more cost effective health care,
beginning in 1993, the Company changed its focus to developing and marketing
personal health management products and services to health plans and payors. At
the same time, the Company altered its business model to price its products and
services predominantly on a recurring per-member per-month fee basis rather than
on a non-recurring basis. The Company's personal health management business has
grown dramatically; the number of enrolled members has increased to over 11.5
million in November 1996 from 4.3 million at the end of fiscal 1995.
The Company's primary personal health management product, Personal Health
Advisor(R) ("PHA"), provides eligible health plan members with toll-free
telephone access to registered nurse counselors, pre-recorded information on
various health care topics, and other health care and information services on a
24-hour-a-day, 7-day-a-week basis. Its PHA product is marketed to managed care
organizations, health plans and large self-insured employer groups. The
Company's health systems services also offers a broad range of health care
information products and services to health care providers. The Company's
primary health systems services products include ASK-A-NURSE(R), Cancer
HELPLINK(R) and a series of software products providing membership management
and referral management capability.
The Company currently provides its personal health management products
and services from four advanced teleservice centers. The service centers are
staffed by registered nurses and other health counselors who utilize
sophisticated voice and data technology along with proprietary databases of
clinical protocols and membership and provider information. In anticipation of
new information needs in health care, the Company is broadening the scope of its
products and services into such areas as disease management and prevention and
wellness programs. The Company also intends to expand its use of information
delivery technologies to include personal computers and Internet applications.
Through these initiatives, Access Health is seeking to establish its PHA product
as the industry standard and preferred brand name in personal health care
management products and services.
Recent Developments
In October 1996, the Company began marketing its PHA services direct to
the consumer. The Company entered into a contract to publish a health education
CD-Rom for retail and wholesale distribution in fall 1996. Additionally, in fall
1996, the Company launched its PHA-OnLine service. Further, in March 1996, the
Company made a $5 million equity investment in America's Health Network, the
first cable television network focused solely on consumer health care concerns.
In addition to the equity stake, the Company and America's Health Network also
have a co-marketing agreement. The Company is also pursuing a strategy to enter
into joint ventures with certain strategic partners to market PHA
internationally.
In November 1996, the Company acquired Informed Access Systems, Inc.
("Informed Access"). Informed Access is a leading provider of health care
coordination products and services to the health care industry. Informed
Access' primary clients are major managed health care providers, including
health maintenance organizations (HMOs), preferred provider organizations
(PPOs), indemnity insurers, integrated delivery systems and physician groups.
In 1994, Informed Access commercially introduced the FirstHelp(TM) line
of health care coordination products and services. The FirstHelp system is a
proprietary, integrated suite of products and services which enable managed care
organizations to improve and monitor the access, quality and cost-effectiveness
of health care services while enhancing the satisfaction of health care service
consumers. Informed Access provides its FirstHelp products and services to
enrolled members of managed care plans from its advanced call center staffed by
experienced registered nurses on a 24-hour-a-day, 7-day-a-week basis. The
FirstHelp system is also licensed to large health care providers and insurers
who operate their own call centers. At September 1, 1996, FirstHelp products and
services were available under contract to approximately 6.0 million members from
40 client organizations, including approximately 4.0 million call center
members and 2.0 million license site users. Informed Access' clients include
Blue Cross and Blue Shield of Massachusetts, IHC Hospitals, CaliforniaCare
Health Plans (Blue Cross of California), Mayo Management Services, Oxford Health
Plans and the Harris Health Plans.
In November 1996, the Company acquired Clinical Reference Systems, Ltd.
("CRS"), which develops patient education and drug information software
programs. The patient education software products, which include over 3,000
health topics and 6,000 drug product descriptions, enable health care providers
to produce easy-to-read handouts on a variety of medical and drug topics. Its
key products include Adult Health Advisor, ACOG Patient Advisor, Pediatric
Advisor and Women's Health Advisor.
There can be no assurance as to the timing and degree of success of the
Company's direct to the consumer services or the impact of the recent
acquisitions of Informed Access or CRS on the Company's future operating
results. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
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INDUSTRY BACKGROUND
The rate of health care spending increases in the United States continues
to exceed GDP growth. The Health Care Financing Administration expects national
health expenditures to reach 14.5% of GDP or slightly more than $1.0 trillion in
1996. Containment of health care costs has become a national priority. As a
result, the health care system is increasingly dominated by cost-conscious
managed health care programs.
A number of factors have contributed to escalating health care costs.
These include:
- Lack of access. Individuals who lack timely access to health care
and to reliable health care information may delay needed treatment, self-
treat inappropriately or seek unnecessary care, all of which can lead to
poorer health outcomes and ultimately higher costs.
- Lack of preventive care and early intervention. Appropriate
preventive care and early intervention can dramatically influence health
and well-being and is demonstrably cost-effective. Preventive care and
timely intervention both depend on an individual's access to information.
- Inappropriate use of health care resources. Poorly-informed
individuals may choose more costly or less effective means of treatment for
their health care needs. For example, studies indicate that up to 55% of
all emergency room visits may be inappropriate.
Personal health care management programs have been developed in response
to these problems. These programs generally include telephone-based health
counseling services to help individuals optimize their use of the health care
system. These services involve members in managing their own health and empower
them to make better informed decisions. The information they receive helps them
both to obtain proper care and to avoid unnecessary care, ultimately reducing
health care costs, improving health outcomes and increasing member satisfaction
with their health care plans.
Recent studies indicate that personal health management programs can
meaningfully reduce annual medical expenses. Government and commercial health
care plans and insurers increasingly view personal health management programs as
an effective means to cope with capitated reimbursement of health care costs.
Personal health management programs are typically contracted by managed
care programs, insurers and self-insured employers. A personal health management
program is considered to be both a member benefit and a vehicle to rationalize
member usage of the health care delivery system. The Company believes that
personal health management programs currently cover an estimated 30 million
lives and that the total potential market in the United States could extend to
include the more than 200 million persons covered by medical insurance.*
STRATEGY
The Company seeks to position each of its products and services as the
leading brand in its category and create consumer recognition and preference
through the following business strategies:
Focus on key market segments. Many participants in health care benefit
from providing personal health management services to their employees or
members. The Company has segmented the marketplace around the unique needs of
large self-insured employers, health plans and managed care organizations,
military managed health care providers, Medicare, Medicaid, and integrated
physician and hospital delivery systems. In particular, the Company has focused
on the growing trend toward the privatization of government-sponsored health
care programs through contracting with managed care organizations. The Company
adapts its programs to meet the particular needs of various market segments by
creating special member communication materials for different literacy levels
and language requirements, segment-specific medical information and targeted
clinical programs. The Company employs teams of sales and account management
personnel with specific expertise in each segment.
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Build Personal Health Advisor(R) brand equity. The Company seeks to
establish the Personal Health Advisor brand as the personal health management
brand of choice among consumers and health plans by meeting and anticipating the
needs of members, physicians, and health plans. The Company intends to support
this strategy by building brand awareness through consumer advertising, trade
advertising, and other promotional activities. Additionally, the Company has
invested in proprietary technology to enable its PHA product to track member
health care needs over time and build a repository of personal health
information. In this way, the Company seeks to create a long-term relationship
between individuals and its PHA product even when individuals change health
plans, physicians, or employers.
Deliver significant value to customers. The Company seeks to provide
health plans and payors a return on investment by combining of reduced health
care costs, increased member satisfaction and improved quality of care. The
Company continues to invest in clinical programs and delivery capabilities in
order to provide members with the highest quality and most comprehensive set of
personal health management services. More than 87% of PHA users report that PHA
increases their satisfaction with their health plan. One study conducted on
behalf of the Company and a customer shows that the Company's customers receive
a return on their PHA investment of more than 4 to 1.
Expand range and scope of services. The Company plans to continue to
enhance the clinical applications and delivery options offered under the PHA and
ASK-A-NURSE(R) brand names. Clinical applications are being expanded to include
disease management and prevention and wellness products and services. The
Company is also seeking to extend the delivery of its branded health information
products electronic media including personal computer-based consumer software
and on-line services. The Company is developing these clinical products and
services and electronic delivery options internally and through strategic
alliances. The Company recently acquired Informed Access and CRS and also may
make additional acquisitions to augment its product offerings.
Provide a full range of personal health management solutions.
Outsourcing of personal health management services has emerged as the preferred
model for many self-insured employers, health plans and managed care
organizations. Factors supporting this trend include economies of scale, speed
of market entry, required clinical and technology capabilities, and quality of
service. The Company's Personal Health Advisor health information service meets
the needs of organizations that choose to outsource personal health management
capabilities. For organizations choosing to provide personal health management
services in-house, the Company offers Access Care Management System ("ACMS"), a
program consisting of software and clinical guidelines. The Company will
continue to develop its products to be responsive to the changing marketplace
and needs of its customers.
Exploit multiple media. Different media such as telephone, on-line
services, cable and print can be used to deliver tailored health care
information appropriate to particular audiences. The Company has made
significant commitments in each of these areas as evidenced by its investment
in, and co-marketing agreement with, America's Health Network which provides
health care information over cable television and the recently launched PHA-
OnLine service which provides health care information over the Internet.
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PRODUCTS AND SERVICES
The Company's products and services enable its clients to facilitate
appropriate consumer health care decisions, providing for better outcomes,
improving member satisfaction and avoiding unnecessary utilization of health
care services or inappropriate care. Access Health's products and services
provide members 24-hour telephone access to registered nurse counselors who
offer timely, symptom-specific assessments, consultation on appropriate sources
of care, information about major diseases and procedures, and referrals to
physicians and other services. The Company uses five databases from which
services are delivered: (i) a person-based, portable, lifetime membership
database, (ii) a clinical protocol database, (iii) a database of information as
relates to the rules of each client's health plan, (iv) a database of health
plan specific authorized providers and (v) a health care information and
education database.
The Company's products and services are designed to meet the needs of
specific customer groups including managed care providers, self-insured
employers, individual consumers, Medicare, Medicaid and hospital and health
systems.
Personal health management services
Personal Health Advisor(R). The Personal Health Advisor service offering
is a membership benefit sponsored by managed care organizations, self-insured
employers and hospital-based delivery systems for use by members enrolled in the
organization's health plan. Per-member per-month fees are paid by the plan
sponsor and are periodically adjusted based on usage patterns. PHA services are
also available to individual consumers on a self-sponsored basis for a monthly
fee.
The PHA program provides members 24-hour toll-free telephone access to
specially-trained registered nurse phone counselors for general health
information, symptom-specific, non-diagnostic nursing assessments and decision
counseling for major diagnostic or treatment issues. A special feature of the
program is Health Counseling, a service that provides individually researched
information on care alternatives for significant health care episodes, such as
maternity, major illnesses and surgery. Members also can access the AudioHealth
Library(R) database, which is a sophisticated database of pre-recorded
information on more than 430 topics in both English and Spanish. The information
provided through the AudioHealth Library(R) database includes comprehensive
self-care and prevention information designed to help callers make appropriate
health care decisions. After listening to a topic, the caller can choose to
discuss specific concerns with a registered nurse or to request printed
information on a variety of topics. Health care counselors assist PHA members in
selecting physicians or other services available under their particular health
care benefit plan. The Company is exploring additional information distribution
channels for offering PHA that include desktop PC software, on-line services,
expanded printed material capabilities and cable video programming.
As of November 1, 1996, the Company had 47 customers representing
approximately 11.5 million members enrolled in PHA, compared to 14 customers
representing approximately 4.3 million enrolled members at September 30, 1995.
Member communication services. Member communication services are
tailored to meet specific sponsor needs. These services consist of the
development, execution and fulfillment of membership enrollment materials, such
as membership kits, newsletters and other mailings, on-going communication
programs designed to facilitate use of the program, and fulfillment of member
requests for literature for specific health care topics. The Company charges a
flat fee or per-member per-month fees based on the mix of services provided.
Health systems services
Access Care Management System(R). The Access Care Management System(R),
introduced in 1994, is utilized by those organizations seeking to provide in-
house personal health management services. ACMS
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is an integrated package of software, clinical guidelines and care management
functions that enables hospitals, physician groups, integrated health care
delivery systems and health plans to offer personal health management services
directly to patients and member groups through the sponsoring organization's own
telephone call center. ACMS customers pay the Company on a per-member per-month
basis and in return receive technical support and software and clinical database
upgrades.
ASK-A-NURSE(R). The ASK-A-NURSE(R) family of products is licensed to
hospitals and other health care systems, enabling them to provide health care
information and referral services. ASK-A-NURSE programs are staffed by
registered nurses and are accessible by telephone 24 hours a day. ASK-A-NURSE
was introduced in 1986 and is currently licensed to more than 70 clients
representing over 300 participating hospitals in the United States.
The ASK-A-NURSE program was originally introduced to help hospitals
compete in a fee-for-service health care environment by offering phone-based
information as a community service. The program was designed to create awareness
of the hospital and project an image within the community as a quality source
for health care information. By offering useful information, participating
hospitals are able to help callers determine if care is needed and to educate
callers regarding the hospitals' affiliated physicians and services. ASK-A-NURSE
Advantage, introduced in 1993, allows hospitals to offer an enhanced, fee-based
version of these services to members of selected groups.
Cancer HELPLINK. Cancer HELPLINK brand system is a specialized
information and referral system staffed by registered nurses experienced in
cancer care and trained in the extensive information needs of cancer patients,
their families and others concerned about cancer. Cancer HELPLINK, introduced in
1989, provides needed information to patients diagnosed with cancer and refers
callers who have cancer symptoms to appropriate physicians and diagnostic and
treatment services. The Company's cancer products are currently licensed to more
than 35 clients representing over 70 hospitals.
The Company licenses the ASK-A-NURSE(R) and Cancer HELPLINK(R) products
and the ASK-A-NURSE(R) brand name on an exclusive basis to a single hospital or
group of hospitals within a geographically-defined market.
LIFE MATCH(R) Family of Software Products. The Company sells and supports
the LIFE MATCH family of software products, consisting of HEALTH MATCH(R),
HEALTH MATCH(TM) Advantage and LIFE MATCH, which are designed to support health
care information and referral programs. These products enable participating
hospitals to match individuals' health care needs with physicians and hospital
services and to manage referral, medical information and reporting functions. In
addition, these software products allow hospitals to manage membership programs,
scripted outbound call programs and other database management activities.
HealthSelect(TM), the Company's newest software product, is a Windows-based
product designed to provide hospitals, physicians and integrated health care
delivery systems with the technology to manage referral, medical information and
personal health management programs. More than 300 hospitals have licensed one
or more of these software products.
Care Management Services
FirstHelp. The FirstHelp system, first introduced by Informed Access in
1994, is an integrated suite of care coordination products and services which
are designed to help health care consumers make informed, appropriate decisions
about the use of health care services for both acute and chronic conditions and
to help guide these consumers to the most appropriate point of care within a
managed care network. Managed care providers and insurers use the FirstHelp
system to facilitate easier access to the plan network by members, reduce
operating costs by reducing inefficient use of network resources and improve the
quality of care for plan members. The FirstHelp system is used by managed care
organizations in a variety of applications including use as the primary
"gateway" to a plan network, as an emergency room precertification tool, a
health care management tool for individuals with chronic conditions, or solely
as a
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health care information service for plan members. The FirstHelp system also
provides extensive reporting which enables managed care organizations to more
efficiently configure their service delivery network.
Clinical Decision Architecture. The foundation of the FirstHelp system
is Informed Access' patented Clinical Decision Architecture ("CDA"). CDA is a
proprietary software system and database which allows a nurse to assess a
patient's symptoms and to recommend the appropriate level of care based on that
assessment. CDA primarily utilizes four information databases, including a
database of Informed Access' proprietary clinical algorithms, a detailed
provider information database, a health care information database which includes
extensive self-care instructions and a database of health plan members and
rules.
Audio Tape Health Information Library. Customers have access via touch-
tone or rotary telephone to the FirstHelp audio tape health information library.
The audio tape library is a sophisticated database of pre-recorded information
on a wide variety of health topics, including information on specific conditions
and self-care and prevention information. After reviewing information in the
audio tape library, the customer can elect to speak directly with a FirstHelp
nurse.
Chronic Condition Management. Informed Access has developed disease
management programs designed to proactively assist patients with managing
chronic conditions. The goals of the program are to improve the quality of life
for patients who have chronic conditions by reducing the risk of chronic
condition complications and to help contain health care costs by reducing the
need for extensive use of health care services by patients with chronic
conditions. Patients who enroll in the chronic condition management program
receive regular calls from FirstHelp nurses who monitor the patient's condition
and the patient's compliance with treatment regimen. The enrolled patients also
receive information to educate them on how to effectively manage their chronic
condition.
Illness Risk Assessment. Informed Access is introducing an illness risk
assessment tool, FirstHelp IRA, to assist managed care organizations in
identifying plan members who are at greatest risk of requiring significant use
of health care services.* The FirstHelp IRA program will collect and analyze
patient specific predictors of high levels of future use of health care
services.* This information will be inserted into a patient's FirstHelp record
to be used in conjunction with FirstHelp chronic condition management programs
to provide proactive monitoring and intervention for higher risk patients.*
PRODUCT DEVELOPMENT
The Company's growth and future success largely depend upon its ability
to develop new products for the health care industry and to continue to develop
and enhance its existing personal health management products to meet evolving
and changing customer needs. Current development initiatives include:
- - Clinical applications. The Company is in the process of expanding clinical
applications to new areas such as illness prevention and wellness and disease
management programs, and enhancing the protocols and libraries for existing
applications.
- - Patient education software program. Through the Company's acquisition of
CRS, it has the capability of providing computer based patient education
materials that can be distributed by the physician in the form of customized
handouts to their patients.
- - Electronic delivery systems. The Company has developed and continues to
expand its capabilities to use on-line communications and other electronic media
to deliver the Company's products and services.
- - Technology infrastructure. The Company continues to enhance its
infrastructure by installing new hardware and software systems to improve
capability, ease of use and scalability.
- - Customized products. The Company customizes products for specific market
segments such as those with special literacy or foreign language needs.
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- - Algorithms. The Company, through its Informed Access business unit, is
enhancing its FirstHelp CDA clinical algorithms.
The foregoing discussion of product development programs and plans
includes forward-looking statements. There is no assurance as to the successful
completion, timing of introduction or market success of any such activities.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations."
PRINCIPAL CUSTOMERS
The Company markets its products and services to managed care
organizations, government agencies, self-insured employers, hospitals,
integrated hospital organizations, physician groups, independent physician
associations and direct to the consumer.
As of November 1, 1996, the Company had contracts with 47 customers
representing approximately 11.5 million members enrolled in PHA. Other customers
have announced contract awards to the Company that would represent an additional
700,000 members by the end of 1997. These additional contracts are subject to
final negotiation and have not yet been executed. The Company's enrolled members
include members for which the Company receives revenues. Certain of the
Company's contracts specify a guaranteed enrollment rate for members and the
Company receives revenues for such amounts even if the customer has not yet
identified all the particular members. Major customers include Blue Cross of
Western Pennsylvania, Empire Blue Cross and Foundation Health Federal Services,
Inc. which represent 16.8%, 12.0% and 11.6%, respectively, of Access Health's
fiscal year 1996 revenues. After initial terms of approximately one to four
years, contracts generally can be terminated upon 60 to 180 days notice. Two of
the three largest contracts are up for renewal in fiscal 1997, and the third is
up for renewal in fiscal 1998.
In 1994, Informed Access commercially introduced the FirstHelp(TM) line
of health care coordination products and services. The FirstHelp system is a
proprietary, integrated suite of products and services which enable managed care
organizations to improve and monitor the access, quality and cost-effectiveness
of health care services while enhancing the satisfaction of health care service
consumers. Informed Access provides its FirstHelp products and services to
enrolled members of managed care plans from its advanced call center staffed by
experienced registered nurses on a 24-hour-a-day, 7-day-a-week basis. The
FirstHelp system is also licensed to large health care providers and insurers
who operate their own call centers. At September 1, 1996, FirstHelp products and
services were available under contract to approximately 6.0 million members from
40 client organizations, including approximately 4.0 million call center
members and 2.0 million license site users. Informed Access' clients include
Blue Cross and Blue Shield of Massachusetts, IHC Hospitals, CaliforniaCare
Health Plans (Blue Cross of California), Mayo Management Services, Oxford Health
Plans and the Harris Health Plans.
The Company's ASK-A-NURSE and Cancer HELPLINK products are currently
licensed to more than 80 clients. Examples of the Company's principal customers
for these product lines include Florida Hospital in Orlando, Covenant Health
Care Systems in Milwaukee and Emory University Systems of Health Care in
Atlanta.
SALES, MARKETING AND SUPPORT
The Company's sales and marketing strategy includes tailoring its
products to specific market segments, employing a direct sales force organized
around these segments, utilizing experienced account management teams and
engaging in promotional activities to increase brand awareness and recognition
of the Company's products. With the Company's acquisition of Informed Access,
its 15 person direct sales force is organized into groups focused on selling the
Company's products and services to managed care organizations, self-insured
employers, commercial insurers, government entities, and hospitals and health
care systems.
The Company manages its on-going relationships with clients through the
use of account management teams that include clinical and technical support.
These teams work closely with new and existing clients to implement custom
tailored programs, coordinate member communication programs, ensure client
satisfaction, and evaluate program effectiveness. This structure allows the
account management teams to anticipate new member needs.
Additionally, the Company markets PHA directly to consumers and currently
has more than 25,000 self-sponsored consumer members who pay monthly fees. This
marketing effort is conducted through an alliance with a consumer marketing
partner.
The Company's marketing strategy also includes building brand awareness
and brand identity for its Personal Health Advisor(R), ASK-A-NURSE and Cancer
HELPLINK products. The Company has an extensive promotional program that
includes direct mail, advertising, and participation in industry conferences and
trade shows.
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ACQUISITION STRATEGY
Since its management-led buyout of the ASK-A-NURSE business in 1988,
Access Health has grown in part through strategic product and business
acquisitions. These acquisitions include the buy-out of a joint venture partner
in Cancer HELPLINK and the acquisition of the LIFE MATCH family of products from
Baxter Health Care, Inc. They also include its acquisition of Informed Access
and its acquisition of Clinical Reference Systems, Ltd, with its suite of health
information and patient education software programs (see "Recent Developments").
In keeping with the Company's strategy to complement and expand the products and
services it offers, the Company continues to evaluate products or businesses
that may be acquired.
COMPETITION
The market for the Company's products and services is highly and
increasingly competitive. There are a number of competitors that offer products
or services that compete with some or all of those offered by the Company.
Existing and potential clients may also evaluate the Company's products or
services against internally developed programs. Increased competition could
result in pricing pressure and margin erosion. In its existing business and as
the Company offers new products or services, or enters new markets, it may face
increased competition from competitors, some of which may have substantially
greater financial, marketing and technical resources than the Company. There can
be no assurance that the Company will continue to compete successfully. While
the Company cannot predict the effect of future competition, increased
competition would adversely impact the Company's revenues and rate of growth and
operating results, particularly if the Company encountered price competition.
GOVERNMENT REGULATION
The health care industry is subject to extensive and evolving government
regulation at both the Federal and state levels relating to many aspects of the
Company's and its clients' businesses, including the provision of health care
services, teleservicing, health care referral programs, and health maintenance
organizations and other similar plans. These statutes and regulations in many
cases predate the development of telephone-based health care information and
other interstate transmission and communication of medical information and
services. The language of certain of these statutes and regulations governing
the provision of health care services, including the practice of nursing and the
practice of medicine, could be construed by regulatory authorities to apply to
certain of the Company's teleservicing activities, which use California,
Illinois, Arizona and Colorado registered nurses to provide personal health
management services such as nursing assessments and information regarding
appropriate sources of care and treatment time frames. These statutes and
regulations could also apply to certain activities of the Company's health
service customers when operating the Company's programs. The Company has not
been made, nor is it aware that any of its clients, nurse employees or any other
organization providing out-of-state teleservicing have ever been made, the
subject of such requirements by a regulatory authority. In addition, the
language of the statutes and regulations governing health maintenance
organizations and other plans that provide or arrange for the provision of
health care services for a prepaid or periodic charge could be construed by
regulatory authorities to apply to certain activities of the Company that are
provided on a per-member, per-month basis. The Company has not been made, nor is
it aware that any other company providing out-of-state teleservicing has ever
been made, the subject of such requirements by a regulatory authority. However,
if regulators seek to enforce any of the foregoing statutory and regulatory
requirements, the Company, its employees and/or its clients could be required to
obtain additional licenses or registrations, to modify or curtail the operation
of the Company's programs, to modify the method of payment for the Company's
programs, or to pay fines or incur other penalties.
The payment of remuneration to induce the referral of health care
business has been a subject of increasing governmental and regulatory focus in
recent years. Section 1128B(b) of the Social Security Act (sometimes referred to
as the "Federal anti-kickback statute") provides criminal penalties for
individuals or entities that knowingly and willfully offer, pay, solicit or
receive remuneration in order to induce referrals for items or services for
which payment may be made under the Medicare and Medicaid programs and certain
other government-funded programs. The Social Security Act provides authority to
the Office of the
12
<PAGE>
Inspector General through civil proceedings to exclude an individual or entity
from participation in the Medicare and state health programs if it is determined
any such party has violated Section 1128B(b) of the Social Security Act.
Regulations have been promulgated specifying certain payment practices which
will not be subject to criminal prosecution or civil exclusion. These
regulations, commonly referred to as the "safe harbor" regulations, do not
expand the scope of the Federal anti-kickback statute, and the fact that a
business arrangement does not fit within a safe harbor does not mean the
business arrangement violates the Federal anti-kickback statute. The Company's
business meets most, but not all, of the requirements of the safe harbor for
referral services. A number of states in which the Company operates have anti-
kickback statutes similar to the Federal statute as well as statutory and
regulatory requirements governing referral agencies and regulating franchising
and business opportunity ventures. In addition, the Federal government and a
number of states have enacted statutes which contain outright prohibitions on
referrals for specified services which are made by referring providers who have
an ownership interest in, or compensation arrangement with, the entity to which
the referral is made. If the Company or the use of its products and services
were to be found in violation of such statutes, the Company or its clients could
be required to modify or curtail the operation of the Company's programs, or to
pay fines or incur other penalties, and the Company's clients could be excluded
from participation in the Medicare and Medicaid programs and could be precluded
from charging fees and obtaining reimbursement for specified services.
There can be no assurance that the Company or the use of its products and
services will not be subject to review or challenge by government regulators
under any of the foregoing statutes and regulations that apply to health care
services and products. In addition, additional laws and regulations could be
enacted in the future that would regulate the Company or the use of its products
and services. Any government investigative or enforcement actions with respect
to the Company or the use of its products or services could generate adverse
publicity irrespective of the final outcome, and could have a material adverse
effect on the Company.
RISK MANAGEMENT
In recent years, participants in the health care industry, including
physicians, nurses and other health care professionals, have been subject to an
increasing number of lawsuits alleging malpractice, product liability and
related legal theories, many of which involve large claims and significant
defense costs. Due to the nature of its business, the Company could become
involved in litigation regarding the telephone information given by its
registered nurses or those of its licensees or the health care information
provided under the Company's other products and services with the risk of
adverse publicity, significant defense costs and substantial damage awards. The
Company has established policies and procedures that limit the information
provided by its registered nurses to that contained in its protocols and in
other approved reference sources. In connection with its teleservices
operations, the Company has a quality assurance program that includes real-time
audits of calls and post call reviews to monitor compliance with established
policies and procedures. Generally, clients review and approve the Company's
protocols and guidelines prior to program implementation and do not modify them
without medical approval. To date, the Company has not been the subject of any
claim involving either its clinical assessment systems, the operation of its
teleservicing centers, or the operation by hospital clients of on-site call
centers or its other products and services. However, there can be no assurance
that claims will not be brought against the Company. Even if such claims
ultimately prove to be without merit, defending against them can be time
consuming and expensive, and any adverse publicity associated with such claims
could have a material adverse effect on the Company.
While the Company maintains professional liability insurance, there can
be no assurance that claims in excess of the Company's insurance coverage will
not arise or that all claims would be covered by such insurance. In addition,
although the Company has not experienced difficulty in obtaining insurance
coverage in the past, the Company expects to seek increased insurance coverage
as its business grows. There can be no assurance that the Company will be able
to maintain existing insurance coverage or obtain increased coverage on
acceptable terms or at all.
13
<PAGE>
INTELLECTUAL PROPERTY.
The Company regards its software, clinical nursing assessment protocols
and marketing and program operation materials as proprietary and attempts to
protect its intellectual property with copyrights, trademarks, trade secret laws
and restrictions on disclosure, copying and transferring title. Although the
Company holds no patents directly, Informed Access holds one issued United
States patent which covers a number of inventions, including the structure, use
and process of its clinical decision architecture ("CDA") and clinical database
and certain capabilities of the provider profiler product. There can be no
assurance that competitors, some of which have substantial resources and have
made substantial investments in competing technologies, will not seek to apply
for and obtain patents that will prevent, limit or interfere with the Company's
ability to make, use or sell its products either in the United States on in
international markets. Furthermore, the laws of certain foreign countries do
not protect the Company's intellectual property rights to the same extent as do
the laws of the United States. Litigation or regulatory proceedings, which
could result in substantial cost and uncertainty to the Company may also be
necessary to enforce the Company's intellectual property rights or to determine
the scope and validity of other parties' proprietary rights. It is also
possible that the Company may need to acquire licenses to, or contest the
validity of, issued or pending patents of third parties relating to the
Company's technology. There can be no assurance that any of such licenses would
be made available to the Company on acceptable terms, if at all, or that the
Company, if it were to contest the validity of any issued or pending patents,
would prevail. In addition, the Company could incur substantial costs in
defending itself in suits brought against the Company on its patents or in
bringing suits against third parties to enforce the Company's proprietary rights
including patents. The Company also relies on copyright, trademarks, trade
secret laws and restrictions on disclosure, copying and transferring title.
Despite the Company's precautions, it may be possible for unauthorized third
parties to copy aspects of the Company's products or to obtain and use
information that the Company regards as proprietary. Existing copyright laws
afford only limited practical protection. In addition, the laws of some foreign
countries do not protect the Company's proprietary rights to the same extent as
do the laws of the United States, which could be a factor if the Company expands
into markets outside the United States.
EMPLOYEES
As of September 30, 1996, the Company had 396 full-time and 113 part-time
employees, including 207 registered nurses. With the addition of Informed Access
and CRS in November 1996, as of December 16, 1996, the Company had
approximately 576 full-time and 143 part-time employees, including approximately
317 registered nurses. None of the Company's employees is covered by a
collective bargaining agreement, and the Company believes that its relations
with its employees are good.
PHYSICIAN ADVISORS
The Company's medical affairs are directed by Jeremy J. Nobel, M.D.,
Senior Vice President for Medical Affairs. He is supported by two full-time MD
employees - Steve Silverstein, MD, board certified in internal medicine and
emergency medicine, and Maury Gloster, MD, board certified in internal medicine.
In addition, the Company has entered into consulting arrangements with other
physicians who are recognized clinical experts. These physician consultants help
the Company in setting direction and strategy for clinical activities,
developing and assuring the quality of clinical nursing assessment protocols,
responding to new and emerging medical information, developing new clinical
applications, and providing consulting services to client medical directors. The
Company's medical advisors are as follows:
Charles A. Coltman, Jr., M.D., Member of the Cancer HELPLINK Physician
Advisory Council. Dr. Coltman is Professor of Medicine at the University of
Texas Health Science Center and the Director of the San Antonio Cancer
Institute. He is President and CEO of the Cancer and Research Center, Chairman
of the Southwest Oncology Group, the largest cancer clinical trials group in the
U.S., and has received
14
<PAGE>
numerous citations for his research in cancer control and the treatment of
leukemias, lymphomas, and Hodgkin's Disease.
W. David Dawdy, M.D., serves as a pediatric consultant for Access Health
and is a practicing pediatrician. In addition, he is a Clinical Assistant
Professor of Pediatrics of Ohio State University and serves as the Pediatric
Director of the University ASK-A-NURSE program. He is active in numerous local
and state organizations and committees involved with education for medical
residents.
Robert W. Derlet, M.D., Medical Advisor for the Clinical Assessment
Systems and Clinical Outcomes for ASK-A-NURSE and Personal Health Advisor. Dr.
Derlet is an Associate Clinical Professor and Chief of Emergency Medicine at the
University of California at Davis Medical Center. He is board-certified in
emergency medicine and internal medicine. Dr. Derlet has conducted research and
authored several publications dealing with re-directing emergency department
patients to more appropriate levels of care within the health care delivery
system.
G. Denman Hammond, M.D., Cancer HELPLINK National Medical Director and
Chairman of the Cancer HELPLINK Physician Advisory Council. Dr. Hammond is
Associate Vice President for Health Affairs and Professor of Pediatrics at the
University of Southern California. He is Chairman of the National Cancer
Institute-sponsored Children's Cancer Study Group and a leading authority on the
blood disorders and cancers of infants and children. Dr. Hammond has authored or
co-authored over 200 scientific manuscripts, books and book chapters.
The Company's medical advisors receive an annual retainer and consult
with the Company on a periodic basis. Dr. Dawdy and Dr. Derlet typically devote
approximately one to four days per month to Company matters, and the other
medical advisors typically devote approximately one day per quarter to the
Company's matters.
- ------------------
*-- This statement is a forward-looking statement reflecting current
expectations. There can be no assurance that the Company's actual future
performance will meet the Company's current expectations. Investors are
strongly encouraged to review the section entitled "Risk Factors that May Affect
Future Operating Performance."
15
<PAGE>
ITEM 2. PROPERTIES
The Company's corporate offices and largest call center facility are
located in two buildings in Rancho Cordova, California, and comprise 53,892
square feet subject to a lease that expires in November 2001, and 17,441 square
feet subject to a lease that expires in March 1999, respectively. In addition,
the Company has lease agreements for operational facilities in three other
cities, of which one is for an 8,374 square foot call center facility in
Arlington Heights, Illinois and expires in September 1998, one is for a 14,671
square foot call center facility in Phoenix, Arizona and expires in September
2001, and one is for a 7,256 square foot regional sales and account management
office in Boston, Massachusetts and expires in September 2002. The Company's
Broomfield, Colorado call center is located in a 33,000 square foot facility
pursuant to a lease which expires in June 1998 with an option to extend to
June 1999. The Company also leases a 20,825 square foot facility in Boulder,
Colorado pursuant to a lease which expires in December 1999. A backup call
center occupies approximately 11,571 square feet and the balance of the space is
subleased to a third party. The Company believes that its facilities are
adequate for its business as presently operated.
ITEM 3. LEGAL PROCEEDINGS
Not Applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock is traded on the Nasdaq National Market under
the symbol "ACCS". The following table sets forth, for the periods indicated,
the range of the low and high sales prices for the Company's Common Stock as
reported on the Nasdaq National Market beginning in fiscal year 1995*.
<TABLE>
<CAPTION>
HIGH LOW
-------- ------
<S> <C> <C>
Fiscal 1995:
First Quarter........................ $14 59/64 $ 9 59/64
Second Quarter....................... 13 21/64 9 1/2
Third Quarter........................ 14 5/64 10 1/4
Fourth Quarter....................... 19 1/2 12 27/64
Fiscal 1996:
First Quarter........................ 30 21/64 13 53/64
Second Quarter....................... 44 27 1/2
Third Quarter........................ 65 1/2 38 3/4
Fourth Quarter....................... 59 1/4 38
Fiscal 1997:
First Quarter (through December 6,
1996)............................... 56 1/4 30 1/2
</TABLE>
As of December 16, 1996, there were approximately 424 holders of record of
the Common Stock. On December 16, 1996, the last reported sale price on the
Nasdaq National Market for the Common Stock was $45.75. The market for the
Company's Common Stock is highly volatile. See "Risk Factors that May Affect
Future Operating Performance--Volatility of Stock Price."
The Company has not declared or paid any cash dividends on its Common
Stock. The Company presently intends to retain earnings for use in its business
and therefore does not anticipate paying cash dividends in the foreseeable
future.
- -------------
* -- The prices shown prior to February 29, 1996 have been adjusted to reflect a
three-for-two stock split effected in the form of a stock dividend as of that
date.
16
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
SELECTED CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
The selected consolidated financial data at September 30, 1995 and 1996 and for
the years ended September 30, 1994, 1995 and 1996 have been derived from the
audited consolidated financial statements and should be read in conjunction with
such consolidated financial statements and notes thereto, which are included
herein. The consolidated financial data at September 30, 1992, 1993 and 1994 and
for the years ended September 30, 1992 and 1993 have been derived from audited
consolidated financial statements not included herein.
<TABLE>
<CAPTION>
Years ended September 30,
---------------------------------------------------------
1992 1993 1994 1995 1996
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Revenues:
Personal health management
services........................ $ - $ 585 $ 2,912 $20,207 $52,026
Health systems services.......... 12,399 15,697 13,443 11,346 10,047
------- ------- ------- ------- -------
Total commercial revenues.... 12,399 16,282 16,355 31,553 62,073
Development program with related
party........................... - 2,197 2,274 - -
------- ------- ------- ------- -------
Total revenues.............. 12,399 18,479 18,629 31,553 62,073
Costs and expenses:
Cost of revenues:
Personal health management
services................... - 450 3,493 13,214 26,349
Health systems services..... 6,798 8,504 9,248 7,498 6,773
Product and other development.... 99 1,051 1,085 1,708 3,841
Development program.............. - 2,455 2,541 - -
Sales and marketing.............. 2,356 2,467 3,767 3,651 6,766
General and administrative....... 1,235 1,912 2,602 3,456 6,255
------- ------- ------- ------- -------
Total costs and expenses.... 10,488 16,839 22,736 29,527 49,984
------- ------- ------- ------- -------
Income (loss) from operations........... 1,911 1,640 (4,107) 2,026 12,089
Non-operating income (expense):
Interest and other income........ 618 586 612 661 1,490
Interest expense................. (265) (228) (153) (91) (37)
------- ------- ------- ------- -------
Income (loss) before income taxes....... 2,264 1,998 (3,648) 2,596 13,542
Provision (credit) for income taxes..... 905 724 (1,352) 1,056 5,417
------- ------- ------- ------- -------
Net income (loss)....................... $ 1,359 $ 1,274 $(2,296) $ 1,540 $ 8,125
======= ======= ======= ======= =======
Net income (loss) per share(1).......... $ 0.16 $ 0.13 $ (0.24) $ 0.14 $ 0.61
======= ======= ======= ======= =======
Shares used in per share calculations(1) 8,429 9,515 9,456 11,145 13,340
======= ======= ======= ======= =======
<CAPTION>
September 30,
-------------------------------------------------------
1992 1993 1994 1995 1996
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Balance Sheet Data:
Total assets..................... $20,812 $24,206 $25,875 $31,129 $78,831
Working capital.................. 11,716 11,568 10,216 10,243 40,927
Long-term debt................... 881 1,039 690 398 -
Stockholders' equity............. 15,689 17,679 19,467 22,030 64,431
</TABLE>
- ------------
(1) Shares used in per share calculations have been adjusted for the Company's
three-for-two stock split.
17
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS WHICH INVOLVE RISKS
AND UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY FROM
THE RESULTS ANTICIPATED IN THESE FORWARD-LOOKING STATEMENTS AS A RESULT OF
CERTAIN FACTORS SET FORTH HEREUNDER.
General
- -------
The Company is a leading provider of personal health management products and
services to the health care industry. The Company was founded in 1987 and until
1993 primarily provided consumer health care information products and services
designed to help hospitals and other health care providers market their
services. Beginning in 1993, the Company changed its focus to developing and
marketing personal health management products and services to health plans and
payors. In connection with the transition, the Company incurred significant
development expenses for its Personal Health Advisor ("PHA") product, including
expenses for the hiring and training of personnel, capacity expansion and sales
and marketing programs. Because revenues from personal health management
services were not sufficient to cover start-up expenses, the Company's gross
margins decreased and operating losses were sustained in the third and fourth
quarters of fiscal 1994 and the first quarter of fiscal 1995. The Company
returned to profitability in the second quarter of fiscal 1995 and has achieved
increased profitability each quarter since as additional members have been
enrolled in PHA and gross margins improved.
Personal health management services. The Company's primary personal health
management product, Personal Health Advisor, is designed to generate recurring
revenues through a fee structure that is based on per-member per-month fees.
Revenues are generated principally from the Company's PHA contracts. Managed
care organizations, health plans and large self-insured employers purchase PHA
for use by their members or employees in order to reduce unnecessary health care
utilization, improve member satisfaction and lower health care costs. The
Company also earns fees for providing member communications services to its
customers.
Health systems services. The Company also markets a line of personal health
management products and services to hospitals and other health care providers.
Those products include the ASK-A-NURSE family of products, Cancer HELPLINK,
Access Care Management System ("ACMS") and the LIFE MATCH family of products.
The Company's revenues from these products include license implementation fees
as well as on-going fees for program support, teleservices, and direct marketing
activities.
Mergers with Informed Access Systems, Inc. and Clinical Reference Systems, Inc.
During November 1996, the Company completed mergers with Informed Access Systems
("Informed Access"), in exchange for 5,375,000 shares of Access Health, Inc.
common stock (including 4,778,317 shares issued to Informed Access shareholders
and 596,683 shares reserved for future grant to Informed Access option holders)
and Clinical Reference Systems, LTD ("CRS"), in exchange for 170,000 issued
shares of Access Health, Inc. common stock. Both transactions were accounted
for as pooling-of-interests.
Informed Access was founded in 1992 and is a leading provider of health care
coordination products and services to the health care industry. Informed Access'
primary clients are major managed health care providers including health
maintenance organizations (HMO's), preferred provider organizations (PPO's),
indemnity insurers, integrated delivery systems and physician groups. CRS
develops and markets patient education software products that enable health care
providers to produce easy-to-read handouts on a variety of medical and drug
topics. "Management's Discussion and Analysis of Financial Condition and
Results of Operations" does not include the results of operations of Informed
Access.
18
<PAGE>
The following shows the components of the Company's consolidated statements of
operations as a percentage of total revenues:
<TABLE>
<CAPTION>
1994 1995 1996
----------------------------
<S> <C> <C> <C>
Revenues:
Personal health management services.... 15.6% 64.0% 83.8%
Health systems services................ 72.2 36.0 16.2
----- ----- -----
Total commercial revenues.......... 87.8 100.0 100.0
Development program with related party. 12.2 - -
----- ----- -----
Total revenues........................ 100.0 100.0 100.0
Costs and expenses:
Cost of revenues:
Personal health management services... 18.8 41.9 42.4
Health systems services............... 49.6 23.8 10.9
Product and other development.......... 5.8 5.4 6.2
Development program.................... 13.6 - -
Sales and marketing.................... 20.2 11.6 10.9
General and administrative............. 14.0 10.9 10.1
----- ----- -----
Total costs and expenses.............. 122.0 93.6 80.5
----- ----- -----
Income (loss) from operations........... (22.0) 6.4 19.5
Interest and other income, net.......... 2.4 1.8 2.3
----- ----- -----
Income (loss) before income taxes....... (19.6) 8.2 21.8
Provision (credit) for income taxes..... (7.4) 3.3 8.7
----- ----- -----
Net income (loss)....................... (12.2)% 4.9% 13.1%
===== ===== =====
Gross margins by product line:
Personal health management services.... (20.0)% 34.6 % 49.4 %
Health systems services................ 31.2 % 33.9 % 32.6 %
</TABLE>
Results of Operations
- ---------------------
Commercial revenues. Commercial revenues consist of revenues from personal
health management services, and health systems services. Commercial revenues
increased from $16.4 million in fiscal 1994 to $31.6 million in fiscal 1995 and
to $62.1 million in fiscal 1996.
Revenues from personal health management services increased from $2.9 million in
fiscal 1994 to $20.2 million in fiscal 1995 and to $52.0 million in fiscal
1996 because the number of members enrolled under the Company's PHA contracts
increased during these periods. As of September 30, 1996, approximately 10.8
million members were enrolled in PHA, compared to approximately 4.3 million
enrolled as of September 30, 1995 and 480,000 enrolled as of September 30, 1994.
Revenue from PHA contracts is recognized ratably on a per-member per-month basis
and commences upon the enrollment of members.
Revenues from health systems services decreased from $13.4 million in fiscal
1994 to $11.3 million in fiscal 1995 and to $10.0 million in fiscal 1996. Health
systems services revenues include licensing implementations, program support,
and teleservicing activities. Revenues from licensing implementations decreased
from $1.2 million in fiscal 1994 to $0.8 million in fiscal 1995 and to $0.4
million in fiscal 1996. The decrease is due to changes taking place in the
hospital industry and the Company's shift from one-time
19
<PAGE>
license implementation fees to recurring per-member per-month fees. Program
support services revenues increased from $5.6 million in fiscal 1994 to $6.1
million in fiscal 1995 and 1996 primarily because of sales of ACMS to hospital
clients. Teleservicing revenues decreased from $6.6 million in fiscal 1994 to
$4.3 million in fiscal 1995 and $3.5 million in fiscal 1996 due to
discontinuation of certain ASK-A-NURSE teleservices contracts. The Company
expects that revenues from health systems services will continue to decline as a
percentage of the Company's total revenues and will likely continue to decline
in absolute dollars.*
Revenues from development program with related party. During fiscal 1993 the
Company entered into an agreement with Personal Health Management, L.P.
("PHMLP") which provided funding of up to $5 million for the development of PHA,
including expanded delivery capability and related marketing programs for the
managed care industry. Revenues from the development program consist of amounts
recognized pursuant to this agreement. In fiscal 1994, the Company recognized
$2.3 million in revenues and incurred $2.5 million in expenses related to the
development program. The development program ended during the second quarter of
fiscal 1994. In May 1994, the Company exercised its option to acquire the rights
to the PHA product.
Cost of revenues. The cost of personal health management services revenues
includes the costs of operating the Company's services centers, on-going client
consultation and charges for providing PHA member communications services. The
gross margin percentages for personal health management services were (20.0)%,
34.6% and 49.4% for fiscal 1994, 1995 and 1996, respectively. Gross margin for
personal health management services was negative in fiscal 1994 reflecting costs
of staffing and additional facilities to expand call center capacity, and
improved from 1994 to 1995 and 1996 due to the growth in PHA enrollment, as
previously discussed.
The cost of health systems services revenues includes the costs of license
implementations, operating call processing, on-going client consultation, annual
users' conferences, advertising materials, and other support services for ASK-A-
NURSE, Cancer HELPLINK, ACMS and LIFE MATCH licensees. The gross margin
percentages for health system services were 31.2%, and 33.9% and 32.6% for
fiscal 1994, 1995 and 1996, respectively. Fluctuations in gross margin from
fiscal 1994 to fiscal 1995 and 1996 are the result of changes in the mix of
product and services sales with varying margins.
Product and other development expenses. Product and other development expenses
totaled $1.1 million in 1994, $1.7 million in 1995 and $3.8 million in fiscal
1996. These costs related to enhancements of the Company's call center systems
and clinical protocols. Beginning in fiscal 1996, product development also
included development of new disease management products and PHA Online. Product
and other development expenses will increase in fiscal 1997 as the Company
continues to make investments in personal health management products and could
also increase as a percentage of revenues.*
Development program expenses. Development program expenses incurred in fiscal
1994 were associated with the development and marketing of PHA products and
services and the operation of pilot programs. These expenses were principally
funded by revenues received from the development agreement with PHMLP. The
agreement terminated in May 1994 when the Company exercised its option to
acquire the rights to the PHA product.
Sales and marketing expenses. Sales and marketing expenses for the first half
of fiscal 1994 were related primarily to health systems services products. Sales
and marketing expenses for the second half of fiscal 1994, 1995 and 1996 consist
of expenses related to both the personal health management and health systems
services products. Sales and marketing expenses as a percentage of revenues were
20.2%, 11.6% and 10.9% in fiscal 1994, 1995 and 1996, respectively. During the
first six months of fiscal 1994, most of the sales and marketing expenses for
PHA were included in development program expenses. Sales and
20
<PAGE>
marketing expenses in fiscal 1995 decreased from fiscal 1994 because the Company
shifted its sales and marketing emphasis to its managed care products in mid-
1994 which included the development and implementation of a major advertising
program related to the commercial introduction of PHA during the third quarter
of fiscal 1994. Increased sales and marketing expenses from fiscal 1995 to
fiscal 1996 reflected higher levels of lead generation activity, expansion of
the sales team and increased sales commissions related to the increase in
revenues for PHA. Sales and marketing expenses declined as a percentage of
revenues in fiscal 1995 and 1996 due to the growth in personal health management
services revenues previously discussed.
Sales and marketing expenses will likely increase in fiscal 1997 as a percentage
of revenues as the Company continues to pursue its strategy of building brand
awareness for its personal health management products.*
General and administrative expenses. General and administrative expenses were
$2.6 million, or 14.0% of revenues in fiscal 1994, $3.5 million, or 10.9% of
revenues in fiscal 1995 and increased to $6.3 million or 10.1% of revenues, in
fiscal 1996. The increase from 1994 through 1996 reflects increased expenses for
management information systems and additional finance, human resources and
executive level personnel.
Not included in fiscal 1996 results are transaction and integration costs
related to the mergers with Informed Access and CRS, which were consummated in
November 1996, and are expected to be expensed in the first quarter of fiscal
year 1997.*
Income (loss) from operations. Operating income (loss) increased from a loss of
($4.1) million in fiscal 1994 to income of $2.0 million in fiscal 1995 and $12.1
million in fiscal 1996. The loss from operations in fiscal 1994 can be
attributed primarily to significant investments made by the Company to develop
and market its personal health management services. The return to profitability
in fiscal 1995 and the increase in profitability in fiscal 1996 are due to
economies of scale associated with the increased enrollment in PHA.
Non-operating income (expense). The Company generates interest and other income
from cash balances and from interest imputed on licenses receivable due after
one year. Interest and other income increased from $612,000 in fiscal 1994 to
$661,000 in fiscal 1995 and to $1.5 million in fiscal 1996 primarily as a result
of increases in interest income earned on cash and short-term investments.
Income taxes. The Company recorded an income tax benefit of $1.4 million in
1994 and income tax provisions of $1.1 million and $5.4 million in fiscal 1995
and 1996, respectively. The Company's effective income tax rate was 41% in 1995
and 40% in fiscal 1996.
Effects of inflation and changing prices. Inflation and changing prices have
not had a material effect on the Company's operations and, at current levels,
are not expected to in future years.
Liquidity and Capital Resources
- -------------------------------
Cash provided by operations was $317,000 for fiscal 1994, $7.8 million for
fiscal 1995 and $12.6 million for fiscal 1996. As of September 30, 1996 the
Company held cash and equivalents and available-for-sale securities totaling
$39.8 million.
Accounts and licenses receivable increased from $6.2 million in fiscal 1994 to
$6.5 million in fiscal 1995 and to $11.0 million in fiscal 1996 primarily as a
result of increased revenue from PHA contracts.
In fiscal 1994, 1995 and 1996 the Company used cash and equivalents to invest in
short-term investments. In fiscal 1994, 1995 and 1996 the Company also used cash
and equivalents to support additions to property and equipment and the payment
of long-term debt. During fiscal 1995 and 1996 the Company made significant
additions to property and equipment to expand its call center operations. During
April 1996, the
21
<PAGE>
Company invested $5.0 million in America's Health Network, L. P. ("AHN"), a new
24-hour, 7 day a week cable television channel devoted to consumer health care
information. The Company is a limited partner in AHN. The Company is required to
invest an additional $5 million in AHN in January 1997 if AHN achieves certain
operating performance milestones by December 31, 1996. The Company also may
elect to invest an additional $5 million in AHN during January 1997.
The Company completed a secondary public offering of its common stock during the
first quarter of fiscal 1996. A total of 4.8 million shares were sold at $21.33
per share of which 1.5 million shares were sold by the Company and 3.3 million
shares were sold by the Company's original venture capital stockholders who are
now fully divested. Net proceeds to the Company from the offering were
approximately $29.5 million.
During October 1995, the Company repaid all long term debt, including loans and
capital leases. Based on prevailing interest rates, cash flow requirements and
other factors, the Company will, from time to time, evaluate the possibility of
incurring additional debt.
The Company expects to spend approximately $5.0 million to purchase capital
equipment and computer software in fiscal 1997 to expand its call centers. The
Company could increase its expenditures for call center expansion in fiscal 1997
depending on the timing and extent of increases in member enrollment.*
The fiscal 1997 planned operations of Informed Access and CRS are not expected
to require the consumption of significant capital resources.* Informed Access
expects to spend approximately $2.0 million to purchase capital equipment and
computer software in fiscal 1997 to expand its operations and is expected to
generate cash from operations.*
The Company believes its current capital resources are adequate to fund cash
needs for anticipated operating levels for at least the next twelve months.* The
Company also may use capital resources in connection with business expansion
that may include the acquisition of complementary product lines or businesses
during fiscal 1997 or beyond.*
- --------------
*-- This statement is a forward-looking statement reflecting current
expectations. There can be no assurance that the Company's actual future
performance will meet the Company's current expectations. Investors are strongly
encouraged to review the section entitled "Risk Factors that May Affect Future
Operating Performance."
Risk Factors That May Affect Future Operating Performance
- ---------------------------------------------------------
Ability to Secure Additional Contracts and Expand and Retain Existing Contracts.
The Company's ability to increase revenues and profitability is largely
dependent on the Company's ability to secure additional PHA contracts and to
retain and expand existing PHA contracts. In addition, the Company's revenues
are affected by the timing of member enrollment under new contracts. The Company
could be adversely affected by the termination or non-renewal of any of the
Company's contracts, or by renegotiation of the terms of contracts, particularly
if the affected contracts cover a large number of members or represent a
significant portion of the Company's health systems services revenue. In June
1995, the Company renegotiated a PHA contract which reduced the number of
members and during fiscal 1995 renegotiated two health systems services
contracts. Any factors adversely affecting the market for the PHA product or the
health system services products, including factors outside of the Company's
control, such as adverse publicity or government regulatory action, would have a
material adverse effect on the Company.
Dependence on Principal Customers. The Company's PHA contracts cover members
ranging from approximately 3,000 members to 2.2 million members per contract and
include one contract for 2.2 million members, one contract for 2.0 million
members, one contract for 1.6 million members, one contract for 1.3 million
members and one contract for 1.0 million members. In fiscal 1996, the Company's
three largest customers accounted for approximately 16.8%, 12.0%, and 11.6% of
the Company's total revenues and the Company's top five customers, in the
aggregate, accounted for approximately 56.2% of the Company's total revenues.
After an initial term of approximately one to four years, contracts generally
can be terminated upon 60 to 180 days notice to the Company. Two of the three
largest contracts are up for renewal in fiscal 1997, and the third in fiscal
1998. The Company's contracts could also be subject to early termination by its
customers if the Company were not in compliance with any applicable government
regulation. The termination, non-renewal or renegotiation of any of such
agreements could have a material adverse effect on the Company's operating
results. See "Government Regulation."
Uncertainty of Future Operating Results. During fiscal 1994 the Company
incurred significant expenses related to the start-up of its PHA product,
including the hiring and training of personnel and the expansion
22
<PAGE>
of infrastructure and sales and marketing programs. Because revenues from PHA
were not sufficient to cover these start-up expenses, operating losses were
sustained in fiscal 1994 and the first quarter of fiscal 1995. The Company
returned to profitability in the second quarter of fiscal 1995 and achieved
increased profitability in each quarter thereafter as additional members were
enrolled in PHA. There can be no assurance that the Company's revenues and
profitability will continue to increase during fiscal 1997 and beyond. The
Company expects to record merger transaction and integration charges during the
first quarter of fiscal 1997. In addition, the Company will incur significantly
increased sales, marketing and promotional expenses during fiscal 1997, and may
devote additional resources to the further development of PHA or other new
products. To the extent that the Company incurs increased expenses, the
Company's operating results will be adversely affected unless revenues and
operating margins increase sufficiently to offset such expenditures. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
Competition. The market for the Company's products and services is highly and
increasingly competitive. There are a number of competitors that offer products
or services that compete with some or all of those offered by the Company.
Existing and potential clients may also evaluate the Company's products or
services against internally developed programs. Increased competition could
result in pricing pressure and margin erosion. In its existing business and as
the Company offers new products or services, or enters new markets, it may face
increased competition from competitors, some of which may have substantially
greater financial, marketing and technical resources than the Company. There can
be no assurance that the Company will continue to compete successfully. While
the Company cannot predict the effect of future competition, increased
competition would adversely impact the Company's revenues and rate of growth
and operating results, particularly if the Company encountered price
competition.
Changing Health Care Market and New Product Development. The health care
industry has undergone significant changes in recent years, and changes are
expected to continue. Containing health care costs has become a national
priority. As a result, the health care industry has become increasingly
dominated by managed health care plans, causing cost containment pressure to
rise. To address these changes, the Company shifted its business focus in 1993
to payors from providers and developed its personal health management services.
There is no assurance that the Company's existing products and services will
achieve continued success or that its new products and services will succeed.
There also can be no assurance that continued industry change will not adversely
affect the Company's ability to compete. Continued change may cause the Company
to incur significant product development and marketing expenses. The Company's
future success will depend on the Company's ability to adapt to the changing
needs of the health care industry.
Call Center Operations. After the completion of the merger with Informed Access,
the Company maintains member service and data centers ("call centers") in Rancho
Cordova, California; Chicago, Illinois; Broomfield, Colorado; and Phoenix,
Arizona. The Company's operations depend on the adequate functioning of the
computer and telephone systems in its call centers. Although the Company has
taken precautions to provide for power, computer, and telephone systems
redundancy, there can be no assurance that a fire or other disaster affecting
the centers or an equipment failure would not disable the Company's systems for
a significant period of time. Any significant damage to the Company's facilities
or an equipment failure could have a material adverse effect on the Company's
results of operations.
Management of Growth. The Company has experienced rapid growth in recent years.
Continued rapid growth may place a significant strain on the Company's
management, telecommunications systems,
23
<PAGE>
operational infrastructure, working capital and financial and management control
systems. In order for the Company to manage its client base successfully,
management will be required to anticipate the changing demands of their growing
operations and to adopt systems and procedures accordingly. Failure to
effectively implement or maintain such systems and controls could adversely
affect the Company's business, results of operation and financial condition.
Further, there can be no assurance that the Company's current information
systems, telecommunications systems and operational infrastructure will be
adequate for its future needs, or that Access Health will be successful in
implementing new systems. Failure to upgrade its information systems,
telecommunications systems and operational infrastructure or unexpected
difficulties encountered with these systems during expansion could adversely
affect the Company's business, financial condition and results of operations.
Acquisition-Related Risks. The Company has grown in substantial part through
mergers and acquisitions. The process of integrating an acquired company's
business into the Company's operations may result in unforeseen operating
difficulties and expenditures and may absorb significant management attention
that would otherwise be available for the ongoing development of the Company's
business. Moreover, there can be no assurance that the anticipated benefits of
an acquisition will be realized. The Company intends to evaluate acquisitions of
complementary product lines and businesses as part of its business strategy.
Future acquisitions by the Company may result in potentially dilutive issuances
of equity securities, the use of the Company's cash resources, the incurrence of
additional debt and increased goodwill, intangible assets and amortization
expense which could negatively impact the Company's profitability. In addition,
acquisitions involve numerous risks, including difficulties in the assimilation
of the operations and products of the acquired companies, the diversion of
management's attention from other business concerns, risks of entering markets
in which the Company has no or limited direct prior experience, and the
potential loss of key employees of the acquired company. The inability of the
Company's management to respond to changing business conditions effectively,
including the changes associated with its acquired businesses and product lines,
could have a material adverse effect on the Company's results of operations.
Uncertainties Relating to Integration of Operations. The Company recently
consummated the acquisition of Informed Access Systems, Inc. and Clinical
Reference Systems, Ltd. with the expectation that the mergers will result in
beneficial synergies for the combined companies. Achieving the anticipated
benefits of the mergers will depend in part upon whether the integration of the
two companies' businesses with the Company is achieved in an efficient,
effective and timely manner, and there can be no assurance that this will occur.
The successful combination of the two companies with Access Health will require,
among other things, the timely integration of the companies' respective product
and service offerings, coordination of their respective sales and marketing and
research and development efforts and integration of the companies' respective
telecommunications systems with Access Health. The difficulties of such
integration may be increased by the necessity of coordinating geographically
separated organizations. There can be no assurance that integration will be
accomplished smoothly, on time or successfully. Integrating the operations of
the two companies with Access Health could have a material adverse effect of
Access Health's business and future operating results. For example, the process
could: (i) interrupt Access Health's business resulting in lower revenues or
slower revenue growth and/or increased operating expenses or inability to obtain
synergies; (ii) divert management attention; (iii) place further pressure on
Access Health's officers; and (iv) result in additional administrative expense.
Failure to effectively accomplish the integration of the two companies'
operations with Access Health could have a material adverse effect on Access
Health's business, results of operations and financial condition.
24
<PAGE>
Key Employees and Management of Change. The Company's success depends on a
limited number of key management employees, none of whom is subject to post-
employment non-competition restrictions other than certain officers of Informed
Access. The loss of the services of one or more of these employees could have a
material adverse effect on the Company. The Company believes that its continued
success also will depend in large part on its ability to attract and retain
highly-skilled management, marketing, sales and nursing personnel. Competition
for such personnel is intense, and there can be no assurance that the Company
will be successful in attracting and retaining such personnel as necessary.
Furthermore, the Company's ability to manage change and growth successfully will
require the Company to continue to improve its management expertise as well as
its financial systems and controls.
Volatility of Stock Price. The Company believes that factors such as
announcements of developments related to the Company's business and operating
results, including the signing or loss of a major contract, changes in market
analyst estimates and recommendations for the Company's Common Stock, changes in
government regulation and general conditions in the health care industry and the
economy could cause the price of the Company's Common Stock to fluctuate,
perhaps substantially. In addition, in recent years stock prices have
experienced significant price fluctuations.
Government Regulation. The health care industry is subject to extensive and
evolving government regulation at both the Federal and state levels relating to
many aspects of the Company's and its clients' businesses in use of the
Company's programs, including the provision of health care services,
teleservicing, health care referral programs, and health maintenance
organizations and other similar plans. These statutes and regulations in many
cases predate the development of telephone-based health care information and
other interstate transmission and communication of medical information and
services. The literal language of certain of these statutes and regulations
governing the provision of health care services, including the practice of
nursing and the practice of medicine, could be construed by regulatory
authorities to apply to certain of the Company's activities, including without
limitation teleservicing activities which use California, Illinois, Arizona and
Colorado registered nurses to provide out-of-state personal health management
services such as nursing assessments and information regarding appropriate
sources of care and treatment time frames. These statutes and regulations could
also apply to certain activities of the Company's health service customers when
operating the Company's programs. The Company has not been made, nor is it aware
that any of its clients with respect to operation of the Company's programs, or
its nurse employees or any other organization providing out-of-state
teleservicing have ever been made, the subject of such requirements by a
regulatory authority. In addition, the literal language of the statutes and
regulations governing health maintenance organizations and other plans that
provide or arrange for the provision of health care services for a prepaid or
periodic charge could be construed by regulatory authorities to apply to certain
activities of the Company that are provided on a per-member, per-month basis.
The Company has not been made, nor is it aware that any other company providing
out-of-state teleservicing has ever been made, the subject of such requirements
by a regulatory authority. However, if regulators seek to enforce any of the
foregoing statutory and regulatory requirements, the Company, its employees
and/or its clients could be required to obtain additional licenses or
registrations, to modify or curtail the operation of the Company's programs, to
modify the method of payment for the Company's programs, or to pay fines or
incur other penalties.
The payment of remuneration to induce the referral of health care business has
been a subject of increasing governmental and regulatory focus in recent years.
Section 1128B(b) of the Social Security Act (sometimes referred to as the
"Federal anti-kickback statute") provides criminal penalties for individuals or
entities that knowingly and willfully offer, pay, solicit or receive
remuneration in order to induce referrals for items or services for which
payment may be made under the Medicare and Medicaid programs and certain other
government-funded programs. The Social Security Act provides authority to the
Office of the Inspector General through civil proceedings to exclude an
individual or entity from participation in the Medicare and state health
programs if it is determined any such party has violated Section 1128B(b) of the
Social Security Act. Regulations have been promulgated specifying certain
payment practices which will not be subject to criminal prosecution or civil
exclusion. These regulations, commonly referred to as the "safe harbor"
regulations, do not expand the scope of the Federal anti-kickback statute, and
the fact that a
25
<PAGE>
business arrangement does not fit within a safe harbor does not mean the
business arrangement violates the Federal anti-kickback statute. The Company's
programs do not meet the requirements of the safe harbor for referral services.
A number of states in which the Company operates have anti-kickback statutes
similar to the Federal statute as well as statutory and regulatory requirements
governing referral agencies and regulating franchising and business opportunity
ventures. In addition, the Federal government and a number of states have
enacted statutes which contain outright prohibitions on referrals for specified
services which are made by referring providers who have an ownership interest
in, or compensation arrangement with, the entity to which the referral is made.
If the Company or the use of its products and services were to be found in
violation of such statutes, the Company or its clients could be required to
modify or curtail the operation of the Company's programs, or to pay fines or
incur other penalties, and the Company's clients could be excluded from
participation in the Medicare and Medicaid programs and could be precluded from
charging fees and obtaining reimbursement for specified services.
There can be no assurance that the Company or the use of its products and
services will not be subject to review or challenge by government regulators
under any of the foregoing statutes and regulations that apply to health care
services and products. In addition, additional laws and regulations could be
enacted in the future that would regulate the Company or the use of its products
and services. Any government investigative or enforcement actions with respect
to the Company or the use of its products or services could generate adverse
publicity irrespective of the final outcome, and could have a material adverse
effect on the Company.
Risk Management. In recent years, participants in the health care industry,
including physicians, nurses and other health care professionals, have been
subject to an increasing number of lawsuits alleging malpractice, product
liability and related legal theories, many of which involve large claims and
significant defense costs. Due to the nature of its business, the Company could
become involved in litigation regarding the telephone information given by its
registered nurses or those of its licensees or the health care information
provided under the Company's other products and services with the risk of
adverse publicity, significant defense costs and substantial damage awards. The
Company has established policies and procedures that limit the information
provided by its registered nurses to that contained in its protocols and in
other approved reference sources. In connection with its teleservices
operations, the Company has a quality assurance program that includes real-time
audits of calls and post call reviews to monitor compliance with established
policies and procedures. Generally clients review and approve the Company's
protocols and guidelines prior to program implementation and do not modify them
without medical approval. To date, the Company has not been the subject of any
claim involving either its clinical assessment systems, the operation of its
teleservicing centers, or the operation by hospital clients of on-site call
centers or its other products and services. However, there can be no assurance
that claims will not be brought against the Company. Even if such claims
ultimately prove to be without merit, defending against them can be time
consuming and expensive, and any adverse publicity associated with such claims
could have a material adverse effect on the Company.
Intellectual Property. The Company regards its software, clinical nursing
assessment protocols and marketing and program operation materials as
proprietary and attempts to protect its intellectual property with copyrights,
trademarks, trade secret laws and restrictions on disclosure, copying and
transferring title. Despite these precautions, it may be possible for
unauthorized third parties to copy aspects of the Company's products or to
obtain and use information that the Company regards as proprietary. The Company
has no patents (other than held by Informed Access), and existing copyright laws
afford only limited practical protection. In addition, the laws of some foreign
countries do not protect the Company's proprietary rights to the same extent as
do the laws of the United States, which could be a factor if the Company expands
into markets outside the United States.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
26
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Access Health, Inc.
We have audited the accompanying consolidated balance sheets of Access Health,
Inc. as of September 30, 1995 and 1996, and the related consolidated statements
of operations, stockholders' equity, and cash flows for each of the three years
in the period ended September 30, 1996. Our audits also included the financial
statement schedule listed in the Index at Item 14(a)1. These financial
statements and schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Access
Health, Inc. at September 30, 1995 and 1996, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
September 30, 1996, in conformity with generally accepted accounting principles.
Also, in our opinion, the related financial statement schedule, when considered
in relation to the basic financial statements taken as a whole, presents fairly
in all material respects the information set forth therein.
Sacramento, California ERNST & YOUNG LLP
October 31, 1996,
except for Note 8
as to which the date
is November 18, 1996
27
<PAGE>
Access Health, Inc.
Consolidated Balance Sheets
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
September 30,
----------------------
1995 1996
----------- ----------
<S> <C> <C>
Assets:
Current assets:
Cash and equivalents.................. $ 6,523 $25,655
Available-for-sale securities......... 5,172 14,126
Accounts receivable, net of allowance
for doubtful accounts of $528 ($400
at September 30, 1995)............... 4,227 10,003
Licenses receivable, net of allowance
for doubtful accounts of $150 ($100
at September 30, 1995)............... 1,525 786
Income taxes receivable............... 84 1,917
Prepaid expenses...................... 914 1,775
Other current assets.................. 499 1,065
------- -------
Total current assets................. 18,944 55,327
Licenses receivable due after one year. 782 165
Property and equipment, net............ 6,571 14,469
Purchased intangibles, net of
accumulated amortization of $4,327
($3,735 at September 30, 1995)........ 4,070 3,478
Investment in AHN...................... - 5,000
Other assets........................... 762 392
------- -------
$31,129 $78,831
======= =======
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable...................... $ 2,127 $ 3,375
Accrued payroll and related expenses.. 1,737 2,944
Other accrued expenses................ 1,122 4,348
Current portion of long-term debt..... 292 -
Deferred revenues..................... 2,473 3,068
Deferred income taxes................. 950 665
------- -------
Total current liabilities............ 8,701 14,400
Long-term debt......................... 398 -
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.001 par value-
5,000,000 shares authorized, no
shares issued and outstanding........ - -
Common stock, $.001 par
value-30,000,000 shares authorized,
12,595,824 shares issued and
outstanding (10,217,665 at September
30, 1995)............................ 10 13
Additional paid-in capital............ 19,429 53,702
Retained earnings..................... 2,591 10,716
------- -------
Total stockholders' equity........... 22,030 64,431
------- -------
$31,129 $78,831
======= =======
</TABLE>
See accompanying notes.
28
<PAGE>
Access Health, Inc.
Consolidated Statements of Operations
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Years ended September 30,
-----------------------------------
1994 1995 1996
------------ ---------- ---------
<S> <C> <C> <C>
Revenues:
Personal health management services.... $ 2,912 $20,207 $52,026
Health systems services................ 13,443 11,346 10,047
------- ------- -------
Total commercial revenues.......... 16,355 31,553 62,073
Development program with related party. 2,274 - -
------- ------- -------
Total revenues........................ 18,629 31,553 62,073
Costs and expenses:
Cost of revenues:
Personal health management services... 3,493 13,214 26,349
Health systems services............... 9,248 7,498 6,773
Product and other development.......... 1,085 1,708 3,841
Development program.................... 2,541 - -
Sales and marketing.................... 3,767 3,651 6,766
General and administrative............. 2,602 3,456 6,255
------- ------- -------
Total costs and expenses.............. 22,736 29,527 49,984
------- ------- -------
Income (loss) from operations........... (4,107) 2,026 12,089
Non-operating income (expense):
Interest and other income.............. 612 661 1,490
Interest expense....................... (153) (91) (37)
------- ------- -------
Income (loss) before income taxes....... (3,648) 2,596 13,542
Provision (credit) for income taxes..... (1,352) 1,056 5,417
------- ------- -------
Net income (loss)....................... $(2,296) $ 1,540 $ 8,125
======= ======= =======
Net income (loss) per share............. $(0.24) $0.14 $0.61
======= ======= =======
Shares used in per share calculations... 9,456 11,145 13,340
======= ======= =======
</TABLE>
See accompanying notes.
29
<PAGE>
Access Health, Inc.
Consolidated Statements of Stockholders' Equity
Years Ended September 30, 1994, 1995 and 1996
(In thousands, except share amounts)
<TABLE>
<CAPTION>
Common Stock Additional Stockholder Total
---------------------- Paid-in Retained Notes Stockholders'
Shares Amount Capital Earnings Receivable Equity
------------ --------- ----------- --------------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Balance, September 30, 1993........ 9,119,760 $ 9 $14,332 $ 3,347 $(9) $17,679
Sale of common stock.............. 198,975 - 570 - - 570
Issuance of common stock to
purchase product................. 679,090 1 3,513 - - 3,514
Net loss.......................... - - - (2,296) - (2,296)
---------- --- ------- ------- --- -------
Balance, September 30, 1994........ 9,997,825 10 18,415 1,051 (9) 19,467
Sale of common stock.............. 219,840 - 664 - - 664
Repayment of stockholder note
receivable....................... - - - - 9 9
Income tax benefit from exercise
of stock options................. - - 350 - - 350
Net income........................ - - - 1,540 - 1,540
---------- --- ------- ------- --- -------
Balance, September 30, 1995........ 10,217,665 10 19,429 2,591 - 22,030
Sale of common stock in
secondary public offering........ 1,500,000 2 29,503 - - 29,505
Sale of common stock upon
exercise of warrants and options. 878,159 1 2,279 - - 2,280
Income tax benefit from exercise
of stock options................. - - 2,491 - - 2,491
Net income........................ - - - 8,125 - 8,125
---------- --- ------- ------- --- -------
Balance, September 30, 1996........
12,595,824 $13 $53,702 $10,716 $ - $64,431
========== === ======= ======= === =======
</TABLE>
See accompanying notes.
30
<PAGE>
Access Health, Inc.
Consolidated Statements of Cash Flows
Increase (Decrease) in Cash and Equivalents
(In thousands)
<TABLE>
<CAPTION>
Years ended September 30,
----------------------------------
1994 1995 1996
------------ ---------- ----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)...................... $(2,296) $ 1,540 $ 8,125
Adjustments to reconcile net income
(loss) to cash provided by operations:
Allowance for doubtful accounts....... (62) 253 178
Depreciation and amortization......... 1,441 1,863 3,639
Deferred income taxes................. 166 1,115 (285)
Changes in:
Accounts and licenses receivable..... 1,540 (615) (4,598)
Income taxes receivable.............. (1,614) 1,530 658
Prepaid expenses and other current
assets.............................. 495 (141) (1,427)
Accounts payable..................... 604 748 1,248
Accrued payroll and related expenses. (261) 1,100 1,207
Other accrued expenses............... 563 322 3,226
Deferred revenues.................... (259) 105 595
------- ------ -------
Net cash provided by operating
activities........................ 317 7,820 12,566
------- ------ -------
Cash flows from investing activities:
Purchases of available-for-sale
securities............................ (4,009) (6,919) (33,259)
Maturities of available-for-sale
securities............................ 1,500 4,256 24,305
Purchase of property and equipment..... (1,059) (4,596) (10,945)
Investment in AHN...................... - - (5,000)
(Increase) decrease in other assets.... (476) (36) 370
------- ------ -------
Net cash used by investing
activities........................ (4,044) (7,295) (24,529)
------- ------ -------
Cash flows from financing activities:
Payment of long-term debt.............. (767) (349) (690)
Payment of stockholder note receivable. - 9 -
Sale of common stock................... 570 664 31,785
------- ------ -------
Net cash provided (used) by
financing activities.............. (197) 324 31,095
------- ------ -------
Net increase (decrease) in cash and
equivalents............................ (3,924) 849 19,132
Cash and equivalents at beginning of
year................................... 9,598 5,674 6,523
------- ------ -------
Cash and equivalents at end of year..... $ 5,674 $ 6,523 $25,655
======= ======= =======
</TABLE>
See accompanying notes.
31
<PAGE>
ACCESS HEALTH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1996
Note 1: Summary of Significant Accounting Policies
Organization, Business and Principles of Consolidation
These financial statements include the accounts of Access Health, Inc.
and its wholly-owned subsidiaries. The consolidated entity is referred to herein
as the Company. All intercompany accounts and transactions have been eliminated
in consolidation.
The Company develops, markets and supports personal health management
programs which help managed care organizations, self-insured employers and
hospitals manage consumer demand for health care services.
Revenue Recognition
Commercial revenues include personal health management services, which
consist of program membership and member communications fees from the Company's
Personal Health Advisor contracts with managed care organizations, self-insured
employers and hospitals. Commercial revenues also include health systems
services, which consist of licensing and support revenues related to the
Company's ASK-A-NURSE, Cancer HELPLINK, Access Care Management System, and LIFE
MATCH products.
Program membership fees from Personal Health Advisor contracts are
recognized ratably in accordance with contract terms on the basis of per-member
fees. Member communications fees are recognized upon the delivery of services.
During fiscal 1994 and 1995, health system services license revenues
from ASK-A-NURSE and Cancer HELPLINK were recognized when program implementation
services were substantially completed and, effective at the beginning of fiscal
1996, are recognized ratably over the term of the contract. This modification
resulted from changes in the terms of the Company's contracts with customers and
had no material impact on the Company's consolidated financial statements.
Revenues from ASK-A-NURSE and Cancer HELPLINK include the present value of
contract installments, discounted at the prime rate (which ranged from 6% to 9%
for the periods presented), plus 3%, that are billable more than one year after
the license grant date. Licenses receivable due are $936,394, $84,623, $14,908
and $65,841 for 1997, 1998, 1999 and thereafter, respectively. LIFE MATCH
software product licensing revenue is recognized partially upon delivery of the
software, with the remainder deferred until installation and training services
are complete.
Health system services support revenues are comprised of ASK-A-NURSE
and Cancer HELPLINK support revenue, LIFE MATCH software support revenue, direct
marketing fees and teleservicing fees. Revenue from support contracts and
software maintenance contracts is deferred when billed and recognized ratably
over the contract term. Direct marketing fees are recognized upon the delivery
of services. Teleservicing fees are recognized in accordance with contract terms
on the basis of per-call fees or fees based on phone counselor staffing.
In fiscal 1993, the Company entered into a development agreement which
provided for the funding of specified development projects. Development program
revenue was recognized pro rata as costs were incurred under the related
agreement.
32
<PAGE>
Cash Equivalents and Available-For-Sale Securities
The Company invests its excess cash in high quality money market
instruments and certain other investments. The Company considers highly liquid
investments with maturities of three months or less to be cash equivalents.
Available-for-sale securities are carried at amortized cost which approximated
fair value as of September 30, 1996 and 1995 and are available to fund current
operations.
Property and Equipment
Property and equipment are stated at cost and consist of office
furniture and equipment, computer equipment, leasehold improvements and computer
software for internal use. Depreciation and amortization of furniture and
equipment, computer equipment and leasehold improvements are provided on the
straight-line basis over the useful lives of the respective assets or the lease
term if shorter, which range from two to ten years. Computer software consists
of the direct cost of internally-developed software and purchased software and
is being amortized on the straight-line basis over an estimated useful life of
four years.
Purchased Intangibles
Purchased intangibles consist primarily of product rights and are
being amortized on the straight line basis over three to ten years.
Investment in AHN
In April, 1996, the Company invested $5.0 million in America's Health
Network, L. P. ("AHN"), a new 24-hour 7 days a week cable television channel
devoted to consumer health care information. The Company is a limited partner in
AHN and the investment in AHN is accounted for using the cost method.
Concentrations of Credit Risk and Major Customers
During fiscal 1996, sales to each of the Company's three largest
customers were $10,446,000, $7,427,000 and $7,184,000, respectively. During
fiscal 1995, sales to each of the Company's three largest customers were
$6,438,000, $4,077,000 and $3,624,000.
The Company's accounts and licenses receivable are primarily with
companies in the health care and insurance industries. The Company believes that
adequate provision for uncollectible accounts and licenses receivable has been
made in the accompanying financial statements.
Stock Split
On February 15, 1996, the Company effected a three-for-two stock
split. All references in the accompanying financial statements to the number of
capital shares and per-share amounts have been retroactively restated to reflect
the stock split.
Net Income (Loss) per Share
The Company's net income (loss) per share is based upon the weighted
average number of shares of common stock outstanding. Common stock issuable upon
the exercise of stock options and stock warrants has been included in the
computation, to the extent dilutive, using the treasury stock method.
33
<PAGE>
Income Taxes
Deferred income tax assets and liabilities are determined based on
differences between the financial reporting and tax bases of assets and
liabilities and are measured using the currently enacted tax rates and laws that
are scheduled to be in effect when the differences are expected to reverse.
Stock Issued To Employees
The Company accounts for its stock option plans and its employee stock
purchase plan in accordance with the provisions of the Accounting Principles
Board's Opinion No. 25 "Accounting for Stock Issued to Employees" ("APB 25").
In 1995, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 123, "Accounting for Stock Based Compensation" ("SFAS
123"). SFAS 123 provides an alternative to APB 25 and is effective for fiscal
years beginning after December 15, 1995. The Company expects to continue to
account for its stock plans in accordance with APB 25. Accordingly, SFAS 123 is
not expected to have any material impact on the Company's financial position or
results of operations.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principals requires management to make estimates and
assumptions. These estimates may affect the reported amounts of assets and
liabilities, disclosure of contingent assets and liabilities at the date of the
financial statements, and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
Statement of Financial Accounting Standards No. 121
In March 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of"
("SFAS No. 121"), which requires impairment losses to be recorded on long-lived
assets used in operations when indicators of impairment are present and the
undiscounted cash flows estimated to be generated by those assets are less than
the assets' carrying amount. SFAS No. 121 also addresses the accounting for
long-lived assets that are expected to be disposed of. The Company will adopt
SFAS No. 121 in the first quarter of fiscal 1997 and, based on current
circumstances, management believes the effect of adoption will not be material
to the Company's consolidated financial position or results of operations.
Reclassifications
Certain reclassifications have been made to amounts reported as of and
for the years ended September 30, 1994 and 1995 to conform with the September
30, 1996 presentation.
34
<PAGE>
Note 2: Available-for-Sale Securities
The following is a summary of available-for-sale securities as of September
30, 1995 and 1996 (in thousands):
<TABLE>
<CAPTION>
1995 1996
----------------------
<S> <C> <C>
U.S. government and municipal debt $ 5,172 $ 23,789
securities.............................
Corporate debt securities............... 525 6,451
Corporate and municipal bond funds...... 2,500 9,526
------- --------
Total debt securities.................. 8,197 39,766
Less: amounts included in cash and
equivalents............................ (3,025) (25,640)
------- --------
$ 5,172 $ 14,126
======= ========
</TABLE>
Realized and unrealized gains and losses on available-for-sale securities
were immaterial as of and for the years ended September 30, 1995 and 1996.
The amortized cost of debt securities at September 30, 1996, by contractual
maturity, are shown below (in thousands). Expected maturities will differ from
contractual maturities.
<TABLE>
<S> <C>
Less than 1 year......... $33,572
1 to 5 years............. 6,194
-------
Total debt securities... $39,766
=======
</TABLE>
Note 3: Property and Equipment
As of September 30, 1995 and 1996, property and equipment consisted of the
following (in thousands):
<TABLE>
<CAPTION>
1995 1996
-------- --------
<S> <C> <C>
Computer equipment............... $ 6,477 $14,753
Office furniture and equipment... 1,761 2,946
Computer software................ 767 1,835
Leasehold improvements........... 790 1,206
------- -------
9,795 20,740
Less: accumulated depreciation... (3,224) (6,271)
------- -------
$ 6,571 $14,469
======= =======
</TABLE>
Note 4: Long-Term Debt
As of September 30, 1995, long-term debt consisted primarily of an
installment note payable to a bank bearing interest at 7.36%, requiring monthly
principal and interest payments of $21,502 through March, 1998.
Interest paid during the years ended September 30, 1994, 1995 and 1996 was
$181,907, $91,393 and $29,014, respectively.
35
<PAGE>
In May 1996, the Company signed a revolving credit agreement (the "Credit
Agreement") with a bank under which the Company may borrow up to $3 million for
qualifying equipment purchases. Interest on borrowings under the Credit
Agreement accrues at the bank's prime rate plus 0.50% (aggregating 8.75% as of
September 30, 1996) and is payable monthly. The Credit Agreement expires on May
1, 1997, at which time any outstanding balance will be due and payable. The
Credit Agreement contains restrictive financial covenants which require the
Company to maintain specified levels of tangible net worth and maintain
specified minimum debt and earnings before interest and local taxes ratios.
Borrowings under the Credit Agreement would be unsecured. The Company has no
balances outstanding under the Credit Agreement at September 30, 1996.
Note 5: Income Taxes
The provision (credit) for income taxes consists of the following (in
thousands):
<TABLE>
<CAPTION>
1994 1995 1996
----------- -------- --------
<S> <C> <C> <C>
Federal:
Current............................ $(1,518) $ 40 $4,461
Deferred (prepaid)................. 266 781 (669)
------- ------ ------
Total federal...................... (1,252) 821 3,792
State:
Current............................ - 6 1,591
Deferred (prepaid)................. (100) 229 34
------- ------ ------
Total state........................ (100) 235 1,625
------- ------ ------
Provision (credit) for income taxes... $(1,352) $1,056 $5,417
======= ====== ======
</TABLE>
The income tax provisions differ from the amount computed by applying the
federal statutory income tax rate (34% in each year presented) to income (loss)
before income taxes. A reconciliation to the statutory federal income tax rate
is as follows:
<TABLE>
<CAPTION>
1994 1995 1996
--------- ------- ------
<S> <C> <C> <C>
Statutory federal income tax rate....... (34%) 34% 35%
State income taxes, net of federal
benefit................................ (2) 6 7
Tax exempt interest income.............. (3) - (2)
Other................................... 2 1 -
--- -- --
Effective income tax rate............... (37%) 41% 40%
=== == ==
</TABLE>
36
<PAGE>
Significant components of the Company's deferred income tax assets and
liabilities at September 30, 1995 and 1996 are as follows (in thousands):
<TABLE>
<CAPTION>
1995 1996
------------------
<S> <C> <C>
Deferred income tax liabilities:
Depreciation and amortization.......... $ 331 $1,080
Prepaid expenses....................... 2,550 2,354
------ ------
Total deferred income tax liabilities... 2,881 3,434
Deferred income tax assets:
Amortization........................... - 954
Vacation accrual....................... 191 297
Accrued expenses....................... 271 784
State income taxes..................... 61 386
Receivable allowances and reserves..... 213 288
Alternative minimum tax credit......... 129 -
Net operating loss..................... 623 -
Stock compensation..................... 350 -
Other.................................. 93 60
------ ------
Total deferred income tax assets........ 1,931 2,769
------ ------
Net deferred income tax liability....... $ 950 $ 665
====== ======
</TABLE>
Income tax payments were $70,149, $49,715 and $4,908,900 for the years
ended September 30, 1994, 1995 and 1996, respectively. The Company received
income tax refunds of $426,564 and $1,629,658 during the years ended September
30, 1994 and 1995, respectively.
The Company's income tax returns for fiscal years ended September 30, 1989,
1990 and 1994 are currently under examination by the Internal Revenue Service
(the "IRS"). The IRS is examining the deductibility of certain expenses claimed
in connection with prior acquisitions by the Company. Subsequent to September
30, 1996, the Company reached a partial settlement with the IRS for certain
deductions related to fiscal years 1989 and 1990. As a result of the partial
settlement, the Company had no additional income tax expense. With respect to
the remaining deductions under examination, the Company believes that these
deductions were properly taken and that adequate provision has been made in the
statements of operations for taxes owed.
Note 6: Commitments
Operating Leases
The Company leases its offices under the terms of operating leases that
expire between September 1998 and November 2001. Annual minimum rental payments
for fiscal 1997, 1998, 1999, 2000, 2001 and thereafter are $1,729,535,
$1,738,036, $1,507,863, $1,391,709, $1,393,816 and $117,812, respectively.
Rental expenses are recorded on a straight-line basis over the respective lease
terms and were $1,080,980, $1,292,539 and $1,370,019 for the years ended
September 30, 1994, 1995 and 1996, respectively.
37
<PAGE>
Note 7: Stockholders' Equity
Common Stock
In December, 1995, the Company completed a secondary public offering of its
common stock. A total of approximately 4.8 million shares were sold at $21.33
per share of which 1.5 million shares were sold by the Company and approximately
3.3 million shares were sold by the Company's original venture capital
stockholders who are now fully divested. Net proceeds to the Company from the
offering were approximately $29.5 million.
Employee Stock Options
The Company established an employee common stock participation plan in 1989
(the "1989 Incentive Stock Plan") under which incentive stock options,
nonqualified stock options, and restricted common stock may be issued or sold to
employees and consultants. As of September 30, 1996 a total of 2,550,000 shares
of common stock have been reserved for issuance under this plan, of which 32,065
shares remained available for the granting of options at September 30, 1996.
The following table summarizes incentive stock option activity for the
years ended September 30, 1994, 1995 and 1996.
<TABLE>
<CAPTION>
Number of Exercise Price
Shares Per Share
------------- ---------------
<S> <C> <C>
Balance, September 30, 1993... 895,242 $ 0.167-6.833
Options granted............ 367,605 5.33-8.83
Options exercised.......... (54,495) 0.167-5.42
Options cancelled.......... (33,285) 1.333-5.42
---------
Balance, September 30, 1994... 1,175,067 0.167-8.83
Options granted............ 259,365 10.25-13.75
Options exercised.......... (102,975) 0.167-6.917
Options cancelled.......... (17,475) 0.167-10.25
---------
Balance, September 30, 1995... 1,313,982 0.167-13.75
Options granted............ 1,141,470 15.333-62.50
Options exercised.......... (421,499) 0.167-13.75
Options cancelled.......... (208,786) 1.333-62.50
---------
Balance, September 30, 1996... 1,825,167 0.167-60.75
=========
</TABLE>
Incentive stock options generally become exercisable at the rate of twenty
percent per year commencing on the first anniversary of the date of grant,
however certain officers of the Company may exercise options for restricted
common stock at the date of grant. As of September 30, 1995 and 1996, options to
purchase 510,498 shares at exercise prices ranging from $0.167 to $12.67 per
share and 330,221 shares at exercise prices ranging from $0.167 to $12.42 per
share, respectively, were exercisable.
38
<PAGE>
Common Stock Warrants and Options
In August, 1993, the Company issued warrants to purchase 525,000 shares of
the Company's common stock. The warrants became exercisable in January 1994 and
356,916 shares of common stock were issued upon the cashless exercise of all
warrants in December, 1995.
In October 1988, nonqualified stock options to purchase 98,974 shares of
Series A Preferred Stock at $0.46 per share, which converted to common stock
options on February 28, 1992, were granted to a former director. As of September
30, 1996, 96,617 shares of common stock have been issued pursuant to this
option.
Nonqualified stock options to purchase 22,500 shares of common stock at
prices ranging from $4.167 to $6.667 per share were granted in fiscal 1993 to
certain consultants of the Company. The options become exercisable in equal
installments over a five-year period commencing on the first anniversary of the
date of grant; as of September 30, 1996, 13,500 shares of common stock have been
purchased pursuant to these options and none of the remaining 9,000 shares are
exercisable.
In May, 1996, the Company granted 2,000 shares of restricted stock to an
officer. The Company retained the right to repurchase, at the market price on
the date of grant ($50.625 per share), all of the shares if the officer leaves
the Company during the first year after the grant date and half of the shares if
the officer leaves the Company during the second year after the grant date.
During 1996, the Company granted nonqualified stock options to purchase
230,000 shares of common stock at $50.625 per share to a newly-hired officer.
The options become exercisable in equal installments over a five-year period
commencing on the first anniversary of the date of grant; as of September 30,
1996 none of these options is exercisable.
Stock Purchase Plan
The Company established a stock purchase plan in 1991 (the "1991 Plan")
under which most employees of the Company may participate. A total of 825,000
shares of the Company's common stock have been reserved for issuance under the
1991 Plan. The 1991 Plan is administered by a committee appointed by the Board
of Directors. Employees can elect to have from 1% to 10% of their monthly gross
salary deducted during each offering period and applied to the purchase of
stock. The purchase price is an amount equal to 85% of the fair market value of
a share of common stock of the Company on the enrollment date or on the purchase
date, whichever is lower. During the years ended September 30, 1994, 1995 and
1996, the Company sold 96,320 shares of common stock for $410,553, 48,548 shares
of common stock for $468,710 and 41,659 shares of common stock for $753,146,
respectively.
Director Options
The Company established a director common stock participation plan in 1995
(the "1995 Director Stock Option Plan") under which nonqualified stock options
may be granted to directors. As of September 30, 1996 a total of 150,000 shares
of common stock have been reserved for issuance under this plan, of which
116,250 shares remained available for the granting of options at September 30,
1996. As of September 30, 1996, options to purchase 33,750 shares were granted
and 16,558 shares were exercisable at prices ranging from $10.25 to $54.25 per
share.
39
<PAGE>
Note 8: Subsequent Event
During November 1996, the Company completed mergers with Informed Access
Systems ("Informed Access"), in exchange for 5,375,000 shares of Access Health,
Inc. common stock (including 4,778,317 shares issued to Informed Access
shareholders and 596,683 shares reserved for future grant to Informed Access
option holders) and Clinical Reference Systems, LTD ("CRS"), in exchange for
170,000 shares of Access Health, Inc. common stock. Both transactions were
accounted for as pooling-of-interests.
Unaudited proforma combined results of operations giving effect to certain
adjustments as if the Informed Access and CRS transactions had occurred on
October 1, 1993 are displayed in the following table (in thousands, except per
share amounts). These unaudited proforma combined results have been prepared for
comparative purposes only and do not purport to be indicative of the results of
operations which actually would have resulted had the transactions been
completed on October 1, 1993 or which may result in the future.
<TABLE>
<CAPTION>
Years ended
September 30,
-------------------------
1994 1995 1996
--------- ------- ------
<S> <C> <C> <C>
Revenues...................... $19,864 $36,010 $72,105
Net income (loss)............. $(3,729) $(545) $4,150
Net income (loss) per share... $(0.30) $(0.04) $0.22
</TABLE>
40
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Reference is made to the information regarding Directors and Executive
Officers appearing under the heading "Election of Directors" in the Registrant's
proxy statement for the annual meeting of stockholders to be held on March 26,
1997, which information is hereby incorporated by reference.
ITEM 11. EXECUTIVE COMPENSATION
Reference is made to the information regarding executive compensation
appearing under the heading "Executive Compensation and Other Matters" in the
Registrant's proxy statement for the annual meeting of stockholders to be held
on March 26, 1997, which information is hereby incorporated by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Reference is made to the information regarding security ownership appearing
under the heading "Record Date and Principal Share Ownership" in the
Registrant's proxy statement for the annual meeting of stockholders to be held
on March 26, 1997, which information is hereby incorporated by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Not applicable.
41
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Financial Statements and Schedules
The financial statements as set forth under Item 8 of this report on Form
10-K are included.
1. Financial Statement Schedules. The following consolidated financial
statement schedule of Access Health, Inc. for each of the three years ended
September 30, 1996 is filed as part of this Report and should be read in
conjunction with the consolidated financial statements:
<TABLE>
<CAPTION>
Description Page No.
----------- --------
<S> <C>
Schedule II Valuation and Qualifying Accounts.................... S-1
</TABLE>
Schedules not listed above have been omitted because they are not
applicable or are not required or the information required to be set forth
therein is included in the consolidated financial statements or notes thereto.
(b) Reports on Form 8-K
The Registrant filed a report on Form 8-K on November 27, 1996.
(c) Exhibits.
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- ------- -----------
<C> <S> <C>
2.1 (J) Conformed Agreement and Plan of Reorganization by and among the Registrant, Access
Acquisition Corp. and Informed Access Systems, Inc. dated as of September 3, 1996
3.1 Amended and Restated Certificate of Incorporation
3.2 Amended and Restated Bylaws
4.1 Specimen Stock Certificate
4.2 (A) Registration Rights Agreement dated June 26, 1990 between Registrant and certain parties
named therein
4.3 Shareholder's Representation Statement and Registration Rights Agreement dated as of
November 25, 1996 between Registrant and various investors
4.4 Registration Rights Agreement dated November 18, 1996
10.1 (K) Registrant's 1989 Incentive Stock Plan (as amended)
10.2 (H) Registrant's 1991 Employee Stock Purchase Plan (as amended)
10.3 (A) Lease dated April 10, 1991 for Registrant's office equipment at 11020 White Rock Road,
Rancho Cordova, California and 104 Wilmot Road, Deerfield, Illinois
10.4 (B) Lease dated June 15, 1992 for Registrant's facilities at 11020 White Rock Road, Rancho
Cordova, California
10.5 (B) Form of Note and Security Agreement for Registrant's office equipment at 11020 White
Rock Road, Rancho Cordova, California
10.6 (B) Lease dated February 19, 1992 for Registrant's office equipment at 11020 White Rock Road,
Rancho Cordova, California and 104 Wilmot Road, Deerfield, Illinois
10.7 (A) Sale and Installation Agreement dated November 16, 1990 between Registrant and
Aspect Telecommunications Corporation
10.8 (B) Lease dated May 5, 1992 for Registrant's office equipment at 11020 White Rock Road,
Rancho Cordova, California and 104 Wilmot Road, Deerfield, Illinois
10.9 Form of Director and Officer Indemnification Agreement
10.10 (C) Equipment Financing Agreement for Registrant's office and computer equipment at
11020 White Rock Road, Rancho Cordova, California and 3060 Salt Creek Lane,
Arlington Heights, Illinois
10.11 (E) First Amendment to Lease dated August 6, 1993 for Registrant's facility at 11020
White Rock Road, Rancho Cordova, California
10.12 (E) Lease dated August 13, 1993 for Registrant's facility at 3060 Salt Creek Lane,
Arlington Heights, Illinois
10.13 (E) Lease dated November 1, 1993 for Registrant's facility at 2510 W. Dunlap Drive,
Phoenix, Arizona
10.14 (D) Common Stock Purchase Option Agreement
</TABLE>
42
<PAGE>
<TABLE>
<C> <S> <C>
10.15 (H) Registrant's 1995 Director Option Plan
10.16 (L) Registrant's 1996 Supplemental Stock Plan
10.17 (G) Employment Agreement with Jeremy J. Nobel, MD
10.18+ (I) Amended and Restated Agreement of Limited Partnership of AHN
10.19+ (I) Admission Agreement dated April 15, 1996
10.20+ (I) Partnership Interest Option Agreement dated April 15, 1996
10.21 (I) Line of Credit Note dated May 7, 1996
10.24 Employment Agreement with Thomas E. Gardner dated December 1, 1996
11.1 Statement re: Computation of Per Share Earnings
21.1 Listing of Subsidiaries of Registrant
23.1 Consent of Independent Auditors
</TABLE>
(A) Incorporated by reference to Registrant's Form S-1 Registration No.
33-44604.
(B) Incorporated by reference to Registrant's Form 10K for the year ended
September 30, 1992.
(C) Incorporated by reference to Registrant's Form 10Q for the quarter
ended March 31, 1993.
(D) Incorporated by reference to Registrant's Form 10Q for the quarter
ended June 30, 1993.
(E) Incorporated by reference to Registrant's Form 10K for the year ended
September 30, 1993.
(F) Incorporated by reference to Registrant's Form 10K for the year ended
September 30, 1995.
(G) Incorporated by reference to Registrant's Form 10K/A for the year
ended September 30, 1995.
(H) Incorporated by reference to Registrant's Form 10Q for the quarter
ended December 31, 1995.
(I) Incorporated by reference to Registrant's Form 10Q for the quarter
ended June 30, 1996.
(J) Incorporated by reference to Registrant's Registration Statement on
Form S-4 (No. 333-13931).
(K) Incorporated by reference to Registrant's Registration Statement on
Form S-8 (No. 333-04662).
(L) Incorporated by reference to Registrant's Registration Statement on
Form S-8 (No. 333-18163).
+ -- Confidential treatment sought for portions of document
43
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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, in Rancho Cordova,
State of California, on the 22nd day of December, 1996.
ACCESS HEALTH, INC.
By: /s/ Thomas E. Gardner
----------------------
Thomas E. Gardner
President, Chief Executive Officer and Director
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Thomas E. Gardner and John V. Crisan, and
each of them, his attorneys-in-fact, and agents, each with the power of
substitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments to this Report on Form 10-K, and all
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and conforming all
that said attorneys-in-fact and agents of any of them, or his or their
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
44
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons in the capacities and on
the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
/s/ Thomas E. Gardner President, Chief Executive Officer and Director December 22, 1996
- --------------------------
Thomas E. Gardner
/s/ John V. Crisan Senior Vice President of Finance and December 22, 1996
- -------------------------- Administration and Chief Financial Officer
John V. Crisan
/s/ John R. Durant Director December 22, 1996
- --------------------------
John R. Durant
/s/ Kinney L. Johnson Director December 22, 1996
- --------------------------
Kinney L. Johnson
/s/ Alice H. Lusk Director December 22, 1996
- --------------------------
Alice H. Lusk
/s/ Richard C. Miller Director December 22, 1996
- --------------------------
Richard C. Miller
/s/ Kenneth B. Plumlee Director December 22, 1996
- --------------------------
Kenneth B. Plumlee
/s/ Brent T. Rider Director December 22, 1996
- --------------------------
Brent T. Rider
/s/ Edward K. Rygiel Director December 22, 1996
- --------------------------
Edward K. Rygiel
/s/ Joseph P. Tallman Director December 22, 1996
- --------------------------
Joseph P. Tallman
/s/ Frank G. Washington Director December 22, 1996
- --------------------------
Frank G. Washington
</TABLE>
45
<PAGE>
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
ACCESS HEALTH, INC.
YEARS ENDED SEPTEMBER 30, 1994, 1995 AND 1996
<TABLE>
<CAPTION>
Col. A Col. B Col. C Col. D Col. E
- --------------------------------------------------------------------------------------------------------------
Additions
-----------------------
Balance (1) (2)
At Charged Charged
Beginning To Costs To Other Balance
of and Accounts Deductions At End of
Description Period Expenses -Describe -Describe Period
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Year ended September 30, 1994:
Deducted from asset account:
Allowance for doubtful accounts $308,987 $ 24,721 $ - $ 86,317 (a) $247,391
Year ended September 30, 1995:
Deducted from asset account:
Allowance for doubtful accounts 247,391 151,000 130,082 (b) 28,292 (a) 500,181
Year ended September 30, 1996:
Deducted from asset account:
Allowance for doubtful accounts 500,181 285,000 120,000 (b) 226,797 (a) 678,384
</TABLE>
(a) Represent accounts written off
(b) Represent additions charged to revenues related to estimated
enrollee usage adjustments.
46
<PAGE>
EXHIBIT 3.1
-----------
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
ACCESS HEALTH, INC.
Access Health, Inc., a Delaware corporation, hereby certifies that:
1. The name of the Corporation is Access Health, Inc. The original
Certificate of Incorporation was filed with the office of the Secretary of State
of the State of Delaware on July 6, 1990. The name under which the Corporation
was originally incorporated was "Access Health Marketing, Inc."
2. This Amended and Restated Certificate of Incorporation restates and
integrates and further amends the provisions of the Certificate Incorporation of
the Corporation.
3. This Amended and Restated Certificate of Incorporation has been duly
approved and adopted by the Board of Directors and the stockholders of the
Corporation in accordance with Sections 242 and 245 of the Delaware General
Corporation Law.
4. Pursuant to Sections 242 and 245 of the General Corporation Law of the
State of Delaware, the Certificate of Incorporation of this Corporation, as
heretofore amended and supplemented, is hereby amended and restated to read in
its entirety as follows:
" I
The name of the Corporation is Access Health, Inc. (the "Corporation").
II
The address of the Corporation's registered office in the State of Delaware
is Corporation Trust Center, 1209 Orange Street, in the City of Wilmington,
County of New Castle, zip code 19801. The name of its registered agent at such
address is The Corporation Trust Company.
III
The purpose of the Corporation is to engage in any lawful act or activity
for which corporations may be organized under the General Corporation Law of
Delaware.
IV
This Corporation is authorized to issue two classes of shares, designated
"Common Stock", $.001 par value, and "Preferred Stock", $.001 par value. The
total number of shares which this Corporation is authorized to issue is
80,000,000. The number of shares of Preferred Stock which this Corporation is
authorized to issue is 5,000,000. The number of shares of Common Stock which
this Corporation is authorized to issue is 75,000,000.
<PAGE>
The Preferred Stock may be issued from time to time in one or more series.
The Board of Directors is expressly granted, to the fullest extent permitted by
law, the authority to fix, alter, or rescind by resolution or resolutions the
rights, preferences, qualifications, limitations and restrictions of any
unissued series of Preferred Stock including, without limitation, the power to
specify the number of shares of any series. Within the limits and restrictions
stated in any resolution or resolutions of the Board of Directors originally
fixing or specifying the number of shares constituting any series of Preferred
Stock, the Board of Directors is expressly granted the authority to increase or
decrease (but not below the shares of any such series outstanding) the number of
shares of any series subsequent to the issuance of shares in the series. In
case the number of shares of Preferred Stock of any series shall be so
decreased, the shares of Preferred Stock constituting such decrease shall resume
the status of authorized but unissued shares with the series, rights,
preferences, qualifications, limitations and restrictions to be determined by
the Board of Directors. The number of authorized shares of Preferred Stock may
be increased or decreased (but not below the number of shares thereof then
outstanding in addition to any shares of any series of Preferred Stock reserved
for issuance under any option granted by the Corporation) by the affirmative
vote of the holders of a majority of the outstanding shares of the Common Stock,
and by the affirmative vote of the holders of a majority of the outstanding
shares of the Preferred Stock.
V
The Corporation is to have perpetual existence.
VI
Elections of directors need not be by written ballot unless a stockholder
demands election by written ballot at the meeting and before voting begins.
VII
Vacancies occurring on the Board of Directors for any reason may be filled
by vote of a majority of the remaining members of the Board of Directors,
although less than a quorum, at a meeting of the Board of Directors. A person
so elected by the Board of Directors to fill a vacancy shall hold office until
the next succeeding annual meeting of stockholders of the Corporation and until
his or her successor shall have been duly elected and qualified.
VIII
The number of directors which constitute the whole Board of Directors of
the Corporation shall be designated in the Bylaws of the Corporation.
IX
In furtherance and not in limitation of the powers conferred by statute,
the Board of Directors is expressly authorized to make, alter, amend or repeal
the Bylaws of the Corporation.
-2-
<PAGE>
X
To the fullest extent permitted by the Delaware General Corporation Law as
the same exists or as may hereafter be amended, no director of the Corporation
shall be personally liable to the Corporation or its stockholders for monetary
damages for breach of fiduciary duty as a director.
Neither any amendment nor repeal of this Tenth Article, nor the adoption of
any provision of this amended Restated Certificate of Incorporation inconsistent
with this Tenth Article, shall eliminate or reduce the effect of this Tenth
Article in respect of any matter occurring, or any cause of action, suit or
claim that, but for this Tenth Article, would accrue or arise, prior to such
amendment, repeal or adoption of an inconsistent provision.
XI
At the election of directors of the Corporation, each holder of stock of
any class of series shall be entitled to as many votes as shall equal the number
of votes which (except for such provision as to cumulative voting) he would be
entitled to cast for the election of directors with respect to his shares of
stock multiplied by the number of directors to be elected by him, and he may
cast all of such votes for a single director or may distribute them as he may
see fit, so long as the name of the candidate for director shall have been
placed in nomination prior to the voting and the stockholder, or any other
holder of the same class or series of stock, has given notice at the meeting
prior to the voting of the intention to cumulate votes.
XII
Meetings of stockholders may be held within or without the State of
Delaware, as the Bylaws may provide. The books of the Corporation may be kept
(subject to any provision contained in the statutes) outside of the State of
Delaware at such place or places as may be designated from time to time by the
Board of Directors or in the Bylaws of the Corporation.
XIII
Advance notice of new business and stockholder nominations for the election
of directors shall be given in the manner and to the extent provided in the
Bylaws of the Corporation.
XIV
The Corporation reserves the right to amend, alter, change or repeal any
provisions contained in this Certificate of Incorporation, in the manner now or
hereafter prescribed by statute, and all rights conferred upon stockholders
herein are granted subject to this reservation."
-3-
<PAGE>
IN WITNESS WHEREOF, this Amended and Restated Certificate of Incorporation
has been signed this 18th day of November, 1996.
ACCESS HEALTH, INC.
By: /s/ Thomas E. Gardner
---------------------------
Thomas E. Gardner, President
ATTEST:
/s/ Julie A. Brooks
- ---------------------------------
Julie A. Brooks, Secretary
-4-
<PAGE>
EXHIBIT 3.2
BYLAWS
OF
ACCESS HEALTH, INC.
(Amended as of November 20, 1996)
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I - CORPORATE OFFICES...................................... 1
1.1 REGISTERED OFFICE........................................... 1
1.2 OTHER OFFICES............................................... 1
ARTICLE II - MEETINGS OF STOCKHOLDERS.............................. 1
2.1 PLACE OF MEETINGS........................................... 1
2.2 ANNUAL MEETING.............................................. 1
2.3 SPECIAL MEETING............................................. 1
2.4 NOTICE OF STOCKHOLDERS' MEETINGS............................ 2
2.6 QUORUM...................................................... 2
2.7 ADJOURNED MEETING; NOTICE................................... 3
2.8 VOTING...................................................... 3
2.9 WAIVER OF NOTICE............................................ 3
2.10 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING..... 4
2.11 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING; GIVING CONSENTS. 4
2.12 PROXIES..................................................... 5
2.13 LIST OF STOCKHOLDERS ENTITLED TO VOTE....................... 5
ARTICLE III - DIRECTORS............................................ 5
3.1 POWERS...................................................... 5
3.2 NUMBER OF DIRECTORS......................................... 5
3.3 ELECTION, QUALIFICATION AND TERM OF OFFICE OF DIRECTORS..... 6
3.4 RESIGNATION AND VACANCIES................................... 6
3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE.................... 7
3.6 FIRST MEETINGS.............................................. 7
3.7 REGULAR MEETINGS............................................ 7
3.8 SPECIAL MEETINGS; NOTICE.................................... 7
3.9 QUORUM...................................................... 8
3.10 WAIVER OF NOTICE............................................ 8
3.11 ADJOURNED MEETING; NOTICE................................... 8
3.12 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING........... 8
3.13 FEES AND COMPENSATION OF DIRECTORS.......................... 9
3.14 APPROVAL OF LOANS TO OFFICERS............................... 9
</TABLE>
-i-
<PAGE>
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
Page
----
<S> <C>
3.15 REMOVAL OF DIRECTORS........................................ 9
ARTICLE IV - COMMITTEES............................................ 9
4.1 COMMITTEES OF DIRECTORS..................................... 9
4.2 COMMITTEE MINUTES........................................... 10
4.3 MEETINGS AND ACTION OF COMMITTEES........................... 10
ARTICLE V - OFFICERS............................................... 10
5.1 OFFICERS.................................................... 10
5.2 ELECTION OF OFFICERS........................................ 11
5.3 SUBORDINATE OFFICERS........................................ 11
5.4 REMOVAL AND RESIGNATION OF OFFICERS......................... 11
5.5 VACANCIES IN OFFICES........................................ 11
5.6 CHAIRMAN OF THE BOARD....................................... 11
5.7 PRESIDENT................................................... 11
5.8 VICE PRESIDENT.............................................. 12
5.9 SECRETARY................................................... 12
5.10 TREASURER................................................... 12
5.11 ASSISTANT SECRETARY......................................... 13
5.12 ASSISTANT TREASURER......................................... 13
5.13 AUTHORITY AND DUTIES OF OFFICERS............................ 13
ARTICLE VI - INDEMNITY............................................. 13
6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS................... 13
6.2 INDEMNIFICATION OF OTHERS................................... 14
6.3 INSURANCE................................................... 14
ARTICLE VII - RECORDS AND REPORTS.................................. 14
7.1 MAINTENANCE AND INSPECTION OF RECORDS....................... 14
7.2 INSPECTION BY DIRECTORS..................................... 15
7.3 ANNUAL STATEMENT TO STOCKHOLDERS............................ 15
7.4 REPRESENTATION OF SHARES OF OTHER CORPORATIONS.............. 15
</TABLE>
-ii-
<PAGE>
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE VIII - GENERAL MATTERS..................................... 16
8.1 CHECKS...................................................... 16
8.2 EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS............ 16
8.3 STOCK CERTIFICATES; PARTLY PAID SHARES...................... 16
8.4 SPECIAL DESIGNATION ON CERTIFICATES......................... 17
8.5 LOST CERTIFICATES........................................... 17
8.6 CONSTRUCTION; DEFINITIONS................................... 17
8.7 DIVIDENDS................................................... 17
8.8 FISCAL YEAR................................................. 18
8.9 TRANSFER OF STOCK........................................... 18
8.10 STOCK TRANSFER AGREEMENTS................................... 18
8.11 REGISTERED STOCKHOLDERS..................................... 18
ARTICLE IX - AMENDMENTS............................................ 18
ARTICLE X - DISSOLUTION............................................ 19
ARTICLE XI - CUSTODIAN............................................. 19
11.1 APPOINTMENT OF A CUSTODIAN IN CERTAIN CASES................. 19
11.2 DUTIES OF CUSTODIAN......................................... 20
</TABLE>
-iii-
<PAGE>
BYLAWS
------
OF
--
ACCESS HEALTH, INC.
-------------------
ARTICLE I
CORPORATE OFFICES
-----------------
1.1 REGISTERED OFFICE
-----------------
The registered office of the corporation shall be in the City of
Wilmington, County of New Castle, State of Delaware. The name of the registered
agent of the corporation at such location is Corporation Trust Center.
1.2 OTHER OFFICES
-------------
The board of directors may at any time establish other offices at any place
or places where the corporation is qualified to do business.
ARTICLE II
MEETINGS OF STOCKHOLDERS
------------------------
2.1 PLACE OF MEETINGS
-----------------
Meetings of stockholders shall be held at any place, within or outside the
State of Delaware, designated by the board of directors. In the absence of any
such designation, stockholders' meetings shall be held at the registered office
of the corporation.
2.2 ANNUAL MEETING
--------------
The annual meeting of stockholders shall be held each year on a date and at
a time designated by the board of directors. In the absence of such
designation, the annual meeting of stockholders shall be held on the Second
Tuesday of December in each year at 10:00 a.m. However, if such day falls on a
legal holiday, then the meeting shall be held at the same time and place on the
next succeeding full business day. At the meeting, directors shall be elected
and any other proper business may be transacted.
2.3 SPECIAL MEETING
---------------
A special meeting of the stockholders may be called at any time by the (i)
board of directors, (ii) chairman of the board, (iii) president or (iv) one or
more stockholders holding shares in the aggregate entitled to cast not less than
ten (10%) of the votes at that meeting.
<PAGE>
If a special meeting is called by any person or persons other than the
board of directors or the president or the chairman of the board, then the
request shall be in writing, specifying the time of such meeting and the general
nature of the business proposed to be transacted, and shall be delivered
personally or sent by registered mail or by telegraphic or other facsimile
transmission to the chairman of the board, the president, any vice president or
the secretary of the corporation. The officer receiving the request shall cause
notice to be promptly given to the stockholders entitled to vote, in accordance
with the provisions of Sections 2.4 and 2.5 of these bylaws, that a meeting will
be held at the time requested by the person or persons calling the meeting so
long as that time is not less than fifteen (15) nor more than sixty (60) days
after the receipt of the request. If the notice is not given within five (5)
days after receipt of the request, then the person or persons in this paragraph
of this Section 2.3 shall be construed as limiting, fixing or affecting the time
when a meeting of stockholders called by action of the board of directors may be
held.
2.4 NOTICE OF STOCKHOLDERS' MEETINGS
--------------------------------
All notices of meetings with stockholders shall be in writing and shall be
sent or otherwise given in accordance with Section 2.5 of these bylaws not less
than ten (10) nor more than sixty (60) days before the date of the meeting to
each stockholder entitled to vote at such meeting. The notice shall specify the
place, date, and hour of the meeting, and, in the case of a special meeting, the
purpose of purposes for which the meeting is called.
2.5 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE
--------------------------------------------
Written notice of any meeting of stockholders, if mailed, is given when
deposited in the United States mail, postage prepaid, directed to the
stockholder at his address as it appears on the records of the corporation. An
affidavit of the secretary or an assistant secretary or of the transfer agent of
the corporation that the notice has been given shall, in the absence of fraud,
be prima facie evidence of the facts stated therein.
2.6 QUORUM
------
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 at all meetings of the stockholders for the transaction of business
except as otherwise provided by statute or by the certificate of incorporation.
If, however, such quorum is not present or represented at any meeting of the
stockholders, then the stockholders entitled to vote thereat, present in person
or represented by proxy, shall have power to adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a quorum is
present or represented. At such adjourned meeting at which a quorum is present
or represented, any business may be transacted that might have been transacted
at the meeting as originally noticed.
-2-
<PAGE>
2.7 ADJOURNED MEETING; NOTICE
-------------------------
When a meeting is adjourned to another time or place, unless these bylaws
otherwise require, notice need not be given of the adjourned meeting if the time
and place thereof are announced at the meeting at which the adjournment is
taken. At the adjourned meeting the corporation may transact any business that
might have been transacted at the original meeting. If the adjournment is for
more than forty-five (45) 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 stockholder of record entitled to vote at the meeting.
2.8 VOTING
------
The stockholders entitled to vote at any meeting of stockholders shall be
determined in accordance with the provisions of Section 2.11 of these bylaws,
subject to the provisions of Sections 217 and 218 of the General Corporation Law
of Delaware (relating to voting rights of fiduciaries, pledgors and joint owners
of stock and to voting trusts and other voting agreements).
Except as provided in the last paragraph of this Section 2.8, or as may be
otherwise provided in the certificate of incorporation, each stockholder shall
be entitled to one vote for each share of capital stock held by such
stockholder.
At a stockholders' meeting at which directors are to be elected, or at
elections held under special circumstances, a stockholder shall be entitled to
cumulate votes (i.e., cast for any candidate a number of votes greater than the
number of votes which such stockholder normally is entitled to cast). Each
holder of stock, or of any class or classes or of a series or series thereof,
who elects to cumulate votes shall be entitled to as many votes as equals the
number of votes which (absent this provision as to cumulative voting) he would
be entitled to cast for the election of directors with respect to his shares of
stock multiplied by the number of directors to be elected by him, and he may
cast all of such votes for a single director or may distribute them among the
number to be voted for, or for any two or more of them, as he may see fit.
2.9 WAIVER OF NOTICE
----------------
Whenever notice is required to be given under any provision of the General
Corporation Law of Delaware or of the certificate of incorporation or these
bylaws, a written waiver thereof, signed by the person entitled to notice,
whether before or after the time stated therein, shall be deemed equivalent to
notice. Attendance of a person at a meeting shall constitute a waiver of notice
of such meeting, except when the person attends a 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. Neither the
business to be transacted at, nor the purpose of, any regular or special meeting
of the stockholders need be specified in any written waiver of notice unless so
required by the certificate of incorporation or these bylaws.
-3-
<PAGE>
2.10 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING
-------------------------------------------------------
Unless otherwise provided in the certificate of incorporation, any action
required by this chapter to be taken at any annual or special meeting of
stockholders of a corporation, or any action that may be taken at any annual or
special meeting of such stockholders, may be taken without a meeting, without
prior notice, and without a vote if a consent in writing, setting forth the
action so taken, is signed by the holders of outstanding stock having not less
than the minimum number of votes that would be necessary to authorize or take
such action at a meeting at which all shares entitled to vote thereon were
present and voted.
Prompt notice of the taking of the corporate action without a meeting by
less than unanimous written consent shall be given to those stockholders who
have not consented in writing. If the action which is consented to is such as
would have required the filing of a certificate under any section of the General
Corporation Law of Delaware if such action had been voted on by stockholders at
a meeting thereof, then the certificate filed under such section shall state, in
lieu of any statement required by such section concerning any vote of
stockholders, that written notice and written consent have been given as
provided in Section 228 of the General Corporation Law of Delaware.
2.11 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING; GIVING CONSENTS
-----------------------------------------------------------
In order that the corporation may determine the stockholders entitled to
notice of or to vote at any meeting of stockholders or any adjournment thereof,
or entitled 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 any rights in respect of any
change, conversion or exchange of stock or for the purpose of any other lawful
action, the board of directors may fix, in advance, a record date, which shall
not be more than sixty (60) nor less than ten (10) days before the date of such
meeting, nor more than sixty (60) days prior to any other action.
If the board of directors does not so fix a record date:
(i) The record date for determining stockholders entitled to notice of
or to vote at a meeting of stockholders shall be at the close of business on the
day next preceding the day on which notice is given, or, if notice is waived, at
the close of business on the day next preceding the day on which the meeting is
held.
(ii) The record date for determining stockholders entitled to express
consent to corporate action in writing without a meeting, when no prior action
by the board of directors is necessary, shall be the day on which the first
written consent is expressed.
(iii) The record date for determining stockholders for any other purpose
shall be at the close of business on the day on which the board of directors
adopts the resolution relating thereto.
A determination of stockholders of record entitled to notice of or to vote
at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the board of directors may fix a new record date for the
adjourned meeting.
-4-
<PAGE>
2.12 PROXIES
-------
Each stockholder entitled to vote at a meeting of stockholders or to
express consent or dissent to corporate action in writing without a meeting may
authorize another person or persons to act for him by a written proxy, signed by
the stockholder and filed with the secretary of the corporation, but no such
proxy shall be voted or acted upon after three (3) years from its date, unless
the proxy provides for a longer period. A proxy shall be deemed signed if the
stockholder's name is placed on the proxy (whether by manual signature,
typewriting, telegraphic transmission or otherwise) by the stockholder or the
stockholder's attorney-in-fact. The revocability of a proxy that states on its
face that it is irrevocable shall be governed by the provisions of Section
212(c) of the General Corporation Law of Delaware.
2.13 LIST OF STOCKHOLDERS ENTITLED TO VOTE
-------------------------------------
The officer who has charge of the stock ledger of a corporation shall
prepare and make, at least ten (10) days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open
to the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten (10) 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, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present.
ARTICLE III
DIRECTORS
---------
3.1 POWERS
------
Subject to the provisions of the General Corporation Law of Delaware and
any limitations in the certificate of incorporation or these bylaws relating to
action required to be approved by the stockholders or by the outstanding shares,
the business and affairs of the corporation shall be managed and all corporate
powers shall be exercised by or under the direction of the board of directors.
3.2 NUMBER OF DIRECTORS
-------------------
The number of directors of the corporation shall be not less than four (4)
nor more than ten (10). The exact number of directors shall be ten (10) until
changed, within the limits specified above, by a bylaw amending this Section
3.2, duly adopted by the board of directors or by the stockholders. The
indefinite number of directors may be changed, or a definite number may be fixed
without provision for an indefinite number, by a duly adopted amendment to the
certificate of incorporation or by an amendment to this bylaw duly adopted by
the vote or written consent of the holders of the majority of
-5-
<PAGE>
the stock issued and outstanding and entitled to vote or by resolution of the
majority of the board of directors.
No reduction of the authorized number of directors shall have the effect of
removing any director before that director's term of office expires.
3.3 ELECTION, QUALIFICATION AND TERM OF OFFICE OF DIRECTORS
-------------------------------------------------------
Except as provided in Section 3.4 of these bylaws, directors shall be
elected at each annual meeting of stockholders to hold office until the next
annual meeting. Directors need not be stockholders unless so required by the
certificate of incorporation or these bylaws, wherein other qualifications for
directors may be prescribed. Each director, including a director elected to
fill a vacancy, shall hold office until his successor is elected and qualified
or until his earlier resignation or removal.
Elections of directors need not be by written ballot.
3.4 RESIGNATION AND VACANCIES
-------------------------
Any director may resign at any time upon written notice to the corporation.
When one or more directors so resigns and the resignation is effective at a
future date, a majority of the directors then in office, including those who
have so resigned, shall have power to fill such vacancy or vacancies, the vote
thereon to take effect when such resignation or resignations shall become
effective, and each director so chosen shall hold office as provided in this
section in the filling of other vacancies.
Unless otherwise provided in the certificate of incorporation or these
bylaws:
(i) Vacancies and newly created directorships resulting from any
increase in the authorized number of directors elected by all of the
stockholders having the right to vote as a single class may be filled by a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director.
(ii) Whenever the holders of any class or classes of stock or series
thereof are entitled to elect one or more directors by the provisions of the
certificate of incorporation, vacancies and newly created directorships of such
class or classes or series may be filled by a majority of the directors elected
by such class or classes or series thereof then in office, or by a sole
remaining director so elected.
If at any time, by reason of death or resignation or other cause, the
corporation should have no directors in office, then any officer or any
stockholder or an executor, administrator, trustee or guardian of a stockholder,
or other fiduciary entrusted with like responsibility for the person or estate
of a stockholder, may call a special meeting of stockholders in accordance with
the provisions of the certificate of incorporation or these bylaws, or may apply
to the Court of Chancery for a decree summarily ordering an election as provided
in Section 211 of the General Corporation Law of Delaware.
-6-
<PAGE>
If, at the time of filling any vacancy or any newly created directorship,
the directors then in office constitute less than a majority of the whole board
(as constituted immediately prior to any such increase), then the Court of
Chancery may, upon application of any stockholder or stockholders holding at
least ten (10) percent of the total number of the shares at the time outstanding
having the right to vote for such directors, summarily order an election to be
held to fill any such vacancies or newly created directorships, or to replace
the directors chosen by the directors then in office as aforesaid, which
election shall be governed by the provisions of Section 211 of the General
Corporation Law of Delaware as far as applicable.
3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE
----------------------------------------
The board of directors of the corporation may hold meetings, both regular
and special, either within or outside the State of Delaware.
Unless otherwise restricted by the certificate of incorporation or these
bylaws, members of the board of directors, or any committee designated by the
board of directors, may participate in a meeting of the board of directors, or
any committee, by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and such participation in a meeting shall constitute presence in
person at the meeting.
3.6 FIRST MEETINGS
--------------
The first meeting of each newly elected board of directors shall be held at
such time and place as shall be fixed by the vote of the stockholders at the
annual meeting and no notice of such meeting shall be necessary to the newly
elected directors in order legally to constitute the meeting, provided a quorum
shall be present. In the event of the failure of the stockholders to fix the
time or place of such first meeting of the newly elected board of directors, or
in the event such meeting is not held at the time and place so fixed by the
stockholders, the meeting may be held at such time and place as shall be
specified in a notice given as hereinafter provided for special meetings of the
board of directors, or as shall be specified in a written waiver signed by all
of the directors.
3.7 REGULAR MEETINGS
----------------
Regular meetings of the board of directors may be held without notice at
such time and at such place as shall from time to time be determined by the
board.
3.8 SPECIAL MEETINGS; NOTICE
------------------------
Special meetings of the board of directors for any purpose or purposes may
be called at any time by the chairman of the board, the president, any vice
president, the secretary or any two (2) directors.
Notice of the time and place of special meetings shall be delivered
personally or by telephone to each director or sent by first-class mail or
telegram, charges prepaid, addressed to each director at that director's address
as it is shown on the records of the corporation. If the notice is mailed, it
shall be
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deposited in the United States mail at least four (4) days before the time of
the holding of the meeting. If the notice is delivered personally or by
telephone or by telegram, it shall be delivered personally or by telephone or to
the telegraph company at least forty-eight (48) hours before the time of the
holding of the meeting. Any oral notice given personally or by telephone may be
communicated either to the director or to a person at the office of the director
who the person giving the notice has reason to believe will promptly communicate
it to the director. The notice need not specify the purpose or the place of the
meeting, if the meeting is to be held at the principal executive office of the
corporation.
3.9 QUORUM
------
At all meetings of the board of directors, a majority of the authorized
number of directors shall constitute a quorum for the transaction of business
and 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 of directors, except as may be
otherwise specifically provided by statute or by the certificate of
incorporation. If a quorum is not present at any meeting of the board of
directors, then the directors present thereat may adjourn the meeting from time
to time, without notice other than announcement at the meeting, until a quorum
is present.
3.10 WAIVER OF NOTICE
----------------
Whenever notice is required to be given under any provision of the General
Corporation Law of Delaware or of the certificate of incorporation or these
bylaws, a written waiver thereof, signed by the person entitled to notice,
whether before or after the time stated therein, shall be deemed equivalent to
notice. Attendance of a person at a meeting shall constitute a waiver of notice
of such meeting, except when the person attends a 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. Neither the
business to be transacted at, nor the purpose of, any regular or special meeting
of the directors, or members of a committee of directors, need be specified in
any written waiver of notice unless so required by the certificate of
incorporation or these bylaws.
3.11 ADJOURNED MEETING; NOTICE
-------------------------
If a quorum is not present at any meeting of the board of directors, then
the directors present thereat may adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum is present.
3.12 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING
-------------------------------------------------
Unless otherwise restricted by the certificate of incorporation or these
bylaws, any action required or permitted to be taken at any meeting of the board
of directors, or of any committee thereof, may be taken without a meeting if all
members of the board or committee, as the case may be, consent thereto in
writing and the writing or writings are filed with the minutes of proceedings of
the board or committee.
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3.13 FEES AND COMPENSATION OF DIRECTORS
----------------------------------
Unless otherwise restricted by the certificate of incorporation or these
bylaws, the board of directors shall have the authority to fix the compensation
of directors.
3.14 APPROVAL OF LOANS TO OFFICERS
-----------------------------
The corporation may lend money to, or guarantee any obligation of, or
otherwise assist any officer or other employee of the corporation or of its
subsidiary, including any officer or employee who is a director of the
corporation or its subsidiary, whenever, in the judgment of the directors, such
loan, guaranty or assistance may reasonably be expected to benefit the
corporation. The loan, guaranty or other assistance may be with or without
interest and may be unsecured, or secured in such manner as the board of
directors shall approve, including, without limitation, a pledge of shares of
stock of the corporation. Nothing in this section contained shall be deemed to
deny, limit or restrict the powers of guaranty or warranty of the corporation at
common law or under any statute.
3.15 REMOVAL OF DIRECTORS
--------------------
Unless otherwise restricted by statute, by the certificate of incorporation
or by these bylaws, any director or the entire board of directors may be
removed, with or without cause, by the holders of a majority of the shares then
entitled to vote at an election of directors.
No reduction of the authorized number of directors shall have the effect of
removing any director prior to the expiration of such director's term of office.
ARTICLE IV
COMMITTEES
----------
4.1 COMMITTEES OF DIRECTORS
-----------------------
The board of directors may, by resolution passed by a majority of the whole
board, designate one or more committees, with 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. In the absence or
disqualification of a member of a committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not he or
they constitute a quorum, may unanimously appoint another member of the board of
directors to act at the meeting in the place of any such absent or disqualified
member. Any such committee, to the extent provided in the resolution of the
board of directors or in the bylaws of the corporation, shall have and may
exercise all the powers and authority of the board of directors 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 to (i) amend the certificate of
incorporation (except that a committee may, to the extent
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authorized in the resolution or resolutions providing for the issuance of shares
of stock adopted by the board of directors as provided in Section 151(a) of the
General Corporation Law of Delaware, fix any of the preferences or rights of
such shares relating to dividends, redemption, dissolution, any distribution of
assets of the corporation or the conversion into, or the exchange of such shares
for, shares of any other class or classes or any other series of the same or any
other class or classes of stock of the corporation), (ii) adopt an agreement of
merger or consolidation under Sections 251 or 252 of the General Corporation Law
of Delaware, (iii) recommend to the stockholders the sale, lease or exchange of
all or substantially all of the corporation's property and assets, (iv)
recommend to the stockholders a dissolution of the corporation or a revocation
of a dissolution, or (v) amend the bylaws of the corporation; and, unless the
board resolution establishing the committee, the bylaws or the certificate of
incorporation expressly so provide, no such committee shall have the power or
authority to declare a dividend, to authorize the issuance of stock, or to adopt
a certificate of ownership and merger pursuant to Section 253 of the General
Corporation Law of Delaware.
4.2 COMMITTEE MINUTES
-----------------
Each committee shall keep regular minutes of its meetings and report the
same to the board of directors when required.
4.3 MEETINGS AND ACTION OF COMMITTEES
---------------------------------
Meetings and actions of committees shall be governed by, and held and taken
in accordance with, the provisions of Article III of these bylaws, Section 3.5
(place of meetings and meetings by telephone), Section 3.7 (regular meetings),
Section 3.8 (special meetings and notice), Section 3.9 (quorum), Section 3.10
(waiver of notice), Section 3.11 (adjournment and notice of adjournment), and
Section 3.12 (action without a meeting), with such changes in the context of
those bylaws as are necessary to substitute the committee and its members for
the board of directors and its members; provided, however, that the time of
regular meetings of committees may also be called by resolution of the board of
directors and that notice of special meetings of committees shall also be given
to all alternate members, who shall have the right to attend all meetings of the
committee. The board of directors may adopt rules for the government of any
committee not inconsistent with the provisions of these bylaws.
ARTICLE V
OFFICERS
--------
5.1 OFFICERS
--------
The officers of the corporation shall be a president, one or more vice
presidents, a secretary, and a treasurer. The corporation may also have, at the
discretion of the board of directors, a chairman of the board, one or more
assistant vice presidents, assistant secretaries, assistant treasurers, and any
such other officers as may be appointed in accordance with the provisions of
Section 5.3 of these bylaws. Any number of offices may be held by the same
person.
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5.2 ELECTION OF OFFICERS
--------------------
The officers of the corporation, except such officers as may be appointed
in accordance with the provisions of Sections 5.3 or 5.5 of these bylaws, shall
be chosen by the board of directors, subject to the rights, if any, of an
officer under any contract of employment.
5.3 SUBORDINATE OFFICERS
--------------------
The board of directors may appoint, or empower the president to appoint,
such other officers and agents as the business of the corporation may require,
each of whom shall hold office for such period, have such authority, and perform
such duties as are provided in these bylaws or as the board of directors may
from time to time determine.
5.4 REMOVAL AND RESIGNATION OF OFFICERS
-----------------------------------
Subject to the rights, if any, of an officer under any contract of
employment, any officer may be removed, either with or without cause, by an
affirmative vote of the majority of the board of directors at any regular or
special meeting of the board or, except in the case of an officer chosen by the
board of directors, by any officer upon whom such power of removal may be
conferred by the board of directors.
Any officer may resign at any time by giving written notice to the
corporation. Any resignation shall take effect at the date of the receipt of
that notice or at any later time specified in that notice; and, unless otherwise
specified in that notice, the acceptance of the resignation shall not be
necessary to make it effective. Any resignation is without prejudice to the
rights, if any, of the corporation under any contract to which the officer is a
party.
5.5 VACANCIES IN OFFICES
--------------------
Any vacancy occurring in any office of the corporation shall be filled by
the board of directors.
5.6 CHAIRMAN OF THE BOARD
---------------------
The chairman of the board, if such an officer be elected, shall, if
present, preside at meetings of the board of directors and exercise and perform
such other powers and duties as may from time to time be assigned to him by the
board of directors or as may be prescribed by these bylaws. If there is no
president, then the chairman of the board shall also be the chief executive
officer of the corporation and shall have the powers and duties prescribed in
Section 5.7 of these bylaws.
5.7 PRESIDENT
---------
Subject to such supervisory powers, if any, as may be given by the board of
directors to the chairman of the board, if there be such an officer, the
president shall be the chief executive officer of the corporation and shall,
subject to the control of the board of directors, have general supervision,
direction, and control of the business and the officers of the corporation. He
shall preside at all meetings of the
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shareholders and, in the absence or nonexistence of a chairman of the board, at
all meetings of the board of directors. He shall have the general powers and
duties of management usually vested in the office of president of a corporation
and shall have such other powers and duties as may be prescribed by the board of
directors or these bylaws.
5.8 VICE PRESIDENT
--------------
In the absence or disability of the president, the vice presidents, if any,
in order of their rank as fixed by the board of directors or, if not ranked, a
vice president designated by the board of directors, shall perform all 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 presidents shall
have such other powers and perform such other duties as from time to time may be
prescribed for them respectively by the board of directors, these bylaws, the
president or the chairman of the board.
5.9 SECRETARY
---------
The secretary shall keep or cause to be kept, at the principal executive
office of the corporation or such other place as the board of directors may
direct, a book of minutes of all meetings and actions of directors, committees
of directors, and shareholders. The minutes shall show the time and place of
each meeting, whether regular or special (and, if special, how authorized and
the notice given), the names of those present at directors' meetings or
committee meetings, the number of shares present or represented at shareholders'
meetings, and the proceedings thereof.
The secretary shall keep, or cause to be kept, at the principal executive
office of the corporation or at the office of the corporation's transfer agent
or registrar, as determined by resolution of the board of directors, a share
register, or a duplicate share register, showing the names of all shareholders
and their addresses, the number and classes of shares held by each, the number
and date of certificates evidencing such shares, and the number and date of
cancellation of every certificate surrendered for cancellation.
The secretary shall give, or cause to be given, notice of all meetings of
the shareholders and of the board of directors required to be given by law or by
these bylaws. He shall keep the seal of the corporation, if one be adopted, in
safe custody and shall have such other powers and perform such other duties as
may be prescribed by the board of directors or by these bylaws.
5.10 TREASURER
---------
The treasurer shall keep and maintain, or cause to be kept and maintained,
adequate and correct books and records of accounts of the properties and
business transactions of the corporation, including accounts of its assets,
liabilities, receipts, disbursements, gains, losses, capital, retained earnings,
and shares. The books of account shall at all reasonable times be open to
inspection by any director.
The treasurer shall deposit all money and other valuables in the name and
to the credit of the corporation with such depositaries as may be designated by
the board of directors. He shall disburse the funds of the corporation as may
be ordered by the board of directors, shall render to the president and
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directors, whenever they request it, an account of all of his transactions as
treasurer and of the financial condition of the corporation, and shall have such
other powers and perform such other duties as may be prescribed by the board of
directors or these bylaws.
5.11 ASSISTANT SECRETARY
-------------------
The assistant secretary, or, if there is more than one, the assistant
secretaries in the order determined by the stockholders or board of directors
(or if there be no such determination, then in the order of their election)
shall, in the absence of the secretary or in the event of his or her inability
or refusal to act, perform the duties and exercise the powers of the secretary
and shall perform such other duties and have such other powers as the board of
directors or the stockholders may from time to time prescribe.
5.12 ASSISTANT TREASURER
-------------------
The assistant treasurer, or, if there is more than one, the assistant
treasurers, in the order determined by the stockholders or board of directors
(or if there be no such determination, then in the order of their election),
shall, in the absence of the treasurer or in the event of his or her inability
or refusal to act, perform the duties and exercise the powers of the treasurer
and shall perform such other duties and have such other powers as the board of
directors or the stockholders may from time to time prescribe.
5.13 AUTHORITY AND DUTIES OF OFFICERS
--------------------------------
In addition to the foregoing authority and duties, all officers of the
corporation shall respectively have such authority and perform such duties in
the management of the business of the corporation as may be designated from time
to time by the board of directors or the stockholders.
ARTICLE VI
INDEMNITY
---------
6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS
-----------------------------------------
The corporation shall, to the maximum extent and in the manner permitted by
the General Corporation Law of Delaware, indemnify each of its directors and
executive officers against expenses (including attorneys' fees), judgments,
fines, settlements, and other amounts actually and reasonably incurred in
connection with any proceeding, arising by reason of the fact that such person
is or was an agent of the corporation. For purposes of this Section 6.1, a
"director" or "executive officer" of the corporation includes any person (i) who
is or was a director or executive officer of the corporation, (ii) who is or was
serving at the request of the corporation as a director or officer of another
corporation, partnership, joint venture, trust or other enterprise, or (iii) who
was a director or executive officer of a
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corporation which was a predecessor corporation of the corporation or a director
or officer of another enterprise at the request of such predecessor corporation.
6.2 INDEMNIFICATION OF OTHERS
-------------------------
The corporation shall have the power, to the extent and in the manner
permitted by the General Corporation Law of Delaware, to indemnify each of its
officers, employees and agents (other than directors and executive officers)
against expenses (including attorneys' fees), judgments, fines, settlements, and
other amounts actually and reasonably incurred in connection with any
proceeding, arising by reason of the fact that such person is or was an agent of
the corporation. For purposes of this Section 6.2, an "employee" or "agent" of
the corporation (other than a director or executive officer) includes any person
(i) who is or was an employee or agent of the corporation, (ii) who is or was
serving at the request of the corporation as an employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, or (iii) who
was an employee or agent of a corporation which was a predecessor corporation of
the corporation or of another enterprise at the request of such predecessor
corporation.
6.3 INSURANCE
---------
The corporation may purchase and maintain insurance on behalf of any person
who is or was a director, officer, employee or agent of the corporation, or is
or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against any liability asserted against him and incurred by him
in any such capacity, or arising out of his status as such, whether or not the
corporation would have the power to indemnify him against such liability under
the provisions of the General Corporation Law of Delaware.
ARTICLE VII
RECORDS AND REPORTS
-------------------
7.1 MAINTENANCE AND INSPECTION OF RECORDS
-------------------------------------
The corporation shall, either at its principal executive office or at such
place or places as designated by the board of directors, keep a record of its
shareholders listing their names and addresses and the number and class of
shares held by each shareholder, a copy of these bylaws as amended to date,
accounting books, and other records.
Any stockholder of record, in person or by attorney or other agent, shall,
upon written demand under oath stating the purpose thereof, have the right
during the usual hours for business to inspect for any proper purpose the
corporation's stock ledger, a list of its stockholders, and its other books and
records and to make copies or extracts therefrom. A proper purpose shall mean a
purpose reasonably related to such person's interest as a stockholder. In every
instance where an attorney or other agent is the person who seeks the right to
inspection, the demand under oath shall be accompanied by a power
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of attorney or such other writing that authorizes the attorney or other agent to
so act on behalf of the stockholder. The demand under oath shall be directed to
the corporation at its registered office in Delaware or at its principal place
of business.
The officer who has charge of the stock ledger of a corporation shall
prepare and make, at least ten (10) days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open
to the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten (10) 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, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present.
7.2 INSPECTION BY DIRECTORS
-----------------------
Any director shall have the right to examine the corporation's stock
ledger, a list of its stockholders, and its other books and records for a
purpose reasonably related to his position as a director. The Court of Chancery
is hereby vested with the exclusive jurisdiction to determine whether a director
is entitled to the inspection sought. The Court may summarily order the
corporation to permit the director to inspect any and all books and records, the
stock ledger, and the stock list and to make copies or extracts therefrom. The
Court may, in its discretion, prescribe any limitations or conditions with
reference to the inspection, or award such other and further relief as the Court
may deem just and proper.
7.3 ANNUAL STATEMENT TO STOCKHOLDERS
--------------------------------
The board of directors shall present at each annual meeting, and at any
special meeting of the stockholders when called for by vote of the stockholders,
a full and clear statement of the business and condition of the corporation.
7.4 REPRESENTATION OF SHARES OF OTHER CORPORATIONS
----------------------------------------------
The chairman of the board, the president, any vice president, the
treasurer, the secretary or assistant secretary of this corporation, or any
other person authorized by the board of directors or the president or a vice
president, is authorized to vote, represent, and exercise on behalf of this
corporation all rights incident to any and all shares of any other corporation
or corporations standing in the name of this corporation. The authority granted
herein may be exercised either by such person directly or by any other person
authorized to do so by proxy or power of attorney duly executed by such person
having the authority.
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ARTICLE VII
GENERAL MATTERS
---------------
8.1 CHECKS
------
From time to time, the board of directors shall determine by resolution
which person or persons may sign or endorse all checks, drafts, other orders for
payment of money, notes or other evidences of indebtedness that are issued in
the name of or payable to the corporation, and only the persons so authorized
shall sign or endorse those instruments.
8.2 EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS
------------------------------------------------
The board of directors, except as otherwise provided in these bylaws, may
authorize any officer or officers, or agent or agents, to enter into any
contract or execute any instrument in the name of and on behalf of the
corporation; such authority may be general or confined to specific instances.
Unless so authorized or ratified by the board of directors or within the agency
power of an officer, no officer, agent or employee shall have any power or
authority to bind the corporation by any contract or engagement or to pledge its
credit or to render it liable for any purpose or for any amount.
8.3 STOCK CERTIFICATES; PARTLY PAID SHARES
--------------------------------------
The shares of a corporation shall be represented by certificates, provided
that the board of directors of the corporation may provide by resolution or
resolutions that some or all of any or all classes or series of its stock shall
be uncertificated shares. Any such resolution shall not apply to shares
represented by a certificate until such certificate is surrendered to the
corporation. Notwithstanding the adoption of such a resolution by the board of
directors, every holder of stock represented by certificates and upon request
every holder of uncertificated shares 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 of directors, or the president or vice-president, and by the treasurer
or an assistant treasurer, or the secretary or an assistant secretary of such
corporation representing the number of shares registered in certificate form.
Any or all of the signatures on the certificate may be a facsimile. In case any
officer, transfer agent or registrar who has signed or whose facsimile signature
has been placed upon a certificate has 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 he were such officer, transfer agent or
registrar at the date of issue.
The corporation may issue the whole or any part of its shares as partly
paid and subject to call for the remainder of the consideration to be paid
therefor. Upon the face or back of each stock certificate issued to represent
any such partly paid shares, upon the books and records of the corporation in
the case of uncertificated partly paid shares, the total amount of the
consideration to be paid therefor and the amount paid thereon shall be stated.
Upon the declaration of any dividend on fully paid shares, the corporation shall
declare a dividend upon partly paid shares of the same class, but only upon the
basis of the percentage of the consideration actually paid thereon.
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8.4 SPECIAL DESIGNATION ON CERTIFICATES
-----------------------------------
If the corporation is authorized to issue more than one class of stock or
more than one series of any class, then the powers, the designations, the
preferences, and the 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 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; provided, however, that,
except as otherwise provided in Section 202 of the General Corporation Law of
Delaware, in lieu of the foregoing requirements there may be set forth on the
face or back of the certificate that the corporation shall issue to represent
such class or series of stock a statement that the corporation will furnish
without charge to each stockholder who so requests the powers, the designations,
the preferences, and the 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.
8.5 LOST CERTIFICATES
-----------------
Except as provided in this Section 8.5, no new certificates for shares
shall be issued to replace a previously issued certificate unless the latter is
surrendered to the corporation and cancelled at the same time. The corporation
may issue a new certificate of stock or uncertificated shares in the place of
any certificate theretofore issued by it, alleged to have been lost, stolen or
destroyed, and the corporation may require the owner of the lost, stolen or
destroyed certificate, or his legal representative, to give the corporation a
bond sufficient to indemnify it against any claim that may be made against it on
account of the alleged loss, theft or destruction of any such certificate or the
issuance of such new certificate or uncertificated shares.
8.6 CONSTRUCTION; DEFINITIONS
-------------------------
Unless the context requires otherwise, the general provisions, rules of
construction, and definitions in the Delaware General Corporation Law shall
govern the construction of these bylaws. Without limiting the generality of this
provision, the singular number includes the plural, the plural number includes
the singular, and the term "person" includes both a corporation and a natural
person.
8.7 DIVIDENDS
---------
The directors of the corporation, subject to any restrictions contained in
the certificate of incorporation, may declare and pay dividends upon the shares
of its capital stock pursuant to the General Corporation Law of Delaware.
Dividends may be paid in cash, in property, or in shares of the corporation's
capital stock.
The directors of the corporation may set apart out of any of the funds of
the corporation available for dividends a reserve or reserves for any proper
purpose and may abolish any such reserve. Such purposes shall include but not
be limited to equalizing dividends, repairing or maintaining any property of the
corporation, and meeting contingencies.
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8.8 FISCAL YEAR
-----------
The fiscal year of the corporation shall be fixed by resolution of the
board of directors and may be changed by the board of directors.
8.9 TRANSFER OF STOCK
-----------------
Upon surrender to the corporation or the transfer agent of the corporation
of a certificate for shares duly endorsed or accompanied by proper evidence of
succession, assignation 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 in its books.
8.10 STOCK TRANSFER AGREEMENTS
-------------------------
The corporation shall have power to enter into and perform any agreement
with any number of shareholders of any one or more classes of stock of the
corporation to restrict the transfer of shares of stock of the corporation of
any one or more classes owned by such stockholders in any manner not prohibited
by the General Corporation Law of Delaware.
8.11 REGISTERED STOCKHOLDERS
-----------------------
The corporation shall be entitled to recognize the exclusive right of a
person registered on its books as the owner of shares to receive dividends and
to vote as such owner, shall be entitled to hold liable for calls and
assessments the person registered on its books as the owner of shares, and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of another person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Delaware.
ARTICLE IX
AMENDMENTS
----------
The original or other bylaws of the corporation may be adopted, amended or
repealed by the stockholders entitled to vote; provided, however, that the
corporation may, in its certificate of incorporation, confer the power to adopt,
amend or repeal bylaws upon the directors. The fact that such power has been so
conferred upon the directors shall not divest the stockholders of the power, nor
limit their power to adopt, amend or repeal bylaws.
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ARTICLE X
DISSOLUTION
-----------
If it should be deemed advisable in the judgment of the board of directors
of the corporation that the corporation should be dissolved, the board, after
the adoption of a resolution to that effect by a majority of the whole board at
any meeting called for that purpose, shall cause notice to be mailed to each
stockholder entitled to vote thereon of the adoption of the resolution and of a
meeting of stockholders to take action upon the resolution.
At the meeting a vote shall be taken for and against the proposed
dissolution. If a majority of the outstanding stock of the corporation entitled
to vote thereon votes for the proposed dissolution, then a certificate stating
that the dissolution has been authorized in accordance with the provisions of
Section 275 of the General Corporation Law of Delaware and setting forth the
names and residences of the directors and officers shall be executed,
acknowledged, and filed and shall become effective in accordance with Section
103 of the General Corporation Law of Delaware. Upon such certificate's
becoming effective in accordance with Section 103 of the General Corporation Law
of Delaware, the corporation shall be dissolved.
Whenever all the stockholders entitled to vote on a dissolution consent in
writing, either in person or by duly authorized attorney, to a dissolution, no
meeting of directors or stockholders shall be necessary. The consent shall be
filed and shall become effective in accordance with Section 103 of the General
Corporation Law of Delaware. Upon such consent's becoming effective in
accordance with Section 103 of the General Corporation Law of Delaware, the
corporation shall be dissolved. If the consent is signed by an attorney, then
the original power of attorney or a photocopy thereof shall be attached to and
filed with the consent. The consent filed with the Secretary of State shall
have attached to it the affidavit of the secretary or some other officer of the
corporation stating that the consent has been signed by or on behalf of all the
stockholders entitled to vote on a dissolution; in addition, there shall be
attached to the consent a certification by the secretary or some other officer
of the corporation setting forth the names and residences of the directors and
officers of the corporation.
ARTICLE XI
CUSTODIAN
---------
11. APPOINTMENT OF A CUSTODIAN IN CERTAIN CASES
-------------------------------------------
The Court of Chancery, upon application of any stockholder, may appoint one
or more persons to be custodians and, if the corporation is insolvent, to be
receivers, of and for the corporation when:
(i) at any meeting held for the election of directors the stockholders
are so divided that they have failed to elect successors to directors whose
terms have expired or would have expired upon qualification of their successors;
or
-19-
<PAGE>
(ii) the business of the corporation is suffering or is threatened
with irreparable injury because the directors are so divided respecting the
management of the affairs of the corporation that the required vote for action
by the board of directors cannot be obtained and the stockholders are unable to
terminate this division; or
(iii) the corporation has abandoned its business and has failed within
a reasonable time to take steps to dissolve, liquidate or distribute its assets.
11.2 DUTIES OF CUSTODIAN
-------------------
The custodian shall have all the powers and title of a receiver appointed
under Section 291 of the General Corporation Law of Delaware, but the authority
of the custodian shall be to continue the business of the corporation and not to
liquidate its affairs and distribute its assets, except when the Court of
Chancery otherwise orders and except in cases arising under Sections 226(a)(3)
or 352(a)(2) of the General Corporation Law of Delaware.
-20-
<PAGE>
CERTIFICATE OF ADOPTION OF BYLAWS
OF
ACCESS HEALTH, INC.
-------------------
Adoption by Incorporator
------------------------
The undersigned person appointed in the Certificate of Incorporation to act
as the Incorporator of ACCESS HEALTH, INC. hereby adopts the foregoing bylaws,
comprising twenty-four (24) pages, as the Bylaws of the corporation.
Executed this 1st day of December 1991.
/s/ BARRY E. TAYLOR
------------------------------------------
Barry E. Taylor, Incorporator
Certificate by Secretary of Adoption by Incorporator
----------------------------------------------------
The undersigned hereby certifies that he is the duly elected, qualified,
and acting Secretary of Access Health, Inc. and that the foregoing Bylaws,
comprising twenty-four (24) pages, were adopted as the Bylaws of the corporation
on ______________, 19__, by the person appointed in the Certificate of
Incorporation to act as the Incorporator of the corporation.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and affixed
the corporate seal this _____ day of __________ 19___.
_______________________________
Richard C. Miller, Secretary
-21-
<PAGE>
EXHIBIT 4.1
-----------
COMMON STOCK
FBA 15006
THIS CERTIFICATE IS TRANSFERABLE IN
BOSTON, MA OR NEW YORK, NY
COMMON STOCK
SEE REVERSE FOR CERTAIN DEFINITIONS AND A
STATEMENT AS TO THE RIGHTS, PREFERENCES,
PRIVILEGES AND RESTRICTIONS ON SHARES
CUSIP 004311 10 2
[ACCESS LOGO APPEARS HERE]
ACCESS HEALTH
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
THIS CERTIFIES THAT
SPECIMEN
IS THE OWNER OF
FULLY PAID AND NONASSESSABLE SHARES OF THE COMMON STOCK, PAR VALUE $.001 PER
SHARE, OF
ACCESS HEALTH, INC.
transferable on the books of the Corporation by the holder hereof in person or
by duly authorized attorney upon surrender of this Certificate properly
endorsed. This Certificate is not valid until countersigned and registered by
the Transfer Agent and Registrar.
WITNESS the facsimile seal of the Corporation and the facsimile signature of its
duly authorized officers.
[INCORPORATION SEAL APPEARS HERE]
Dated:
/s/ JULIE A. BROOKS /s/ THOMAS E. GARDNER
- ------------------------------ -------------------------------------
Julie A. Brooks Thomas E. Gardner
SECRETARY PRESIDENT AND CHIEF EXECUTIVE OFFICER
COUNTERSIGNED AND REGISTERED:
THE FIRST NATIONAL BANK OF BOSTON
TRANSFER AGENT AND REGISTRAR
BY
- ---------------------------------
AUTHORIZED SIGNATURE
<PAGE>
ACCESS HEALTH, INC.
The corporation is authorized to issue two classes of stock, Common Stock
and Preferred Stock. The Board of Directors of the corporation has authority to
fix the number of shares and the designation of any series of Preferred Stock
and to determine or alter the rights, preferences, privileges and restrictions
granted to or imposed upon any unissued series of Preferred Stock.
A statement of the rights, preferences, privileges and restrictions granted
to or imposed upon the respective classes or series of shares and upon the
holders thereof as established, from time to time, by the Certificate of
Incorporation of the Corporation and by any certificate of determination, and
the number of shares constituting each class and series and the designations
thereof, may be obtained by the holder hereof upon request and without charge
from the Transfer Agent of the Corporation at the offices in Boston, MA or New
York, NY.
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
JTTEN - as joint tenancy with right of survivorship and not as tenants in
common
COMPROP - as community property
UNIF GIFT MIN ACT - __________________ Custodian ___________________
(Cust.) (Minor)
under Uniform Gifts to Minors
Act ____________________________________________
(State)
UNIF TRF MIN ACT - _____________ Custodian (age) __________________
(Cust.)
_________________________ under Uniform Transfers
(Minor)
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
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE ________
_______________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
_______________________________________________________________________________
_______________________________________________________________________________
________________________________________________________________________ shares
of the common stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
______________________________________________________________________ Attorney
to transfer the said stock on the books of the within named Corporation with
full power of substitution in the premises.
Dated _____________________ X _________________________________________________
X _________________________________________________
NOTICE: THE SIGNATURE(S) TO THIS ASSIGNMENT MUST CORRESPOND
WITH THE NAME(S) AS WRITTEN UPON THE FACE OF THE
CERTIFICATE IN PARTICULAR, WITHOUT ALTERATION
OR ENLARGEMENT OR ANY CHANGE WHATEVER.
Signature(s) Guaranteed
By _____________________________________________________________________________
THE SIGNATURE(S) SHOULD BE GUARANTEED BY ANY ELIGIBLE GUARANTOR INSTITUTION
(BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS
WITH APPROVED SIGNATORY GUARANTEE MEDALLION PROGRAM) PURSUANT TO SEC
REGULATIONS.
<PAGE>
EXHIBIT 4.3
-----------
SHAREHOLDER'S REPRESENTATION STATEMENT
AND REGISTRATION RIGHTS AGREEMENT
THIS SHAREHOLDER'S REPRESENTATION STATEMENT AND REGISTRATION RIGHTS
AGREEMENT (the "Agreement") is entered into by the undersigned shareholders
(the "Shareholders") of Clinical Reference Systems, Ltd., a Colorado corporation
("CRS") and Access Health, Inc. a Delaware corporation ("Access Health" or the
"Company"), as of the 25th day of November, 1996, in consideration of and in
connection with that certain Agreement and Plan of Reorganization by and between
Access Health, Access Health Colorado, Inc., a Colorado corporation ("Merger
Sub") and CRS.
RECITALS
A. CRS, Access Health and Merger Sub have entered into an Agreement and
Plan of Reorganization, dated as of September 5, 1996 (the "Reorganization
Agreement"), pursuant to which CRS will be merged with and into Merger Sub (the
"Merger").
B. Upon the consummation of the Merger, subject to the terms and
conditions of the Reorganization Agreement, and in connection therewith, the
Shareholders will become the owners of 170,000 shares of Common Stock of Access
Health (the "Access Health Common Stock").
C. The Access Health Common Stock to be issued in connection with the
Merger has not been registered under the Securities Act of 1933, as amended (the
"Securities Act") in reliance upon the exemption therefrom contained in Section
4(2) of the Securities Act.
NOW, THEREFORE, in consideration of the premises and the mutual agreements,
provisions and covenants set forth in the Reorganization Agreement and in this
Agreement and in consideration of the exchange of the CRS Common Stock for
Access Health Common Stock, the parties hereby represent, warrant, covenant and
do hereby agree as follows:
1. Restricted Stock; Legend
------------------------
1.1 Legend. It is understood that each certificate representing the
------
Access Health Common Stock and any securities issued in respect thereof or
exchange therefor shall bear legends in substantially the following forms (in
addition to any legend required under applicable state securities laws):
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933. NO SALE OR DISPOSITION OF THESE SECURITIES MAY BE
EFFECTED WITHOUT THE PRIOR WRITTEN CONSENT OF THE COMPANY AND
WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN
OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH
<PAGE>
REGISTRATION IS NOT REQUIRED UNDER THE ACT OR RECEIPT OF A NO
ACTION LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION."
1.2 In connection with the limitations on disposition with respect to
the Access Health Common Stock contained in this Agreement, Access Health will
issue stop transfer instructions to its transfer agent with respect to such
shares.
1.3 The undersigned Shareholders understand that Access Health is
under no obligation to register the sale, transfer or other disposition of the
Access Health Common Stock, except as specifically provided in this Agreement
2. Shareholder's Representations. Each Shareholder represents, warrants
-----------------------------
and covenants to Access Health that:
2.1 Experience; Risk. Shareholder is able to fend for itself in the
----------------
transactions contemplated by this Agreement and the Reorganization Agreement and
has the ability to bear the economic risk of the investment, including complete
loss of the investment.
2.2 Investment. Shareholder is acquiring the Access Health Common
----------
Stock for investment for its own account, not as a nominee or agent, and not
with a view to, or for resale in connection with, any distribution thereof, and
Shareholder has no present intention of selling, granting any participation in,
or otherwise distributing the same. Shareholder understands that the Access
Health Common Stock has not been registered under the Securities Act by reason
of a specific exemption from the registration provisions of the Securities Act
which depends upon, among other things, the bona fide nature of the investment
intent and the accuracy of such Shareholder's representations as expressed
herein.
2.3 Restricted Securities; Rule 144. Shareholder understands that
-------------------------------
the Access Health Common Stock is characterized as "restricted securities" under
the federal securities laws inasmuch as they are being acquired from Access
Health in a transaction not involving a public offering and that under such laws
and applicable regulations the Access Health Common Stock may be resold without
registration under the Securities Act only in certain limited circumstances.
Shareholder acknowledges that the Access Health Common Stock must be held
indefinitely unless subsequently registered under the Securities Act or an
exemption from such registration is available. Shareholder is aware of the
provisions of Rule 144 promulgated under the Securities Act which permit limited
resale of shares purchased in a private placement subject to the satisfaction of
certain conditions. Shareholder understands that within sixty (60) days of the
consummation of the transaction contemplated by the Reorganization Agreement
Access Health expects to file with the Securities and Exchange Commission, a
Registration Statement on Form S-3 whereby the shares of Access Health Common
Stock to be issued in such transaction will become Registered Shares.
Immediately upon such Registration, such shares of Access Health Common Stock
will be freely tradeable by persons who are not affiliates of CRS.
-2-
<PAGE>
2.4 Access to Data. Each Shareholder is aware of Access Health's
--------------
business affairs and financial condition and has sufficient information about
Access Health to reach an informed and knowledgeable decision to acquire the
Access Health Common Stock pursuant to the Reorganization Agreement. Each
Shareholder acknowledges he or she has (i) previously received Access Health's
Annual Report for the fiscal year ended September 30, 1995, and (ii) has
previously received Access Health's Quarterly Report for the quarterly period
ended June 30, 1996. Each Shareholder is acquiring such Access Health Common
Stock for investment for such Shareholder's own account and not with a view to
resale or distribution.
3. Transfers of Stock. With respect to any disposition or attempted
------------------
disposition of any Access Health Common Stock, the undersigned Shareholder will
comply with the following procedure:
3.1 With respect to a disposition of the Access Health Common Stock
registered under the Securities Act, the undersigned will dispose of such shares
as provided in the applicable registration statement.
3.2 Each Shareholder who becomes subject to the provisions of Section
16 of the Securities Exchange Act of 1934, as amended (the "Exchange Act") as a
result of their relationship with Access Health subsequent to the date of this
Agreement, hereby agrees to dispose of any shares of Access Health Common Stock
held by such person in conformity with the then current insider trading and
compliance policies of Access Health applicable to similarly situated persons.
4. Registration Rights.
-------------------
4.1 Certain Definitions. As used in this Section 4, the following
-------------------
terms shall have the following respective meanings:
(i) The term "Commission" means the Securities and Exchange
Commission;
(ii) The term "Form S-3" will refer to the registration statement
of the same name (including successors thereto) prepared for filing with the
Commission;
(iii) The term "Holder" means any holder or transferee of
outstanding Registrable Securities who acquired such Registrable Securities in a
transaction or series of transactions not involving any public offering;
(iv) The terms "register", "registered" and "registration" refer
to a registration effected by preparing and filing a registration statement in
compliance with the Securities Act and the declaration or ordering of the
effectiveness of such registration;
(v) The term "Registrable Securities" means the Access Health
Common Stock so long as such shares have not been (i) sold to or through a
broker or dealer or underwriter in
-3-
<PAGE>
a public distribution or a public securities transaction, or (ii) sold in a
transaction exempt from the registration and prospectus delivery requirements of
the Securities Act under Section 4(1) thereof so that all transfer restrictions
and restrictive legends with respect thereto are removed upon the consummation
of such sale, together with any securities issued with respect to the Access
Health Common Stock upon a stock split, stock dividend, recapitalization or
similar event;
(vi) The term "Restricted Securities" means the Access Health
Common Stock required to bear the legends set forth in Section 1.1 hereof; and
(vii) The term "Securities Act" means the Securities Act of
1933, as amended.
4.2 Registration on Form S-3. Access Health will use reasonable
------------------------
efforts to prepare and file a registration statement under the Securities Act on
Form S-3 covering the Registrable Securities (whether or not required by law to
do so) and to have such registration statement declared effective by January 24,
1997. To the extent that Form S-3 is not available to Access Health, Access
Health will prepare and file a registration statement on Form S-1 covering the
Registrable Securities and will use reasonable efforts to cause such
registration statement to be declared effective as soon as possible after the
closing of the Merger. Access Health knows of no reason why Form S-3 would not
be available to register the Access Health Common Stock.
4.3 Registration and Selling Expenses. All expenses incurred in
---------------------------------
connection with any registration proceeding pursuant to Section 4.2 will be
borne by Access Health.
4.4 Registration Procedures. In the case of the registration and
-----------------------
qualification effected by Access Health pursuant to this Section 4, Access
Health will keep each Holder participating therein advised in writing as to the
initiation of such registration or qualification and as to the completion
thereof. Access Health will, as expeditiously as possible:
(i) Prepare and file with the Commission a registration statement
with respect to such Registrable Securities and use its best efforts to cause
such registration statement to become effective, and, keep such registration
statement effective for the lesser of (i) two years, (ii) until such time as the
Holders have informed Access Health in writing that the distribution of their
securities has been completed or (iii) upon a favorable interpretation of the
Field's Bill which would allow the shareholders to sell the Registrable
Securities (without restriction) in reliance on the exemption from the
registration requirements of Section 5 of the Securities Act provided by Section
3(a)(10) thereof.
(ii) Prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement, and use reasonable efforts to cause each such
amendment to become effective, as may be necessary to comply with the provisions
of the Securities Act with respect to the disposition of all securities covered
by such registration statement.
-4-
<PAGE>
(iii) Furnish to the Holders participating in such registration
such reasonable number of copies of the registration statement, preliminary
prospectus, final prospectus and such other documents as such Holders may
reasonable request in order to facilitate the public offering of such
securities.
(iv) Notify each seller of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading or incomplete in the light of the
circumstances then existing, and at the request of any such seller, prepare and
furnish to such seller a reasonable number of copies of supplement to or an
amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchaser of such shares, such prospectus shall not include an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not misleading or
incomplete in the light of the circumstances then existing.
(v) Use reasonable efforts to register and qualify the securities
covered by such registration statement under such other securities or Blue Sky
laws of such jurisdictions as shall be reasonably requested by the Holders,
provided that the Company shall not be required in connection therewith or as
condition thereto to qualify to do business or to file a general consent to
service of process in any such states or jurisdictions.
(vi) Use reasonable efforts to qualify the Registrable Securities
being registered for inclusion on the automated quotation system of the National
Association of Securities Dealers, Inc.
4.5 Information by Holder. The Holder or Holders of Registrable
---------------------
Securities included in the registration will furnish to Access Health such
information regarding such Holder or Holders and the distribution proposed by
such Holder or Holders as Access Health may reasonably request in writing in
connection with any registration, qualification or compliance referred to in
this Section 4.
5. Rule 144 Reporting. With a view to making available the benefits of
------------------
certain rules and regulations of the Commission which may at any time permit the
sale of the Restricted Securities to the public without registration, Access
Health agrees for a period of three years from the date of this Agreement to use
its best efforts to:
5.1 Make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act;
5.2 Use its best efforts to file with the Commission in a timely
manner all reports and other documents required of Access Health under the
Securities Act and the Securities Exchange Act of 1934, as amended; and
-5-
<PAGE>
5.3 So long as a Shareholder owns any Restricted Securities to
furnish to the Shareholder forthwith upon request a written statement by Access
Health as to its compliance with the reporting requirements of said Rule 144 and
of the Securities Act and the Exchange Act, a copy of the most recent annual or
quarterly report of Access Health, and such other reports and documents of
Access Health and other information in the possession of or reasonably
obtainable by Access Health as a Shareholder may reasonably request in availing
itself of any rule or regulation of the Commission allowing a Shareholder to
sell any such securities without registration.
6. Notices. Except as otherwise provided in this Agreement, all notices
-------
or other communications hereunder shall be in writing and delivered personally
or sent by registered or certified mail, postage prepaid. Until otherwise
specified by notice in writing to the other party, such notices, if given to
Access Health, shall be addressed to it at 11020 White Rock Road, Rancho
Cordova, California 95670, Attention: General Counsel; and if given to the
undersigned Shareholders, shall be addressed to them at their addresses set
forth on the stock records of Access Health or Access Health's transfer agent.
7. Miscellaneous.
-------------
7.1 This Agreement shall be binding upon and shall inure to the
benefit of Access Health and the undersigned Shareholders and their respective
assigns, transferees and successors in interest.
7.2 This Agreement shall be governed by and construed in accordance
with the laws of the State of California, excluding its conflicts of law rules,
as applied to agreements entered into in California between California
residents.
7.3 This Agreement may be executed in counterparts. All of such
counterparts, taken together, shall constitute a single instrument.
7.4 This Agreement and the contents hereof shall not be disclosed in
any form by Shareholder to any other person or entity. Each Shareholder further
agrees not to disclose to any other person and to maintain the confidentiality
of all non-public information known to him or her concerning the Merger and the
transactions in connection therewith.
-6-
<PAGE>
IN WITNESS WHEREOF, the Parties below have caused this Shareholder's
Representation Statement and Registration Rights Agreement to be executed as of
the date first written above.
ACCESS HEALTH, INC. SHAREHOLDER
By:
------------------------- ------------------------------------
(Signature)
Title:
---------------------- ------------------------------------
(Print Name)
------------------------------------
(Print Address)
------------------------------------
(Print Address)
------------------------------------
(Print Telephone Number)
------------------------------------
(Social Security or Tax I.D. Number)
Total Number of Shares of Capital Stock owned on the date
---------------
hereof:
Common Stock:
----------------
State of Residence:
----------------
[SIGNATURE PAGE TO SHAREHOLDER'S REPRESENTATION STATEMENT]
-7-
<PAGE>
EXHIBIT 4.4
-----------
- --------------------------------------------------------------------------------
ACCESS HEALTH, INC.
REGISTRATION RIGHTS AGREEMENT
November 18, 1996
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SECTION 1 - REGISTRATION RIGHTS............................ 1
1.1 Definitions......................................... 1
1.2 Restrictive Legend.................................. 2
1.3 Requested Registration.............................. 3
1.4 Piggyback Registration.............................. 4
1.5 Expenses of Registration............................ 5
1.6 Obligations of the Company.......................... 6
1.7 Furnish Information................................. 7
1.8 Delay of Registration............................... 7
1.9 Indemnification..................................... 7
1.10 "Market Stand-Off" Agreement....................... 10
1.11 Transfer of Registration Rights.................... 10
1.12 Termination of Rights.............................. 10
1.13 Rule 144 Reporting................................. 10
SECTION 2 - MISCELLANEOUS.................................. 11
2.1 Waivers and Amendments.............................. 11
2.2 Governing Law....................................... 11
2.3 Successors and Assigns.............................. 11
2.4 Entire Agreement.................................... 11
2.5 Notices............................................. 11
2.6 Severability........................................ 11
2.7 Titles and Subtitles................................ 11
2.8 Counterparts........................................ 11
</TABLE>
-i-
<PAGE>
ACCESS HEALTH, INC.
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT is entered into as of November 18,
1996, by and among ACCESS HEALTH, INC., a Delaware corporation (the "Company"),
and the persons named in Schedule A hereto (the "Stockholders").
RECITALS
WHEREAS, the Stockholders acquired shares of Common Stock of the Company
pursuant to an Agreement and Plan of Reorganization by and among the Company,
Access Acquisition Corp. ("Sub") and Informed Access, Inc. ("Informed Access")
dated September 3, 1996 (the "Merger Agreement") in connection with the merger
of Sub with and into Informed Access. Pursuant to Section 5.22 of the Merger
Agreement, the Company agreed to provide the Stockholders certain registration
rights as provided herein.
WHEREAS, as an inducement for Informed Access to enter into the Merger
Agreement, the Company desires to grant the registration rights to the
Stockholders as contained herein;
NOW, THEREFORE, in consideration of the mutual premises and covenants
hereinafter set forth, the Company and the Stockholders agree as follows:
SECTION 1
REGISTRATION RIGHTS
-------------------
1.1 Definitions. As used in this Agreement, the following terms shall
-----------
have the following meanings:
(a) "SEC" shall mean the Securities and Exchange Commission, or any
other Federal agency at the time administering the Securities Act.
(b) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any similar Federal statute and the rules and regulations
thereunder, all as the same shall be in effect at the time.
(c) "Expiration Date" shall mean the date the Company has published
(in accordance with applicable pooling of interest accounting rules) the
combined financial results of the Company and Informed Access for a period of at
least thirty (30) days of combined operations of the Company and Informed
Access.
(d) "Holder" shall mean any holder of outstanding Registrable
Securities which have not been sold to the public or anyone who holds
outstanding Registrable Securities to whom the registration rights conferred by
this Agreement have been transferred in compliance with Section 1.13 hereof.
<PAGE>
(e) "Register," "registered" and "registration" shall refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement, and compliance with applicable
state securities laws of such states in which Holders notify the Company of
their intention to offer Registrable Securities.
(f) "Registrable Securities" shall mean all of the following to the
extent the same have not been sold to the public (i) any and all shares of
Common Stock of the Company issued pursuant to the Merger Agreement and held by
a Holder, (ii) stock issued in respect of stock referred to in (i) above in any
reorganization, or (iii) stock issued in respect of the stock referred to in (i)
and (ii) as a result of a stock split, stock dividend, recapitalization or
combination.
(g) "Registration Expenses" shall mean all expenses incurred in
connection with a registration hereunder, including, without limitation, all
registration and filing fees, printing expenses, fees and disbursements of
counsel and accountants for the Company, blue sky fees and expenses and the
expense of any special audits incident to or required by any such registration
(but excluding the compensation of regular employees of the Company, which shall
be paid in any event by the Company).
(h) "Securities Act" shall mean the Securities Act of 1933, as
amended, or any similar Federal statute and the rules and regulations
thereunder, all as the same shall be in effect at the time.
(i) "Selling Expenses" shall mean all underwriting discounts and
selling commissions applicable to the sale of Registrable Securities and all
fees and disbursements of counsel for the Holders.
1.2 Restrictive Legend.
------------------
(a) Each certificate representing Registrable Securities held by any
affiliate listed on Schedule 5.12 of the Merger Agreement shall be stamped or
otherwise imprinted with a legend as provided in the Affiliate Agreement as
defined in the Merger Agreement.
(b) The Company agrees to remove promptly stop transfer instructions
and the legend provided in Section 1.2(a) above when (i) such proposed sale,
transfer or other distribution is permitted pursuant to Rule 145(d) under the
Securities Act; (ii) counsel representing Holder, which counsel is reasonably
satisfactory to the Company, shall have advised the Company in a written opinion
letter satisfactory to the Company and Company's legal counsel, and upon which
the Company and its legal counsel may rely, that no registration under the
Securities Act would be required in connection with the proposed sale, transfer
or other disposition; (iii) a registration statement under the Securities Act
covering the Registrable Securities proposed to be sold, transferred or
otherwise disposed of, describing the manner and terms of the proposed sale,
transfer or other dispositions, and containing a current prospectus, shall have
been filed with the SEC and made effective under the Securities Act; (iv) an
authorized representative of the SEC shall have rendered written advice to
Holder (sought by Holder or counsel to Holder, with a copy thereof and all other
related communications delivered to the Company) to the effect that the SEC
would take no action, or that the staff of the SEC would not recommend that
-2-
<PAGE>
the SEC take any action, with respect to the proposed disposition if
consummated; or (v) when the Holder of Registrable Securities is no longer
subject to the restrictions in Rule 145 under Rule 145(d)(2) or (3).
(c) Each Holder consents to the Company making a notation on its
records and giving instructions to any transfer agent of the Registrable
Securities in order to implement the restrictions on transfer established in
this Agreement.
1.3 Requested Registration.
----------------------
(a) At any time after the Expiration Date, in case the Company shall
receive a written request from a Holder or Holders that the Company effect any
registration with respect to Registrable Securities if the anticipated aggregate
offering price, net of underwriting discounts and commissions, would exceed
$10,000,000, the Company shall:
(i) promptly give written notice of the proposed registration
to all other Holders; and
(ii) as soon as practicable use its best efforts to register
(including, without limitation, the execution of an undertaking to file post-
effective amendments, appropriate qualifications under applicable blue sky or
other state Securities Laws, and appropriate compliance with federal government
requirements) the sale and distribution of the Registrable Securities as
specified in such request, together with all or such portion of the Registrable
Securities of any other Holder or Holders as are specified in a written request
given within ten (10) days after receipt of such written notice from the
Company; provided that the Company shall not be obligated to file a registration
statement pursuant to this section:
(A) within one hundred twenty (120) days after the
effectiveness of the registration statement relating to a registration effected
pursuant to this Section 1.3(a) or Section 1.4(a);
(B) in any particular state in which the Company would be
required to execute a general consent to service of process in effecting such
registration;
(C) in any registration having an aggregate sales price
(before deduction of underwriting discounts and commissions) of less than
$10,000,000; or
(D) after the Company has effected three such
registrations pursuant to this Section 1.3(a) and such registrations have been
declared or ordered effective; provided, however, that any registration request
which is subsequently withdrawn shall not be deemed to be a registration under
this subsection (D) if the Holders requesting such registration shall have
reimbursed the Company for all Registration Expenses related to such withdrawn
registration.
-3-
<PAGE>
Subject to the foregoing clauses (A) through (D), the Company shall file a
registration statement covering the Registrable Securities so requested to be
registered as soon as is practicable after receipt of the request or requests of
the Holders; provided, however, that (i) if the Company shall furnish to such
Holders a certificate signed by the President of the Company stating that in the
good faith judgment of the Board of Directors it would be detrimental to the
Company and its stockholders for such registration statement to be filed within
such period, then the Company may defer the filing of such registration
statement for a period of not more than sixty (60) days, provided that the
Company may not exercise such sixty (60) day hold off more than once during any
one hundred and twenty (120) day period, or (ii) if at the time of such request
the Company determines it desires to register shares for the account of the
Company, then the Company can so notify the Holders who shall then have rights
to participate in such registration statement as provided in Section 1.4.
(b) The Holders agree to distribute the Registrable Securities covered
by their request by means of an underwriting, using an underwriter or
underwriters selected by the Holders and reasonably acceptable to the Company.
The right of any Holder to registration pursuant to Section 1.3 shall be
conditioned upon such Holder's participation in such underwriting and the
inclusion of such Holder's Registrable Securities in the underwriting to the
extent provided herein. The Company shall (together with all Holders
distributing their Registrable Securities through such underwriting) enter into
an under writing agreement in customary form with the underwriter or
underwriters selected for such underwriting. Notwithstanding any other provision
of this Section 1.3, if the managing underwriter advises the participating
Holders in writing that marketing factors so as to not materially adversely
impact the market price of the Company's Common Stock require a limitation of
the number of shares to be underwritten (an "Underwriter's Cutback"), the
Company shall so advise all participating Holders, and the number of shares of
Registrable Securities that may be included in the registration and underwriting
shall be allocated among all participating Holders thereof in proportion, as
nearly as practicable, to the respective amounts of Registrable Securities held
by such Holders. If any Holder disapproves of the terms of the underwriting, he
may elect to withdraw therefrom by written notice to the Company and the
managing underwriter. If, by the withdrawal of such Registrable Securities a
greater number of Registrable Securities held by other Holders may be included
in such registration (up to the limit imposed by the underwriters) the Company
shall offer to all Holders who have included Registrable Securities in the
registration the right to include additional Registrable Securities in the same
proportion used in determining the limitation as set forth above. Any
Registrable Securities which are excluded from the underwriting by reason of the
underwriter's marketing limitation or withdrawn from such underwriting shall be
withdrawn from such registration and shall remain subject to the lockup
agreement in Section 1.10.
1.4 Piggyback Registration.
----------------------
(a) If at any time or from time to time, the Company shall determine
to register any of its securities, for its own account or the account of any of
its stockholders, other than a registration relating solely to employee benefit
plans, a registration statement related to the offering of convertible debt
securities of the Company, a registration relating solely to a Securities Act
Rule 145 transaction, or a registration on any form (other than Form S-1, S-2 or
S-3, or their successor forms) which does not
-4-
<PAGE>
include substantially the same information as would be required to be included
in a registration statement covering the sale of Registrable Securities, the
Company will:
(i) give to each Holder written notice thereof as soon as
practicable prior to filing the registration statement; and
(ii) include in such registration and in any underwriting
involved therein, all the Registrable Securities specified in a written request
or requests, made within ten (10) days after receipt of such written notice from
the Company, by any Holder or Holders, except as set forth in Subsection (b)
below.
(b) If the registration is for a registered public offering involving
an underwriting, the Company shall so advise the Holders as a part of the
written notice given pursuant to Subsection 1.4(a)(i). In such event the right
of any Holder to registration pursuant to Section 1.4 shall be conditioned upon
such Holder's participation in such underwriting and the inclusion of such
Holder's Registrable Securities in the underwriting to the extent provided
herein. All Holders proposing to distribute their securities through such
underwriting shall (together with the Company) enter into an underwriting
agreement in customary form with the underwriter or underwriters selected for
such underwriting by the Company. Notwithstanding any other provision of this
Section 1.4, if the managing underwriter determines that marketing factors so
as to not materially adversely impact the market price of the Company's Common
Stock require a limitation of the number of shares to be underwritten, the
managing underwriter may limit the number of Registrable Securities to be
included in the registration and underwriting on behalf of the Holders on a pro
rata basis to not less than thirty-five percent (35%) of total number of shares
to be included in the registration. In such event, the Company shall so advise
all Holders of Registrable Securities which would otherwise be registered and
underwritten pursuant hereto, and the number of shares of Registrable Securities
that may be included in the registration and underwriting shall be allocated
among the Holders in proportion, as nearly as practicable, to the respective
amounts of Registrable Securities held by each of the Holders seeking to
register shares under this Section 1.4. If any Holder disapproves of the terms
of any such underwriting, he may elect to withdraw therefrom by written notice
to the Company and the managing underwriter. If, by the with drawal of such
Registrable Securities a greater number of Registrable Securities held by other
Holders may be included in such registration (up to the limit imposed by the
underwriters) the Company shall offer to all Holders who have included
Registrable Securities in the registration the right to include additional
Registrable Securities in the same proportion used in determining the limitation
as set forth above. Any Registrable Securities excluded or withdrawn from such
underwriting shall be withdrawn from such registration and shall remain subject
to the lockup agreement in Section 1.10.
1.5 Expenses of Registration. All Registration Expenses and Selling
------------------------
Expenses incurred in connection with any registration, qualification or
compliance pursuant to Section 1.3 shall be borne by the Holders of the
securities so registered pro rata on the basis of the number of their shares so
registered, and such Holders shall be obligated prior to any such registration
to pay to the Company by check or wire transfer $100,000 as an advance of such
Registration Expenses and to pay the remainder of such expenses at closing of
the public offering. The Company shall return to the Holders any amount
-5-
<PAGE>
of such advance which is not necessary to reimburse the Company for the
Registration Expenses. All Registration Expenses incurred in connection with any
registration, qualification or compliance pursuant to Section 1.4 shall be borne
by the Company and all Selling Expenses shall be borne by the Holders of the
securities so registered pro rata on the basis of the number of their shares so
registered.
1.6 Obligations of the Company. Whenever required to effect the
--------------------------
registration of any Registrable Securities under this Agreement, the Company
shall, as expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use its best efforts to cause such
registration statement to become effective, and keep such registration statement
effective until the distribution is completed, but not longer than ninety (90)
days after the effective date thereof (excluding any days in which the Company
requires the Holders to cease sales of shares as provided below); provided,
however, that the Company may by written notice require that the Holders
immediately cease sales of shares (for a period not to exceed sixty (60) days)
pursuant to such Registration Statement at any time that (i) the Company becomes
engaged in business activity or negotiation which is not disclosed in the
Registration Statement (or the prospectus included therein) which the Company
reasonably believes must be disclosed therein under applicable law and which the
Company desires to keep confidential for business purposes, (ii) the Company
determines that a particular disclosure so determined to be required to be
disclosed therein would be premature or would adversely affect the Company or
its business or prospects, or (iii) the registration statement can no longer be
used under the existing rules and regulations promulgated under the Securities
Act. The Company shall not be required to disclose to the Holders which of the
reasons specified in clauses (i), (ii) or (iii) above are the basis for
requiring a suspension of sales hereunder.
(b) Prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by such
registration statement.
(c) Furnish to the Holders such number of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
Securities Act, and such other documents as they may reasonably request in order
to facilitate the disposition of the Registrable Securities owned by them that
are included in such registration.
(d) Use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or Blue Sky
laws of such jurisdictions as shall be reasonably requested by the Holders,
provided, however, that the Company shall not be required in connection
therewith or as a condition thereto to qualify to do business or to file a
general consent to service of process in any such states or jurisdictions.
(e) Enter into and perform its obligations under an underwriting
agreement, in usual and customary form, with the managing underwriter(s) of such
offering. Each Holder participating in such underwriting shall also enter into
and perform its obligations under such an agreement.
-6-
<PAGE>
(f) Notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing.
(g) Furnish, at the request of any Holder registering Registrable
Securities, on the date that such Registrable Securities are delivered to the
underwriters for sale, (i) an opinion, dated as of such date, of the counsel
representing the Company for the purposes of such registration, in form and
substance as is customarily given to underwriters in an underwritten public
offering addressed to the underwriters, and (ii) a "comfort" letter dated as of
such date, from the independent certified public accountants of the Company, in
form and substance as is customarily given by independent certified public
accountants to underwriters in an underwritten public offering addressed to the
underwriters.
1.7 Furnish Information. It shall be a condition precedent to the
-------------------
obligations of the Company to take any action pursuant to Sections 1.3 or 1.4
that the selling Holders shall furnish to the Company such information regarding
themselves, the Registrable Securities held by them, and the intended method of
disposition of such securities as shall be required to timely effect the
registration of Registrable Securities.
1.8 Delay of Registration. No Holder shall have any right to obtain or
---------------------
seek an injunction restraining or otherwise delaying any such registration as
the result of any controversy that might arise with respect to the
interpretation or implementation of this Agreement.
1.9 Indemnification. In the event any Registrable Securities are
---------------
included in a registration statement under Sections 1.3. or 1.4:
(a) By the Company. To the extent permitted by law, the Company will
indemnify and hold harmless each Holder, the partners, officers and directors of
each Holder, any underwriter (as defined in the Securities Act) for such Holder
and each person, if any, who controls such Holder or underwriter within the
meaning of the Securities Act or the Exchange Act against any losses, claims,
damages, or liabilities (joint or several) to which they may become subject
under the Securities Act, the Exchange Act or other federal or state law,
insofar as such losses, claims, damages, or liabilities (or actions in respect
thereof) arise out of or are based upon any of the following statements,
omissions or violations (collectively a "VIOLATION"):
(i) any untrue statement or alleged untrue statement of a
material fact contained in such registration statement, including any
preliminary prospectus or final prospectus contained therein or any
amendments or supplements thereto;
-7-
<PAGE>
(ii) the omission or alleged omission to state therein a material
fact required to be stated therein, or necessary to make the statements
therein, in light of the circumstances in which made, not misleading, or
(iii) any violation or alleged violation by the Company of the
Securities Act, the Exchange Act, any federal or state securities law or
any rule or regulation promulgated under the Securities Act, the Exchange
Act or any federal or state securities law in connection with the offering
covered by such registration statement;
and the Company will reimburse each such Holder, partner, officer or director,
underwriter or controlling person for any legal or other expenses reasonably
incurred by them, as incurred, in connection with investigating or defending any
such loss, claim, damage, liability or action; provided however, that the
indemnity agreement contained in this subsection 1.9(a) shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability or action
if such settlement is effected without the consent of the Company (which consent
shall not be unreasonably withheld), nor shall the Company be liable in any such
case for any such loss, claim, damage, liability or action to the extent that it
arises out of or is based upon a Violation which occurs in reliance upon and in
conformity with written information furnished expressly for use in connection
with such registration by such Holder, partner, officer, director, underwriter
or controlling person of such Holder.
(b) By Selling Holders. To the extent permitted by law, each selling
Holder will indemnify and hold harmless the Company, each of its directors, each
of its officers who have signed the registration statement, each person, if any,
who controls the Company within the meaning of the Securities Act, any
underwriter (as defined in the Securities Act) and any other Holder selling
securities under such registration statement or any of such other Holder's
partners, directors or officers or any person who controls such underwriter or
other Holder within the meaning of the Securities Act or the Exchange Act,
against any losses, claims, damages or liabilities (joint or several) to which
the Company or any such director, officer, controlling person, underwriter or
other such Holder, partner or director, officer or controlling person of such
underwriter or other Holder may become subject under the Securities Act, the
Exchange Act or other federal or state law, insofar as such losses, claims,
damages or liabilities (or actions in respect thereto) arise out of or are based
upon any Violation, in each case to the extent (and only to the extent) that
such Violation occurs in reliance upon and in conformity with written
information furnished by such Holder expressly for use in connection with such
registration; and each such Holder will reimburse any legal or other expenses
reasonably incurred by the Company or any such director, officer, controlling
person, underwriter or other Holder, partner, officer, director or controlling
person of such other Holder or underwriter in connection with investigating or
defending any such loss, claim, damage, liability or action; provided, however,
that the indemnity agreement contained in this subsection 1.9(b) shall not apply
to amounts paid in settlement of any such loss, claim, damage, liability or
action if such settlement is effected without the written consent of the Holder,
which consent shall not be unreasonably withheld; and provided further, that the
total amounts payable in indemnity by a Holder under this subsection 1.9(b) in
respect of any Violation shall not exceed the net proceeds received by such
Holder in the registered offering out of which such Violation arises.
-8-
<PAGE>
(c) Notice. Promptly after receipt by an indemnified party under
Section 1.9 of notice of the commencement of any action (including, without
limitation, any governmental action), such indemnified party will, if a claim in
respect thereof is to be made against any indemnifying party under Section 1.9,
deliver to the indemnifying party a written notice of the commencement thereof
and the indemnifying party shall have the right to participate in, and, to the
extent the indemnifying party so desires, jointly with any other indemnifying
party similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
have the right to retain its own counsel, with the fees and expenses to be paid
by the indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to actual
or potential conflict of interests between such indemnified party and any other
party represented by such counsel in such proceeding, and provided further, that
the indemnifying party shall not be required to pay for more than one separate
counsel for all indemnified parties. The failure to deliver written notice to
the indemnifying party within a reasonable time of the commencement of any such
action, if materially prejudicial to its ability to defend such action, shall
relieve such indemnifying party of any liability to the indemnified party under
Section 1.9, but the omission so to deliver written notice to the indemnifying
party will not relieve it of any liability that it may have to any indemnified
party otherwise than under Section 1.9.
(d) Contribution. In order to provide for just and equitable
contribution to joint liability under the Securities Act in any case in which
either (i) any Holder exercising rights under this Agreement, or any controlling
person of any such Holder, makes a claim for indemnification pursuant to Section
1.9 but it is judicially determined (by the entry of a final judgment or decree
by a court of competent jurisdiction and the expiration of time to appeal or the
denial of the last right of appeal) that such indemnification may not be
enforced in such case notwithstanding the fact that Section 1.9 provides for
indemnification in such case, or (ii) contribution under the Securities Act may
be required on the part of any such selling Holder or any such controlling
person in circumstances for which indemnification is provided under Section 1.9;
then, and in each such case, the Company and such Holder will contribute to the
aggregate losses, claims, damages or liabilities to which they may be subject
(after contribution from others) in such proportion as is appropriate to reflect
the relative fault of the indemnifying party or parties on the one hand and the
indemnified party on the other in connection with the statements or omissions
which resulted in such losses, claims, damages or liabilities, as well as any
other relevant equitable considerations. The relative fault shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the indemnifying party or
parties on the one hand or the indemnified party on the other and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such untrue statement or omission; provided, however, that, in any such
case, (A) no such Holder will be required to contribute any amount in excess of
the net proceeds received by such holder from all such Registrable Securities
offered and sold by such Holder pursuant to such registration statement; and (B)
no person or entity guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) will be entitled to contribution from
any person or entity who was not guilty of such fraudulent misrepresentation.
-9-
<PAGE>
(e) Survival. The obligations of the Company and Holders under
Section 1.9 shall survive the completion of any offering of Registrable
Securities in a registration statement.
1.10 "Market Stand-Off" Agreement. Each Holder who gives notice to the
---------------------------
Company of such Holder's desire to participate in any registration under Section
1.3 or 1.4 hereof hereby agrees that it shall not, to the extent requested by
the Company or the managing underwriter, sell or otherwise transfer or dispose
of any Registrable Securities or other shares of stock of the Company then owned
by such Holder (other than to donees, affiliates or partners of the Holder who
agree to be similarly bound) for the period from the filing of the registration
statement until up to ninety (90) days following the date of the final
prospectus in connection with the registration statement.
In order to enforce the foregoing covenant, the Company shall have the right to
place restrictive legends on the certificates representing the shares subject to
this Section 1.10 and to impose stop transfer instructions with respect to the
Registrable Securities of such Holders until the end of such period. The
provisions of this Section 1.10 shall be binding upon any transferee of any
Registrable Securities.
1.11 Transfer of Registration Rights. The rights to cause the Company to
-------------------------------
register securities granted Holders under Sections 1.3 and 1.4 may be assigned
to any constituent partner of a Holder, where such Holder is a partnership, or
to any parent or subsidiary corporation or any officer, director or principal
stockholder thereof, where such Holder is a corporation, provided that (i) such
transfer may otherwise be effected in accordance with the applicable securities
laws, and (ii) the Company is given written notice of such assignment prior to
such assignment.
1.12 Termination of Rights. The rights granted pursuant to this Agreement
---------------------
(a) shall terminate as to any Holder when the aggregate number of Registrable
Securities which such Holder holds (together with other Holders whose sales may
be aggregated) could all be sold in a public sale in compliance with Rule 144
under the Securities Act using the 1% volume limitation contained in Rule
144(e)(1)(i), and (b) shall not be exercisable by any Holder if at the time of
the request for or notice of registration under Section 1.3 and 1.4 such Holder
could sell (together with other Holders whose sales may be aggregated) in a
three (3) month period all Registrable Securities then held by such Holder in
compliance with Rule 144 using the Company's average weekly trading volume
calculation at such time.
1.13 Rule 144 Reporting. With a view to make available the benefits of
------------------
Rule 144 the Company agrees to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act;
(b) use its best efforts to file with the SEC in a timely manner all
reports and other documents required of the Company under the Securities Act and
the Exchange Act; and
(c) furnish to the Holder forthwith upon request a written statement
by the Company as to its compliance with the reporting requirements of Rule 144,
and provide a copy of the most recent
-10-
<PAGE>
annual or quarterly report of the Company, and such other reports and documents
of the Company as a Holder may reasonably request in availing itself of Rule
144.
SECTION 2
MISCELLANEOUS
-------------
2.1 Waivers and Amendments. The rights and obligations of the Company and
----------------------
the rights and obligations of a Holder under this Agreement may be waived
(either generally or in a particular instance, either retroactively or
prospectively, and either for a specified period of time or indefinitely) or
amended, only with the written consent of such Holder.
2.2 Governing Law. This Agreement shall be governed by and construed
-------------
under the laws of the State of California as such laws are applied to contracts
made and to be fully performed entirely within that state between residents of
that state. All disputes arising out of this Agreement shall be subject to the
exclusive jurisdiction and venue of the California State courts of Sacramento
County, California, (or, if there is exclusive federal jurisdiction, the United
States District Court for the Northern District of California) and the parties
consent to the personal and exclusive jurisdiction and venue of these courts.
2.3 Successors and Assigns. Except as otherwise expressly provided
----------------------
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors and administrators of the
parties hereto.
2.4 Entire Agreement. This Agreement constitutes the full and entire
----------------
understanding and agreement between the parties with regard to the subjects
hereof and thereof.
2.5 Notices. All notices and other communications required or permitted
-------
hereunder shall be in writing and shall be mailed by first class, postage
prepaid, addressed (a) if to a Holder, at such Holder's address set forth in
Schedule A hereto, or at such other address as such Holder shall have furnished
to the Company in writing, or (b) if to the Company, at its principal executive
offices (Attention: Chief Financial Officer) or at such other address as the
Company shall have furnished to the Holders in writing. Notices shall be
effective upon mailing.
2.6 Severability. In case any provision of this Agreement shall be
------------
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions of this Agreement shall not in any way be affected or
impaired thereby.
2.7 Titles and Subtitles. The titles of the sections and subsections of
--------------------
this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
2.8 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be an original, but all of which together
constitute one instrument.
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<PAGE>
The foregoing Registration Rights Agreement is hereby executed as of the
date first above written.
"COMPANY"
ACCESS HEALTH, INC.
a Delaware corporation
By: /s/ THOMAS E. GARDNER
------------------------------------------
Thomas E. Gardner
President and Chief Executive Officer
STOCKHOLDER
---------------------------------------------
(Print Name)
---------------------------------------------
(Signature of Holder or Authorized Signatory)
---------------------------------------------
(Print Name and Title of Authorized Signatory
if Applicable)
REGISTRATION RIGHTS AGREEMENT
-12-
<PAGE>
SCHEDULE A
<PAGE>
EXHIBIT 10.9
ACCESS HEALTH, INC.
INDEMNIFICATION AGREEMENT
This INDEMNIFICATION AGREEMENT is made as of the __ day of _____, 1996 by
and between Access Health, Inc., a Delaware corporation (the "Corporation"), and
the individual whose name appears on the signature page hereof (such individual
being referred to herein as the "Indemnified Representative" and, together with
other persons who may execute similar agreements, as "Indemnified
Representatives").
WHEREAS, the Indemnified Representative currently is and will be in the
future serving in one or more capacities as a director, officer, employee, or
agent the Corporation or, at the request of the Corporation, as a director,
officer, employee, agent fiduciary, or trustee of, or in a similar capacity for,
another corporation, partnership, joint venture, trust, employee benefit plan,
or other entity, and in so doing is and will be performing a valuable service to
or on behalf of the Corporation;
WHEREAS, the Board of Directors of the Corporation has determined that, in
order to attract and retain qualified individuals, the Corporation will attempt
to maintain, at its sole expense, liability insurance to protect persons serving
the Corporation and its subsidiaries from certain liabilities. Although the
furnishing of such insurance has been a customary and widespread practice among
United States based corporations and other business enterprises, the Corporation
believes that, given current market conditions and trends, such insurance may be
available to it in the future only at higher premiums and with more exclusions.
At the same time, directors, officers, and other persons in service to
corporations or business enterprises are being increasingly subjected to
expensive and time-consuming litigation relating to, among other things, matters
that traditionally would have been brought only against the Corporation or
business enterprise itself;
WHEREAS, the Indemnified Representative is willing to continue to serve and
to undertake additional duties and responsibilities for and on behalf of the
Corporation on the condition that he or she be indemnified contractually by the
Corporation; and
WHEREAS, as an inducement to the Indemnified Representative to continue to
serve the Corporation, and in consideration for such continued service, the
Corporation has agreed to indemnify the Indemnified Representative upon the
terms set forth herein.
NOW, THEREFORE, in consideration of the promises and mutual covenants
contained herein, and intending to be legally bound hereby, the Corporation and
the Indemnified Representative agree as follows.
1. Agreement to Serve. The Indemnified Representative agrees to serve or
------------------
continue to serve for or on behalf of the Corporation in each Official Capacity
(as hereinafter defined) held now or in the future for so long as the
Indemnified Representative is duly elected or appointed or until such time as
the Indemnified Representative tenders a resignation in writing. This Agreement
shall not be deemed an employment contract between the Corporation or any of its
subsidiaries and any Indemnified
<PAGE>
Representative who is an employee of the Corporation or any of its subsidiaries.
The Indemnified Representative specifically acknowledges that the Indemnified
Representative's employment with the Corporation or any of its subsidiaries, if
any, is at will, and that the Indemnified Representative may be discharged at
any time for any reason, with or without cause, except as may be otherwise
provided in any written employment contract between the Indemnified
Representative and the Corporation or any of its subsidiaries, other applicable
formal severance policies duly adopted by the board of directors of the
Indemnified Representative's employer, or, with respect to service as a director
of the Corporation, by the Corporation's Certificate of Incorporation, by-laws,
and the Delaware General Corporation Law. The foregoing notwithstanding, this
Agreement shall continue in force after the Indemnified Representative has
ceased to serve in any Official Capacity for or on behalf of the Corporation or
any of its subsidiaries.
2. Indemnification.
---------------
(a) Except as provided in Section 3 and 5 hereof, the Corporation
shall indemnify the Indemnified Representative to the fullest extent permitted
or authorized under the Corporation's certificate of incorporation, by-laws, or
Board resolutions or, if greater, by applicable law, against any Liability (as
hereinafter defined) incurred by or assessed against the Indemnified
Representative in connection with any Proceeding (as hereinafter defined) in
which the Indemnified Representative may be involved, as a party or otherwise,
by reason of the fact that the Indemnified Representative is or was serving in
any Official Capacity held now or in the future or that arises out of or relates
to the Indemnified Representative's service in any Official Capacity, including,
without limitation, any Liability resulting from actual or alleged breach or
neglect of duty, error, misstatement, misleading statement, omission,
negligence, act giving rise to strict or product liability, act giving rise to
liability for environmental contamination, or other act or omission, whether
occurring prior to or after the date of this Agreement. As used in this
Agreement.
(1) "Liability" means any damage, judgment, amount paid in
settlement, fine, penalty, punitive damage, or expense of any nature (including
attorneys' fees and expenses);
(2) "Proceeding" means any threatened, pending, or completed
action, suit, appeal, arbitration, investigation, or other proceeding of any
nature, whether civil, criminal, administrative, or investigative, whether
formal or informal, and whether brought by or in the right of the Corporation, a
class of its security holders, or any other party; and
(3) "Official Capacity" means service to the Corporation as a
director or officer or, at the request of the Corporation, as a director,
officer, employee, agent, fiduciary, or trustee of, or in a similar capacity
for, another corporation, partnership, joint venture, trust, employee benefit
plan (including a plan qualified under the Employee Retirement Income Security
Act of 1974), or other entity.
(b) Notwithstanding Section 2(a) hereof, except for a Proceeding
brought pursuant to Section 5(d) of this Agreement, the Corporation shall not
indemnify the Indemnified Representative under this Agreement for any Liability
incurred in a Proceeding initiated by the Indemnified Representative (except
with respect to Liabilities in connection with such a Proceeding that relate to
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<PAGE>
counter-claims or other claims brought against the Indemnified Representative,
or to claims for declaratory relief or to claims brought because of procedural
rules encouraging joinder of claims) unless the Proceeding is authorized, either
before or after commencement of the Proceeding, by the majority vote of a quorum
of the Board of Directors of the Corporation.
(c) If and to the extent the Corporation has a directors and officers
liability insurance policy, the Corporation shall include as a named insured the
Indemnified Representative under such policy during the period of the
Indemnified Representative's employment by the Corporation and for two years
therafter.
3. Exclusions.
----------
(a) The Corporation shall not be liable under this Agreement to make
any payment in connection with any Liability incurred by the Indemnified
Representative:
(1) to the extent payment for such Liability is made to the
Indemnified Representative under an insurance policy obtained by the
Corporation;
(2) to the extent payment is made to the Indemnified
Representative for such Liability by the Corporation under its Certification of
Incorporation, by-laws, the Delaware General Corporation Law, or otherwise than
pursuant to this Agreement;
(3) to the extent such Liability is determined in a final
determination pursuant to Section 5(d) hereof to be based upon or attributable
to the Indemnified Representative gaining any personal profit to which such
Indemnified Representative was not legally entitled;
(4) for any claim by or on behalf of the Corporation for recovery
of profits resulting from the purchase and sale or sale and purchase by such
Indemnified Representative of equity securities of the Corporation pursuant to
Section 16(b) of the Securities Exchange Act of 1934, as amended;
(5) directly attributable to the conduct of the Indemnified
Representative that has been determined in a final determination pursuant to
Section 5(d) hereof to constitute bad faith or active and deliberate dishonesty,
in either such case material to the cause of action or claim at issue in the
Proceeding, or
(6) to the extent such indemnification has been determined in a
final determination pursuant to Section 5(d) hereof to be unlawful.
(b) Any act, omission, liability, knowledge, or other fact of or
relating to any other person, including any other person who is also an
Indemnified Representative, shall not be imputed to the Indemnified
Representative for the purposes of determining the applicability of any
exclusion set forth herein.
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<PAGE>
(c) The termination of a proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent shall not, of
itself, create a presumption that the Indemnified Representative is not entitled
to indemnification under this Agreement.
4. Advancement of Expenses. Notwithstanding any other provision of this
-----------------------
Agreement, the Corporation shall pay any Liability in the nature of an expense
(including attorneys' fees and expenses) incurred in good faith by the
Indemnified Representative in connection with any Proceeding within thirty (30)
days of receipt of a demand for payment by the Indemnified Representative;
provided, however, that the Indemnified Representative shall repay such amount
if it shall ultimately be determined, pursuant to Section 5(d) hereof, that the
Indemnified Representative is not entitled to be indemnified by the Corporation
pursuant to this Agreement. The financial ability of the Indemnified
Representative to repay an advance shall not be a prerequisite to the making of
such advance.
5. Indemnification Procedure.
-------------------------
(a) The Indemnified Representative shall use his best reasonable
efforts to notify promptly the Secretary of the Corporation of the commencement
of any Proceeding or the occurrence of any event which might give rise to a
Liability under this Agreement, but the failure to so notify the Corporation
shall not relieve the Corporation of any obligation which it may have to the
Indemnified Representative under this Agreement or otherwise.
(b) The Corporation shall be entitled, upon notice to the Indemnified
Representative, to assume the defense of any Proceeding with counsel reasonably
satisfactory to the Indemnified Representative involved in such Proceeding or,
if there be more than one (1) Indemnified Representatives involved in such
Proceeding, to a majority of the Indemnified Representatives involved in such
Proceeding. If, in accordance with the foregoing, the Corporation defends the
Proceeding, the Corporation shall not be liable for the expenses (including
attorneys' fees and expenses) of the Indemnified Representative incurred in
connection with the defense of such Proceeding subsequent to the required
notice, unless (i) such expenses (including attorneys' fees) have been
authorized by the Corporation or (ii) the Corporation shall not in fact have
employed counsel reasonably satisfactory to such Indemnified Representative, or
to the majority of Indemnified Representative if more than one (1) is involved,
to assume the defense of such Proceeding or (iii) counsel for the Indemnified
Representative shall have provided a written legal opinion that there may be a
conflict of interest between such Indemnified Representative and other persons
represented by legal counsel selected by the Corporation, in any of which events
the Indemnified Representative shall be entitled to have the expenses of
separate legal counsel paid by the Corporation. The foregoing notwithstanding,
the Indemnified Representative may elect to retain counsel at the Indemnified
Representative's own cost and expense to participate in the defense of such
Proceeding.
(c) The Corporation shall not be required to obtain the consent of the
Indemnified Representative to the settlement of any Proceeding which the
Corporation has undertaken to defend if the Corporation assumes full and sole
responsibility for such settlement and the settlement grants the Indemnified
Representative a complete and unqualified release in respect of the potential
Liability. The Corporation shall not be liable for any amount paid by an
Indemnified Representative in settlement of any
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<PAGE>
Proceeding that is not defended by the Corporation, unless the Corporation has
consented to such settlement, which consent shall not be unreasonably withheld.
(d) Except as set forth herein, any dispute concerning the right to
indemnification or advancement of expenses under this Agreement and any other
dispute arising hereunder, including but not limited to matters of validity,
interpretation, application, and enforcement, shall be determined exclusively by
and through final and binding arbitration in Sacramento, California, or other
location mutually agreed to, each party hereto expressly and conclusively
waiving its, his or her right to proceed to a judicial determination with
respect to such matter; provided, however, that in the event that a claim for
indemnification against liabilities arising under the Securities Act of 1933
(the "Act") (other than the payment by the Corporation of expenses incurred or
paid by a director, officer, or controlling person of the Corporation in the
successful defense of any action, suit, or proceeding) is asserted by a
director, officer, or controlling person in connection with securities being
registered under the Act, the Corporation will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of competent jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue. The arbitration shall be conducted in accordance
with the commercial arbitration rules then in effect of the American Arbitration
Association before a panel of three (3) arbitrators, one (1) of whom shall be
selected by the Corporation, the second of whom shall be selected by the
Indemnified Representative, and the third of whom shall be selected by the other
two (2) arbitrators. Each arbitrator selected as provided herein is required to
be serving or to have served as a director or an executive officer of a
corporation whose shares of common stock, during at least one year of such
service, were quoted in the NASDAQ National Market System or listed on the New
York Stock Exchange or the American Stock Exchange. The Corporation shall
reimburse the Indemnified Representative for the expenses (including attorneys'
fees) incurred in prosecuting or defending such arbitration to the full extent
of such expenses if the Indemnified Representative is awarded 50% or more of the
monetary value of his claim or, if not, to the extent such expenses are
determined by the arbitrators to be allocable to the Corporation. It is
expressly understood and agreed by the parties that a party may compel
arbitration pursuant to this Section 5(d) through an action for specific
performance and that any award entered by the arbitrators may be enforced,
without further evidence or proceedings, in any court of competent jurisdiction.
(e) Upon a payment under this Agreement to the Indemnified
Representative with respect to any Liability, the Corporation shall be
subjugated to the extent of such payment to all of the rights of the Indemnified
Representative to recover against any person with respect to such Liability, and
the Indemnified Representative shall execute all documents and instruments
reasonably required and shall take such other reasonable actions (at the
Corporation's expense) as may reasonably be necessary to secure such rights
including the execution of such documents as may reasonably be necessary for the
Corporation to bring suit to enforce such rights.
6. Contribution. If the indemnification provided for in this Agreement
------------
is unavailable for any reason to hold harmless an Indemnified Representative in
respect of any Liability or portion thereof the Corporation shall contribute to
such Liability or portion thereof in such proportion as is appropriate to
reflect the relative benefits received by the Corporation and the Indemnified
Representative from the transaction giving rise to the Liability.
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7. Non-Exclusivity. The rights granted to the Indemnified Representative
---------------
pursuant to this Agreement shall not be deemed exclusive of any other rights to
which the Indemnified Representative may be entitled under statute, the
provisions of any certificate of incorporation, by-laws, or agreement, a vote of
stockholders or directors, or otherwise, both as to action in an Official
Capacity and in any other capacity.
8. Reliance on Provisions. The Indemnified Representative shall be
----------------------
deemed to be acting in any Official Capacity in reliance upon the rights of
indemnification provided by this Agreement and the indemnification provisions of
the Corporation's Certificate of Incorporation and by-laws.
9. Severability and Reformation. Any provision of this Agreement which
----------------------------
is determined to be invalid or unenforceable in any jurisdiction or under any
circumstances shall be ineffective only to the extent of such invalidity or
unenforceability and shall be deemed reformed to the extent necessary to conform
to the applicable law of such jurisdiction and still give maximum effect to the
intent of the parties hereto, which is to provide full and complete
indemnification and advancement protection to the Indemnified Representative.
Any such determination shall not invalidate or render unenforceable the
remaining provisions hereof and shall not invalidate or render unenforceable
such provision in any other jurisdiction or under any other circumstances.
10. Notices. Any notice, claim, request, or demand required or permitted
-------
hereunder shall be in writing and shall be deemed given if delivered personally
or sent by telegram or by registered or certified mail, first class, postage
prepaid: (i) if to the Corporation to Access Health, Inc., at its principal
executive offices, Attention: Secretary, or (ii) if to any Indemnified
Representative, to the address of such Indemnified Representative listed on the
signature page hereof, or to such other address as any party hereto shall have
specified in a notice duly given in accordance with this Section 10, provided
that reasonable steps are taken to assure that the notice is actually received
by the Person to be notified.
11. Amendments: Binding Effect. No amendment, modification, termination,
---------------------------
or cancellation of this Agreement shall be effective as to the Indemnified
Representative unless signed in writing by the Corporation and the Indemnified
Representative. This Agreement shall be binding upon the Corporation and its
successors and assigns and shall inure to the benefit of the Indemnified
Representative's heirs, executors, administrators, and personal representatives.
12. Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of Delaware, without regard to the
conflict of laws provisions thereof.
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<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
day and year first set forth above.
(Corporate Seal) ACCESS HEALTH, INC.
-----------------------------------
INDEMNIFIED REPRESENTATIVE
-----------------------------------
Name
Address
-----------------------------------
-----------------------------------
-----------------------------------
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<PAGE>
EXHIBIT 10.24
-------------
EMPLOYMENT AGREEMENT
--------------------
AGREEMENT, made and entered into as of December 1, 1996, by and between
Access Health, Inc., a Delaware corporation (together with its Successors and
Assigns permitted under this agreement, the "Company"), and Thomas E. Gardner
(the "Executive"),
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Executive has been employed as President and Chief Operating
Officer of the Company;
WHEREAS, the Company desires that the Executive also be employed as Chief
Executive Officer of the Company; and
WHEREAS, the Company desires to enter into an agreement embodying the terms
of such employment (the "Agreement") and the Executive desires to enter into the
Agreement and to accept such employment, subject to the terms and provisions of
the Agreement;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein and for other good and valuable consideration, the receipt of
which is mutually acknowledged, the Company and the Executive (individually a
"Party" and together the "Parties") agree as follows:
1. Definitions.
-----------
(a) "Affiliate" of a Person shall mean a Person that directly or
indirectly controls, is controlled by, or is under common control with the
Person specified.
(b) "Base Salary" shall mean the salary provided for in Section
4 below, including any increased salary granted to the Executive pursuant to
Section 4.
(c) "Board" shall mean the Board of Directors of the Company.
(d) "Cause" shall mean:
(i) the Executive is convicted of a felony;
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(ii) a failure, which is continued, willful and
unreasonable, by the Executive to substantially perform his principal duties
under this Agreement (other than as a result of physical or mental disability)
after thirty (30) days written notice from the Company specifying the nature of
the Executive's failure and demanding that such failure be cured;
(iii) continued, willful and unreasonable breach by the
Executive of his obligations under the Confidentiality Agreement between himself
and the Company that is attached as Exhibit F after thirty (30) days written
notice from the Company specifying the nature of the Executive's breach and
demanding that such breach be cured;
(iv) one or more acts of deliberate dishonesty committed by
the Executive and resulting in substantial wrongful personal gain, or personal
enrichment, to the Executive at the Company's expense; or (v) conduct by the
Executive that constitutes willful gross neglect or willful gross misconduct in
carrying out his duties under this Agreement, resulting, in either case, in
material economic harm to the Company, unless the Executive believed reasonably
and in good faith that such act or nonact was in or not opposed to the best
interests of the Company, provided that the foregoing exception based on the
-------- ----
Executive's reasonable good faith belief shall not apply if such act or nonact
directly contravened a duly adopted Board resolution known to the Executive.
(e) "Change in Control" shall mean the occurrence of any of the
following events:
(i) any "person," as that term is currently used in
Sections 3(a)(9) and 13(d) of the Securities Exchange Act of 1934, becomes a
"beneficial owner," as that term is currently used in Rule 13d-3 promulgated
under that act, of 45% or more of the Voting Stock of the Company;
(ii) the majority of the Board consists of individuals
other than Incumbent Directors, which term means the members of the Board on the
date of this Agreement; provided that
2
<PAGE>
any person becoming a director subsequent to that date whose election or
nomination for election was supported by two-thirds of the directors who then
comprised the Incumbent Directors shall be considered to be an Incumbent
Director;
(iii) the Company adopts any plan of liquidation providing
for the distribution of all or substantially all of its assets;
(iv) all or substantially all of the assets or business of
the Company is disposed of pursuant to a merger, consolidation or other
transaction or series of related transactions (unless the Stockholders of the
Company immediately prior to such merger, consolidation or other transaction or
series of related transactions beneficially own, directly or indirectly, in
substantially the same proportion as they owned the Voting Stock of the Company,
at least 55% of the Voting Stock (including at least 55% of the general voting
power as described in Section 1(r)) or other ownership interests of the entity
or entities, if any, that succeed to the business of the Company); or
(v) The Company combines with another company and is the
surviving corporation and, immediately after the combination, the Stockholders
of the Company immediately prior to the combination hold, directly or
indirectly, less than 50% of the Voting Stock (or less than 50% of the general
voting power as described in Section 1(r)) of the combined company (there being
excluded from the number of shares held by such Stockholders, but not from the
Voting Stock of the combined company, any shares received by Affiliates of such
other company in exchange for stock of such other company).
(f) "Claim" shall mean any claim, demand, request,
investigation, dispute, controversy, threat, discovery request, or request for
testimony or information.
(g) "Competing Enterprise" shall mean any enterprise that is
principally engaged in providing personal health management products and
services of the kind provided by the Company at the end of the Term of
Employment and that is in direct competition with the Company.
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<PAGE>
(h) "Constructive Termination Without Cause" shall mean a
termination of the Executive's employment at his initiative as provided in
Sections 9(d) and 9(g) following the occurrence of one or more of the following
events without the Executive's prior written consent:
(i) any reduction in the Executive's then current Base
Salary; any reduction in the Executive's on-plan target bonus opportunity under
any applicable annual incentive award plan below the minimum opportunity set
forth herein; or any material reduction in any employee benefit or perquisite
available to the Executive (unless a comparable benefit or perquisite is
substituted or the reduction is part of an across-the-board reduction of such
benefit or perquisite applying to all senior executives of the Company);
(ii) any material diminution in the Executive's duties or
responsibilities, or the assignment to the Executive of duties or
responsibilities that are materially inconsistent with, or that materially
impair his ability to discharge, his duties and responsibilities as set forth in
Section 3, or the loss of any of the Executive's titles or positions as set
forth in Section 3 (other than his title and position as Chief Operating
Officer), or any failure to elect, or continue, the Executive as a member of the
Company's Board of Directors;
(iii) any relocation of the Company's principal office, or
of the Executive's own office location as assigned to him by the Company, to a
location more than 25 miles from Rancho Cordova, California;
(iv) any material breach of this Agreement by the Company
(including without limitation any termination, or purported termination, of this
Agreement (as distinguished from the Executive's employment) by the Company); or
(v) any failure by the Company to obtain the assumption
writing of its obligation to perform all aspects of this Agreement by any
Successor or Assign within 15 days after a merger, consolidation, sale of assets
or similar transaction.
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<PAGE>
(i) "Disability" shall mean the Executive's inability to
substantially perform his duties and responsibilities under this Agreement by
reason of any physical or mental incapacity for a period of one hundred and
twenty (120) consecutive days.
(j) "Effective Date" shall mean September 1, 1996.
(k) "Employee Benefit Plan" shall mean any employee benefit plan
or program made available to the Executive, to the Company's senior executives,
or to the Company's employees generally (including without limitation any
pension, profit sharing, savings, severance, employee stock purchase, 401(k), or
retirement plan, any medical, dental, hospitalization, disability, life, split-
dollar life, vision, accidental death, dismemberment, travel or accident plan or
program, and any plan or program that would currently be classified as an
"employee benefit plan" under Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")) that may be provided or sponsored by
the Company from time to time, including any plan or program that supplements or
succeeds the above described types of plans or programs, whether funded or
unfunded.
(l) "Employee Welfare Benefit Plan" shall mean any medical,
dental, hospitalization, disability, life, split-dollar life, vision, accidental
death, dismemberment, travel or accident plan or program made available to the
Executive, to the Company's senior executives, or to the Company's employees
generally.
(m) "Person" shall mean any individual, corporation,
partnership, joint venture, trust, Employee Benefit Plan, estate, board,
committee, agency, body, or other person or entity.
(n) "Proceeding" shall mean any action, suit or proceeding,
whether civil, criminal, administrative, investigative, appellate, or other.
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<PAGE>
(o) "Stockholders" shall mean the "beneficial owners" (as that
term is defined in Section 1(e)(i)) of the Voting Stock of the Company.
(p) "Stock of the Company" shall mean Voting Stock of the
Company.
(q) "Successors and Assigns" shall mean:
(i) with respect to the Company, any Person who (A)
succeeds to the Company's obligations under this Agreement, whether
contractually or by operation of law, (B) is the surviving company in any
merger, consolidation, reorganization, or other amalgamation with the Company,
or (C) acquires all or substantially all of the business or assets of the
Company; and
(ii) with respect to the Executive, any person who is a
beneficiary, executor, administrator, designee, distributee, devisee, legatee,
heir, representative, assignee, or other successor.
(r) "Voting Stock" shall mean capital stock of any class or
classes having general voting power under ordinary circumstances, in the absence
of contingencies, to elect the directors of a corporation.
(s) "Term of Employment" shall mean the period specified in
Section 2.
2. Term of Employment.
------------------
The Company hereby employs the Executive under this Agreement,
and the Executive hereby accepts such employment under this Agreement, for the
period commencing September 1, 1996 and ending on September 1, 2006, unless the
------
Executive's employment has previously been terminated in strict accordance with
Section 9 of this Agreement.
6
<PAGE>
3. Position, Duties and Responsibilities.
-------------------------------------
Commencing as of the Effective Date and continuing for the
remainder of the Term of Employment, the Executive shall be employed as Chief
Executive Officer and President of the Company and shall have the authority,
duties and responsibilities customarily exercised by an individual serving in
those positions at a company the size and nature of the Company, and shall
perform such duties relating to the management and operation of the Company,
consistent with his position as President and Chief Executive Officer, as may
from time to time be assigned to him by the Board. The Executive shall be
assigned no duties or responsibilities that are materially inconsistent with, or
that materially impair his ability to discharge, the forgoing duties and
responsibilities. During the Term of Employment, the Executive shall devote
substantially all of his working time and efforts to the affairs of the Company;
provided, however that he may also (i) serve on the boards of a reasonable
number of other business entities, trade associations and/or charitable
organizations (including, without limitation, those listed in Exhibit A), (ii)
engage in charitable activities and community affairs, and (iii) manage his
personal investments and affairs, provided that such activities do not
materially interfere with the proper performance of his duties and
responsibilities under this Agreement. At all times during the Term of
Employment, the Executive shall be a member of the Board and shall report solely
and directly to the Board. The Executive shall also serve as Chief Operating
Officer of the Company until a successor, approved by the Board of Directors, is
appointed to that position.
4. Base Salary.
-----------
Commencing as of the Effective Date, the Executive shall receive
an annualized Base Salary of $300,000, payable in accordance with the regular
payroll practices of the Company. The Executive's Base Salary shall be reviewed
no less frequently than annually for increase in the discretion of the Board.
The Executive's Base Salary may not be decreased at any time during the Term of
Employment (including, without limitation, for the purpose of calculating
termination payments under Section 10).
7
<PAGE>
5. Annual Incentive Awards.
-----------------------
During the Term of Employment, the Executive shall participate in
any annual incentive award plan of the Company at a level commensurate with his
positions and responsibilities at the Company. Under such Plans (and this
Agreement), the Executive shall have an on-plan target bonus opportunity each
year of at least 60% of his annualized current Base Salary, payable in that
amount if the performance goals established for the relevant year are met. If
such performance goals are not met, the Executive shall receive a lesser amount
(or nothing) as determined in accordance with applicable guidelines. If such
performance goals are exceeded, the Executive may receive a greater amount as
determined in accordance with applicable guidelines. The Executive shall be paid
his annual incentive award no later than other senior executives are paid their
incentive awards. For the first annual award cycle that ends during the Term of
Employment, the Executive shall receive a pro-rata annual incentive award,
otherwise determined in accordance with this Section, based on the ratio of the
number of days he was employed by the Company during the annual award cycle to
the total number of days in the annual award cycle.
6. Long-Term Incentive and Compensation Plans.
------------------------------------------
(a) General. During the Term of Employment, the Executive
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shall be eligible to participate in all long-term compensation or incentive
plans that the Company may from time to time establish, at a level commensurate
with his positions and responsibilities at the Company.
(b) Stock Option Awards.
-------------------
(i) The Company has granted the Executive (A) an option,
in the form attached hereto as Exhibit B, to purchase 230,000 shares of
registered Stock of the Company (the "Current Option") and (B) an additional
option, in substantially the form attached hereto as Exhibit C, to purchase
250,000 shares of registered Stock of the Company (the "New Option"). The term
of the New Option is ten years, and the exercise price of the New Option is the
fair market value of the Stock of the Company on the date of grant. Except as
otherwise provided in Sections 9
8
<PAGE>
and 10 of this Agreement, the New Option shall become fully vested, fully
exercisable, and fully nonforfeitable on May 8, 1997 with respect to 20% of the
Stock of the Company subject to the New Option, and shall become fully vested,
fully exercisable, and fully nonforfeitable with respect to an additional 20% of
the Stock of the Company subject to the New Option on each of the first four
anniversaries of that date. In the event of any inconsistency between the
provisions of this Agreement and the provisions of the option agreements whose
forms are attached as Exhibits B and C, the provisions of this Agreement, to the
extent more favorable to the Executive, shall control.
(c) Restricted Stock Award. The Company has granted the
----------------------
Executive an award of 2,000 shares of restricted Stock of the Company in the
form attached hereto as Exhibit D. Fifty percent (50%) of this Award irrevocably
vests, and becomes non-forfeitable, on the first anniversary of the Executive's
employment by the Company, and the remainder irrevocably vests, and becomes non-
forfeitable, on the second anniversary of the Executive's employment by the
Company.
7. Employee Benefit Programs.
-------------------------
During the Term of Employment, the Executive shall participate in
all Employee Benefit Plans for which he is eligible, at a level commensurate
with his positions and responsibilities at the Company, other than those in
which he elects not to participate by written notice to the Company. During the
Term of Employment, no benefit otherwise available to the Executive under any
such plan or program shall be materially reduced without the Executive's advance
written consent, other than as part of an across-the-board reduction applying to
all senior executives of the Company. The Executive shall also be entitled to
all post-retirement welfare benefits (if any) as are made available by the
Company to its senior executives, at a level commensurate with his positions and
responsibilities at the Company.
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8. Reimbursement of Business and Other Expenses; Perquisites;
----------------------------------------------------------
Vacations.
- ---------
(a) The Executive is authorized to incur reasonable expenses in
carrying out his duties and responsibilities under this Agreement, and the
Company shall promptly reimburse him for all such business expenses incurred in
connection with carrying out the business of the Company, subject to
documentation in accordance with the Company's policy. The Company shall pay the
legal expenses incurred by the Executive in connection with this Agreement up to
$50,000.00.
(b) During the Term of Employment, the Executive shall be
entitled to participate in all executive fringe benefits and perquisites, at a
level commensurate with his positions and responsibilities at the Company and in
accordance with the terms and conditions for such benefits and perquisites that
are in effect from time to time for the Company's senior executives. The
Executive shall, in any event, receive a monthly automobile allowance from the
Company of no less than $850.00 per month. He shall also receive, in any event,
(i) prompt cash reimbursement (in return for a note (or notes) (the "Note") for
all reasonable expenses incurred in moving his household goods and other
personal property to his new California home and for all selling commissions and
other reasonable costs incurred in selling his New Jersey home; (ii) prompt cash
reimbursement for reasonable temporary living expenses in the Sacramento area
for up to twelve months commencing on his first day of employment with the
Company; and (iii) a payment sufficient to satisfy all tax obligations relating
to any reimbursement, benefit or payment he receives under this sentence,
provided that payment under this clause (iii) shall not exceed $35,000. The Note
referred to in clause (i) of the preceding sentence shall bear no interest, and
the principal balance shall be forgiven ratably over a period of 24 months. If
the Executive's employment is terminated for Cause (as defined herein) or is
terminated voluntarily by the Executive prior to the completion of 24 months of
employment, the Executive shall repay the unforgiven balance of the Note.
(c) The Executive shall accrue vacation and sick leave at a rate of
7.70 hours per two-week pay period.
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9. Termination of Employment.
-------------------------
(a) Termination Due to Death. If the Executive's employment is
------------------------
terminated due to his death, his estate or his beneficiaries (as the case may
be) shall be promptly entitled to:
(i) Base Salary, at his then current rate, through the
date of his death;
(ii) a pro rata annual incentive award for the year in
which his death occurs based on his on-plan target bonus for such year, payable
in a lump sum promptly upon his death, but offset dollar-for-dollar by any
amount paid under Section 9(a)(v) as an annual incentive award for the year in
which his death occurs;
(iii) the continued right to exercise any vested stock
option outstanding on the date of his death for 12 months after that date;
(iv) full vesting, full transferability, and full
nonforfeitability, as of the date of his death, for the restricted stock award
referred to in Section 6(c);
(v) the balance of any incentive awards earned (but not
yet paid);
(vi) any amounts earned, accrued or owing to the Executive
but not yet paid under Section 7 or 8;
(vii) other or additional benefits in accordance with
applicable plans and programs of the Company.
(b) Termination Due to Disability. If the Executive's employment
-----------------------------
is terminated due to his Disability, he shall be promptly entitled to the
following:
(i) Base Salary, at his then current rate, through the
date of termination;
(ii) all disability benefits under any plan or program of
the Company;
11
<PAGE>
(iii) a pro-rata annual incentive award for the year in
which termination due to Disability occurs based on his on-plan target bonus for
such year, payable in a lump sum promptly upon termination, but offset dollar-
for-dollar by any amount paid under Section 9(b)(vi) as an annual incentive
award for the year in which his termination due to Disability occurs;
(iv) the continued right to exercise any vested stock
option outstanding on the date of termination for 12 months after that date;
(v) full vesting, full transferability, and full
nonforfeitability, as of the date of termination, for the restricted stock award
referred to in Section 6(c);
(vi) the balance of any incentive awards earned (but not
yet paid);
(vii) any amounts earned, accrued or owing to the Executive
but not yet paid under Section 7 or 8 above;
(viii) continued coverage, for 24 months after the date of
termination, under each Employee Welfare Benefit Plan of the Company in which he
was participating on the date of termination, with no reduction in benefits and
no increase in cost to the Executive; and
(ix) other or additional benefits in accordance with
applicable plans and programs of the Company.
(c) Termination by the Company for Cause.
------------------------------------
(i) No termination for Cause shall be effective unless
the provisions of this paragraph (i) shall have been complied with. The Board
shall give the Executive written notice of its intention to terminate him for
Cause, such notice (A) to state in reasonable detail the particular
circumstances that constitute the grounds on which the proposed termination for
Cause is based and (B) to be given within six months of the Board learning of
such circumstances. The Executive shall have 10 days after receiving such notice
in which to cure such grounds, to the extent such cure is possible. If he fails
to cure such grounds
12
<PAGE>
to the Board's reasonable satisfaction, the Executive shall then be entitled to
present his position at a meeting (A) of a quorum of the Board or (B) of the
entire Compensation Committee, at the Company's option. Such meeting shall be
held within thirty (30) days of his receiving such notice. If, within five days
following such meeting, the Board gives written notice to the Executive
confirming that, in its judgment, Cause for terminating him on the basis set
forth in the original notice exists, he shall thereupon be terminated for Cause,
subject to review in accordance with the provisions of Section 21.
(ii) If the Company terminates the Executive's
employment for Cause, he shall be promptly entitled to:
(A) Base Salary, at his then current rate,
through the date of his termination;
(B) the balance of any incentive awards earned
(but not yet paid);
(C) the right to exercise any stock option to the
extent provided in any applicable stock option agreement or plan;
(D) any amounts earned, accrued or owing to the
Executive but not yet paid under Section 7 or 8; and
(E) other or additional benefits in accordance
with applicable plans and programs of the Company.
(d) Termination Without Cause or Constructive Termination
-----------------------------------------------------
Without Cause. If the Company terminates the Executive's employment without
- -------------
Cause (other than due to Disability or death) or if there is a Constructive
Termination Without Cause, the Executive shall be promptly entitled to:
(i) Base Salary, at his then current rate, through the
date of termination;
(ii) an amount equaling 125% of the sum of (A) his
annualized Base Salary on the termination date and (B)
13
<PAGE>
his on-plan target bonus award for the year in which he is terminated,
disregarding in each case any reduction that is a basis for a Constructive
Termination Without Cause and with the entire amount payable in a lump sum
promptly upon termination;
(iii) a pro rata annual incentive award for the year in
which termination occurs based on his on-plan target bonus for such year,
payable in a lump sum promptly upon termination;
(iv) the right to exercise, at any time during the twelve
month period that begins on the date of termination (the "Twelve Month Period"),
that portion of any then outstanding stock option that (A) is exercisable on the
date of termination, or (B) is scheduled to become exercisable at any time
during the Twelve Month Period, any such portion to become, and remain, fully
vested and fully nonforfeitable throughout the Twelve Month Period;
(v) full vesting, full transferability, and full
nonforfeitability, as of the date of termination, for the restricted stock award
referred to in Section 6(c);
(vi) the balance of any incentive awards earned (but not
yet paid);
(vii) any amounts earned, accrued or owing to the
Executive, but not yet paid, under Section 7 or 8;
(viii) continued coverage under each Employee Welfare
Benefit Plan of the Company in which he was participating on the date of his
termination for 24 months following that date, at no increase in cost to the
Executive, provided that the Company's obligations under this clause shall be
reduced to the extent that the Executive receives similar coverage and benefits
under the plans of a subsequent employer; and
(ix) other or additional benefits in accordance with
applicable plans and programs of the Company.
(e) Voluntary Termination by the Executive. If the Executive
--------------------------------------
terminates his employment on his own initiative,
14
<PAGE>
other than due to death, Disability or a Constructive Termination Without Cause,
he shall have the same entitlements as provided in Section 9(c)(ii) above for a
termination for Cause. A voluntary termination under this Section 9(e) shall be
effective 30 days after the Executive gives written notice thereof to the
Company and shall not be deemed a breach of this Agreement.
(f) Termination at Will by the Company. In cases not governed
----------------------------------
by Sections 9(a) or 9(b), the Company may terminate the Executive's employment
without Cause by giving written notice thereof to the Executive. Such a
termination shall be effective 30 days after the Executive receives such written
notice, and shall not constitute a breach of this Agreement. The consequences of
such a termination shall be governed by other provisions of this Agreement,
including, without limitation, Section 9(d).
(g) Notice of Termination. No termination of the Executive's
---------------------
employment, other than a termination due to death, shall be effective before the
terminating Party gives the other Party written notice of termination
identifying the grounds for the termination. No termination of the Executive's
employment for Constructive Termination Without Cause shall be effective unless
(i) the Executive, within ninety (90) days of learning of the event(s) on which
such termination is based, gives written notice to the Company identifying such
event(s) with reasonable specificity and requesting cure, (ii) the Company fails
to fully cure such event(s) within 30 days after the Executive gives such
notice, and (iii) the Executive gives written notice of such termination to the
Company within one hundred and fifty (150) days of learning of such event(s).
(h) Employee Welfare Benefit Plans. If after any termination
------------------------------
for Disability, termination without Cause, or Constructive Termination Without
Cause, the Executive or members of his family are precluded from continuing full
participation in any benefit under any Employee Welfare Benefit Plan as provided
in Sections 9(b)(viii) or 9(d)(viii), then the Company shall provide the after-
tax economic equivalent of any benefit forgone. The economic equivalent of any
benefit foregone shall be deemed to be no less than the total cost to the
Executive of obtaining such benefit on an individual basis. Payment of such
after-tax
15
<PAGE>
economic equivalent shall be made quarterly in advance, without discount.
(i) No Mitigation; Limited Offset. In the event of any
-----------------------------
termination of employment under this Section 9, the Executive shall be under no
obligation to seek other employment and there shall be no offset against amounts
due the Executive under this Agreement on account of (i) any remuneration or
other benefit attributable to any subsequent employment that he may obtain
except as specifically provided in this Section 9 or (ii) any claims the
Company, or its Affiliates, may have against the Executive. In the event that
the Executive secures a damage recovery with respect to any tort or statutory
claim against the Company relating to the termination of his employment, any
portion of that recovery not relating to damages caused by breach by the Company
of any of its contractual obligations to the Executive (including, but not
limited to, breach by it of any contractual obligations under this Agreement)
shall be offset, and thus reduced, by any payments previously made to the
Executive pursuant to Sections 9(a)(ii), 9(b)(iii), 9(d)(ii), or 9(d)(iii).
(j) Unused Vacation. Upon any termination of his employment,
---------------
the Executive shall be entitled to a lump sum payment in respect of accrued but
unused vacation days at his then current Base Salary rate.
(k) Nature of Payments. Any amounts due under this Section 9
------------------
are in the nature of severance payments considered to be reasonable by the
Company and are not in the nature of a penalty.
10. Change of Control.
-----------------
(a) If, in connection with or within two years following a
Change in Control, the Executive's employment is terminated without Cause or
there is a Constructive Termination Without Cause, the Executive shall be
entitled to prompt receipt of all the payments and benefits provided in Section
9(d), except that, instead of the payment specified in Section 9(d)(ii), he
shall receive an amount equaling 200% of the sum of (A) his annualized Base
Salary on the termination date and (B) his on-
16
<PAGE>
plan target bonus award for the year in which he is terminated, disregarding in
each case any reduction that is a basis for a Constructive Termination Without
Cause and with the entire amount payable in a lump sum promptly upon
termination.
(b) Concurrent with any Change of Control, all of the
Executive's stock options, stock and other equity-based awards shall become
fully vested, fully exercisable, and fully nonforfeitable.
(c) Anything in this Agreement to the contrary, if the aggregate
of the amounts due the Executive under this Agreement and any other plan or
program of the Company constitutes a "Parachute Payment," as such term is
defined in Section 280G of the Internal Revenue Code of 1986 (the "Code"), and
the amount of the Parachute Payment, reduced by all Federal, state and local
taxes applicable thereto, including the excise tax imposed pursuant to Section
4999 of the Code, is less than the amount the Executive would receive, after
taxes, if he were paid only three times his Base Amount as defined in Section
280G(b)(3) of the Code less $1.00, then the payments to be made to the Executive
under this Agreement which are contingent on a Change in Control shall be
reduced to an amount which, when added to the aggregate of all other payments to
the Executive which are contingent on a Change in Control, will make the total
amount of such payments equal to three times his Base amount less $1.00. The
determinations to be made with respect to this paragraph shall be made by the
public accounting firm that is retained by the Company as of the date
immediately prior to the Change in Control (the "Accounting Firm") which shall
provide detailed supporting calculations both to the Company and the Executive
within fifteen (15) business days of being requested to do so by the Company or
the Executive. In the event that the Accounting Firm is serving as accountant or
auditor for the individual, entity or group effecting the Change in Control, the
Executive shall appoint another nationally recognized public accounting firm to
make the determinations required hereunder (which accounting firm shall then be
referred to as the Accounting Firm hereunder). All fees and expenses of the
Accounting Firm shall be borne solely by the Company. The Executive shall be
responsible for payment of any excise tax imposed under Section
17
<PAGE>
4999 of the Code on any Parachute Payment as described in this Section 10.
11. Noncompetition.
--------------
(a) For a period of 12 months following any termination of the
Executive's employment, the Executive shall not, without the prior written
consent of the Company, either as principal, manager, agent, consultant,
officer, stockholder, partner, investor or employee or in any other capacity,
carry on, be engaged in or have any ownership interest in, any Competing
Enterprise. Notwithstanding the foregoing, (a) the Executive shall not be
precluded from investing in any publicly held entity (provided that the
Executive's beneficial ownership of any class of such entity's securities does
not exceed 3% of the outstanding securities of such class); (b) it shall not be
a breach of this Section 11 if the Executive is employed by a subsidiary or
division of a Competing Enterprise (so long as such subsidiary or division is
not itself a Competing Enterprise and the Executive has no duties or
responsibilities in respect of the portion of the business of such Competing
Enterprise that does compete with the Company); and (c) the Executive shall not
be precluded from serving on the board of, or from owning securities of, any
entity listed on Exhibit A. In this connection, the Executive acknowledges that
this period of time and scope of business are reasonably necessary to protect
the legitimate business interests of the Company.
(b) In the event that the Executive breaches the provisions of
Section 11(a),
(i) all ob ligations of the Company to make any payments
under Sections 9(b)(iii), 9(d)(ii), 9(d)(iii) and 9(d)(viii) shall immediately
terminate and the Executive shall promptly repay, net of all taxes paid or
payable, any amounts he may have received under those Sections;
(ii) any portion of any stock option that became
exercisable solely pursuant to Section 9(d)(iv)(B) shall be forfeited; and
18
<PAGE>
(iii) in the event that the Executive shall already have
exercised any portion of any stock option that became exercisable solely
pursuant to Section 9(d)(iv)(B), he shall return the Stock of the Company that
he acquired on exercise of such portion, or cash equal to the current market
value (based on the closing price on the last trading day preceeding the date of
return) of any such Stock not returned, less sufficient Stock of the Company
and/or cash to make him whole (on an after-tax basis) for the cost of acquiring
such Stock and for any taxes paid or payable in connection with (x) acquiring
such Stock and (y) any subsequent sale or other disposition of any portion of
such Stock occuring before the return of Stock and/or cash pursuant to this
Section 11(b)(iii).
(c) There shall be no remedies for any breach of Section 11(a)
by the Executive other than as set forth in Section 11(b).
12. Withholding.
-----------
All amounts required to be paid by the Company under this
Agreement shall be subject to reduction in order to comply with applicable
Federal, state and local tax withholding requirements.
13. Assignability; Binding Nature.
-----------------------------
This Agreement shall be binding upon and inure to the benefit of
the Parties and their respective Successors and Assigns. No rights or
obligations of the Company under this Agreement may be assigned or transferred
by the Company except that such rights or obligations may be assigned or
transferred pursuant to a merger or consolidation in which the Company is not
the continuing entity, or the sale or liquidation of all or substantially all of
the assets of the Company, provided that the assignee or transferee is the
successor to all or substantially all of the assets of the Company and such
assignee or transferee expressly assumes all the liabilities, obligations and
duties of the Company, as contained in this Agreement. In connection with any
transfer or assignment of its rights, duties, or obligations under this
Agreement, the Company shall take whatever action it legally can to cause such
assignee or transferee to expressly
19
<PAGE>
assume the liabilities, obligations and duties of the Company hereunder. The
Company shall, in any event, remain as unconditional guarantor of prompt payment
and prompt satisfaction of all such liabilities, obligations and duties. No
rights, obligations or duties of the Executive under this Agreement may be
assigned or transferred, other than his rights to compensation and benefits,
which may be transferred only by will or operation of law, except as provided in
Section 19 below.
14. Representations.
---------------
The Company represents and warrants that it is fully authorized
and empowered by action of the Board to enter into this Agreement and that the
performance of its obligations under this Agreement will not violate any law,
regulation or order or any agreement between it and any other Person. The
Executive represents and warrants that he is not subject to any agreement or
obligation that conflicts with or would be breached by the provisions of this
Agreement.
15. Entire Agreement.
----------------
This Agreement (which includes its six Exhibits) contains the
entire understanding and agreement between the Parties concerning the subject
matter hereof and supersede all prior agreements, understandings, discussions,
negotiations and undertakings, whether written or oral, between the Parties with
respect thereto.
16. Amendment or Waiver.
-------------------
No provision in this Agreement may be amended unless such
amendment is set forth in a writing signed by the Parties. No waiver by either
Party of any breach of any condition or provision contained in this Agreement
shall be deemed a waiver of a similar or dissimilar condition or provision at
the same or any prior or subsequent time. To be effective, any waiver must be
set forth in writing and signed by the waiving Party.
20
<PAGE>
17. Severability.
------------
In the event that any provision or portion of this Agreement
shall be determined to be invalid or unenforceable for any reason, in whole or
in part, the remainder of this Agreement shall be unaffected thereby and shall
remain in full force and effect to the fullest extent permitted by law so as to
achieve the purposes of this Agreement.
18. Survivorship.
------------
Except as otherwise expressly set forth in this Agreement, the
respective rights and obligations of the Parties hereunder shall survive any
termination of the Executive's employment. This Agreement itself (as
distinguished from the Executive's employment) may not be terminated by either
Party.
19. Beneficiaries/References.
------------------------
The Executive shall be entitled, to the extent permitted under
any applicable law, to select and change a beneficiary or beneficiaries to
receive any compensation or benefit hereunder following the Executive's death,
by giving written notice to the Company. In the event of the Executive's death
or a judicial determination of his incompetence, references in this Agreement to
the Executive shall be deemed, where appropriate, to refer to his beneficiary,
estate or other legal representative.
20. Governing Law/Jurisdiction.
--------------------------
This Agreement shall be governed, construed, interpreted,
performed and enforced in accordance with the laws of the State of California
without reference to principles of conflict of laws.
21. Resolution of Disputes.
----------------------
Any Claim arising out of or relating to this Agreement (or any
amendment thereof) shall, at the election of either Party, be resolved by
confidential arbitration, to be held in Sacramento County, California, in
accordance with the
21
<PAGE>
Commercial Arbitration Rules of the American Arbitration Association. The
arbitrator(s) shall explain the reasons and basis of his (their) award in detail
and in writing, and judgment upon the award may be entered in any court having
jurisdiction thereof. All costs and expenses relating to resolving any such
Claim (including, without limitation, the attorneys' fees of both Parties),
shall be borne by the Company unless the arbitrator(s) determine that the
principal substantive positions advanced by the Executive lacked substantial
merit, in which event each Party shall bear its own expenses. Pending the final
and conclusive resolution of any such Claim, the Company shall continue prompt
payment of all amounts due the Executive under this Agreement (or any amendment
thereof) and prompt provision of all benefits to which the Executive or his
Successors and Assigns are entitled.
22. Notices.
-------
Any notice, consent, demand, request, or other communication
given to a Party in connection with this Agreement shall be in writing and shall
be deemed to have been given (a) when delivered personally to the Party
specified or (b), provided that reasonable steps are taken to assure that the
communication is actually received by the Party specified, five business days
after being sent by certified or registered mail, postage prepaid, return
receipt requested, duly addressed to the Party concerned at the address
indicated below or to such changed address as such Party may subsequently give
notice of:
If to the Company:
Access Health, Inc.
11020 White Rock Road
Rancho Cordova, CA 95670
attn: General Counsel
With a copy sent by the same means to:
Wilson Sonsini Goodrich & Rosati, PC
650 Page Mill Road
Palo Alto, CA 94304-1050
attn: Barry E. Taylor, Esq.
22
<PAGE>
If to the Executive:
Thomas E. Gardner
3400 Adams Road
Sacramento, CA 95864
With copies sent by the same means to such person(s), at such address(es), as
the Executive may from time to time give notice of:
23. Headings.
--------
The headings of the Sections contained in this Agreement are for
convenience only and shall not be deemed to control or affect the meaning or
construction of any provision of this Agreement.
24. Counterparts.
------------
This Agreement may be executed in two or more counterparts.
23
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first written above.
ACCESS HEALTH, INC.
By: /s/ KENNETH B. PLUMLEE
---------------------------------------
Kenneth B. Plumlee
Chairman of the Board
/s/ THOMAS E. GARDNER
---------------------------------------
Thomas E. Gardner
24
<PAGE>
EXHIBIT A
---------
OUTSIDE BOARD MEMBERSHIPS
-------------------------
InterGo Communications, Inc.
Rx Remedy, Inc.
25
<PAGE>
EXHIBIT B
---------
ACCESS HEALTH, INC.
STOCK OPTION AGREEMENT
I. NOTICE OF STOCK OPTION GRANT
----------------------------
Thomas E. Gardner
You have been granted an option to purchase Common Stock of Access Health,
Inc., a Delaware corporation (the "Company"), subject to the terms and
conditions of this Option Agreement, as follows:
Date of Grant May 30, 1996
-------------------------
Vesting Commencement Date May 8, 1997
-------------------------
Exercise Price per Share $ 50.625
-------------------------
Total Number of Shares Granted 230,000
-------------------------
Total Exercise Price $11,643,750
-------------------------
Type of Option: _____ Incentive Stock Option
X Nonstatutory Stock Option
-----
Term/Expiration Date May 30, 2006
-------------------------
Vesting Schedule:
----------------
This Option shall be exercisable cumulatively to the extent of one-fifth of
the total number of shares subject to the Option on the Vesting Commencement
Date set forth above and an additional one-fifth of the total shares subject to
the Option at the end of each 12-month period thereafter.
Notwithstanding the foregoing, in the event of (i) a reorganization or
merger of the Company with or into any other corporation which will result in
the Company's shareholders immediately prior to such transaction not holding, as
a result of such transaction, at least 50% of the voting power of the surviving
or continuing entity; (ii) a sale of all or substantially all of the assets of
the corporation which will result in the Company's shareholders immediately
prior to such sale not holding, as a result
<PAGE>
of such sale, at least 5% of the voting power of the purchasing entity; or (iii)
a transaction or series of related transactions which result in more than 50% of
the voting power of the Company being controlled by a single holder, the Option
shall become fully exercisable on the business day immediately preceding such
reorganization, merger sale or transaction.
Termination Period:
------------------
This Option may be exercised to the extent exercisable on the date of
termination for one (1) year after the date of termination of employment or
consulting relationship, or such longer period as may be applicable upon death
or Disability of Optionee as provided in Sections 8 and 9 of this Agreement, but
in no event later than the Term/Expiration Date as provided above.
II. AGREEMENT
---------
1. Definitions. As used herein, the following definitions shall apply:
-----------
(a) "Administrator" means the Board or any of its Committees, which
-------------
Committees shall be constituted to satisfy Applicable Laws.
(b) "Applicable Laws" means the legal requirements relating to the
---------------
administration of stock option plans under U. S. state corporate laws, U.S.
federal and state securities laws, the Code and the applicable laws of any
foreign country or jurisdiction where Options are, or will be, granted under the
Plan.
(c) "Board" means the Board of Directors of the Company.
-----
(d) "Code" means the Internal Revenue Code of 1986, as amended.
----
(e) "Committee" means a Committee appointed by the Board.
---------
(f) "Common Stock" means the Common Stock of the Company.
------------
(g) "Consultant" means any person, including an advisor, engaged by
----------
the Company to render services and who is compensated for such services.
(h) "Director" means a member of the Board.
--------
(i) "Disability" means total and permanent disability as defined in
----------
Section 22(e)(3) of the Code.
(j) "Employee" means any person employed by the Company.
--------
-2-
<PAGE>
(k) "Fair Market Value" means, as of any date, the closing sales price
-----------------
(or the closing bid, if no sales were reported) as quoted on such exchange or
system for the last market trading day prior to the time of determination, as
reported in The Wall Street Journal or such other source as the Administrator
deems reliable.
(l) "Nonstatutory Stock Option" means an Option not intended to
-------------------------
qualify as an incentive stock option within the meaning of Section 422 of the
Code.
(m) "Officer" means a person who is an officer of the Company within
-------
the meaning of Section 16 of the Securities Exchange Act of 1934, as amended.
(n) "Share" means a share of the Common Stock, as adjusted in
-----
accordance with Section 11 of this Agreement.
2. Grant of Option. The Administrator hereby grants to the Optionee
---------------
named in the Notice of Grant attached as Part I of this Agreement (the
"Optionee"), an option (the "Option") to purchase a number of Shares, as set
forth in the Notice of Grant, at the exercise price per share set forth in the
Notice of Grant (the "Exercise Price").
This Option is not intended to qualify as an Incentive Stock Option under
Section 422 of the Code.
3. Exercise of Option.
------------------
(a) Right to Exercise. This Option is exercisable during its term in
-----------------
accordance with the Vesting Schedule set out in the Notice of Grant and the
applicable provisions of this Option Agreement. In the event of Optionee's
death, disability or other termination of Optionee's employment or consulting
relationship, the exercisability of the Option is governed by the applicable
provisions of this Option Agreement and any employment agreement between
Optionee and the Company.
(b) Method of Exercise. This Option is exercisable (in whole or in
------------------
part) by delivery of an exercise notice, in the form attached as Exhibit A (the
"Exercise Notice"), which shall state the election to exercise the Option, the
number of Shares in respect of which the Option is being exercised (the
"Exercised Shares"), and such other representations and agreements as may
reasonably be required by the Company pursuant to the provisions of the Plan.
The Exercise Notice shall be signed by the Optionee and shall be delivered in
person or by certified mail to the Secretary of the Company. The Exercise
Notice shall be accompanied by payment of the aggregate Exercise Price as to all
Exercised Shares. This Option shall be deemed to be exercised upon receipt by
the Company of such fully executed Exercise Notice accompanied by such aggregate
Exercise Price.
No Shares shall be issued pursuant to the exercise of this Option unless
such issuance and exercise complies with all relevant provisions of law and the
requirements of any stock exchange or quotation service upon which the Shares
are then listed. Assuming such compliance, for income tax
-3-
<PAGE>
purposes the Exercised Shares shall be considered transferred to the Optionee on
the date the Option is exercised with respect to such Exercised Shares. To the
extent that Exercise Shares are not promptly issued to the Optionee upon any
exercise of the Option, the Company shall make the Optionee whole for any
resulting expense or loss of benefit.
4. Method of Payment. Payment of the aggregate Exercise Price shall be
-----------------
by any of the following, or a combination thereof, at the election of the
Optionee:
(a) cash; or
(b) check; or
(c) delivery of a properly executed exercise notice together with such
other documentation as the Administrator and the broker, if applicable, may
reasonably require to effect an exercise of the Option and delivery to the
Company of the sale or loan proceeds required to pay the exercise price; or
(d) surrender of other Shares which (i) in the case of Shares acquired
upon exercise of an option and to the extent reasonably required by the
Administrator, have been owned by the Optionee for more than six (6) months on
the date of surrender, and (ii) have a Fair Market Value on the date of
surrender equal to the aggregate Exercise Price of the Exercised Shares.
5. Non-Transferability of Option. This Option may not be transferred in
-----------------------------
any manner otherwise than by will or by the laws of descent or distribution or
by gratuitous transfers to immediate family members or to trusts for their
benefit (collectively, "Permitted Transferees") and may be exercised during the
lifetime of Optionee only by the Optionee or by his Permitted Transferees. The
terms of this Option Agreement shall be binding upon the executors,
administrators, heirs, successors and assigns of Optionee.
6. Term of Option. This Option may be exercised only within the term set
--------------
out in the Notice of Grant, and may be exercised during such term only in
accordance with the terms of this Option Agreement.
7. Termination of Employment. Upon termination of an Optionee's status
-------------------------
as an Employee or Consultant (other than as a result of the Optionee's death or
Disability), the Optionee may exercise his or her Option, but (except as
otherwise provided in any written employment agreement between the Company and
the Optionee) only within one (1) year of such date and only to the extent that
the Optionee was entitled to exercise it at the date of such termination (and in
no event later than the expiration of the term of such Option as set forth in
this Agreement). Except as otherwise provided in any written employment
agreement between the Company and the Optionee, to the extent that Optionee was
not entitled to exercise an Option at the date of such termination, and to the
extent that the Optionee does not exercise such Option (to the extent otherwise
so entitled) within the time specified herein, the Option shall terminate. For
purposes of this Section 7, an Optionee's change in status from: (i) Employee to
Consultant, (ii) Consultant to Employee, or (iii)
-4-
<PAGE>
Employee or Consultant to Officer shall not, unless otherwise reasonably
determined by the Administrator, be considered a termination of status as an
Employee or Consultant.
8. Disability of Optionee. Upon termination of an Optionee's status as
----------------------
an Employee or Consultant as a result of the Optionee's Disability, the Optionee
may exercise his or her Option, but only within one (1) year of such date and
only to the extent that the Optionee was entitled to exercise it at the date of
such termination (and in no event later than the expiration of the term of such
Option as set forth in this Agreement). To the extent that Optionee was not
entitled to exercise an Option at the date of such termination, and to the
extent that the Optionee does not exercise such Option (to the extent otherwise
so entitled) within the time specified herein, the Option shall terminate.
9. Death of Optionee. In the event of an Optionee's death, the
-----------------
Optionee's estate or a person who acquired the right to exercise the deceased
Optionee's Option by bequest or inheritance may exercise the Option, but only
within one (1) year of such date and only to the extent that the Optionee was
entitled to exercise it at the date of death (and in no event later than the
expiration of the term of such Option as set forth in this Agreement). To the
extent that Optionee was not entitled to exercise an Option at the date of
death, and to the extent that the Optionee's estate or a person who acquired the
right to exercise such Option does not exercise such Option (to the extent
otherwise so entitled) within the time specified herein, the Option shall
terminate.
10. Adjustments Upon Changes in Capitalization, Dissolution, Merger or
------------------------------------------------------------------
Asset Sale.
- ----------
(a) Changes in Capitalization. Subject to any required action by the
-------------------------
stockholders of the Company, the number of shares of Common Stock covered by the
Option, as well as the price per share of Common Stock covered by each such
outstanding Option, shall be proportionately adjusted for any increase or
decrease in the number of issued shares of Common Stock resulting from a stock
split, reverse stock split, stock dividend, combination or reclassification of
the Common Stock, or any other increase or decrease in the number of issued
shares of Common Stock effected without receipt of consideration by the Company;
provided, however, that conversion of any convertible securities of the Company
shall not be deemed to have been "effected without receipt of consideration."
Such adjustment shall be made by the Board. Except as expressly provided
herein, no issuance by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, shall affect, and no
adjustment by reason thereof shall be made with respect to, the number or price
of shares of Common Stock subject to the Option.
(b) Dissolution or Liquidation. In the event of the proposed
--------------------------
dissolution or liquidation of the Company, the Administrator shall notify the
Optionee at least fifteen (15) days prior to the effective date of such proposed
transaction. The Administrator may declare that the Option shall terminate as
of a date determined by the Administrator and give the Optionee the right to
exercise his or her Option as to all or any part of the optioned stock,
including Shares which would not otherwise be exercisable. To the extent it has
not been previously exercised, the Option will terminate immediately prior to
the consummation of such proposed action.
-5-
<PAGE>
(c) Merger or Asset Sale. In the event of a merger of the Company
--------------------
with or into another corporation, or the sale of substantially all of the assets
of the Company, the Option will be assumed or an equivalent option or right
substituted by the successor corporation or a Parent or Subsidiary of the
successor corporation.
11. Tax Consequences. Some of the federal and state tax consequences
----------------
relating to this Option, as of the date of this Option, are set forth below.
THIS SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE
SUBJECT TO CHANGE. THE OPTIONEE SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING
THIS OPTION OR DISPOSING OF THE SHARES.
(a) Exercising the Nonqualified Stock Option ("NSO"). This Option
------------------------------------------------
does not qualify as an ISO. As a consequence, the optionee may incur regular
federal income tax and state income tax liability upon exercise. The Optionee
will be treated as having received compensation income (taxable at ordinary
income tax rates) equal to the excess, if any, of the fair market value of the
Exercised Shares on the date of exercise over their aggregate Exercise Price.
If the Optionee is an employee, the Company will be required to withhold from
his or her compensation or collect from Optionee and pay to the applicable
taxing authorities an amount equal to a percentage of this compensation income
at the time of exercise.
(b) Disposition of Shares. If the Optionee holds NSO Shares for at
---------------------
least one year, any gain realized on disposition of the Shares will be treated
as long-term capital gain for federal income tax purposes.
12. In the event of any inconsistency between the provisions of this
Agreement and the provisions of any written employment agreement that the
Company and Optionee may enter into, the provisions of the written employment
agreement (to the extent more favorable to the Optionee) shall control.
-6-
<PAGE>
By your signature and the signature of the Company's representative below,
you and the Company agree that this Option is granted and governed by the terms
and conditions of this Option Agreement. Optionee has reviewed this Option
Agreement in its entirety, has had an opportunity to obtain the advice of
counsel prior to executing this Option Agreement and understands the Option
Agreement.
OPTIONEE: ACCESS HEALTH, INC.
By:
_________________________ ___________________________
Signature
Thomas E. Gardner Title:
- ------------------------- ________________________
Print Name
-7-
<PAGE>
EXHIBIT A
---------
EXERCISE NOTICE
Access Health, Inc.
11020 White Rock Road, Suite 100
Rancho Cordova, CA 95670
Attention:
1. Exercise of Option. Effective as of today, __________, 199__, the
------------------
undersigned ("Purchaser") hereby elects to purchase __________ shares (the
"Shares") of the Common Stock of Access Health, Inc. (the "Company") under and
pursuant to the Stock Option Agreement dated as of October 30, 1996 (the "Option
Agreement"). The purchase price for the Shares shall be $32.25, as required by
the Option Agreement.
2. Delivery of Payment. Purchaser herewith delivers to the Company the
-------------------
full purchase price for the Shares.
3. Representations of Purchaser. Purchaser acknowledges that Purchaser
----------------------------
has received, read and understood the Option Agreement and agrees to abide by
and be bound by its terms and conditions.
4. Rights as Shareholder. Subject to the terms and conditions of this
---------------------
Agreement, Purchaser shall have all of the rights of a shareholder of the
Company with respect to the Shares from and after the date that Purchaser
delivers full payment of the Exercise Price until such time as Purchaser
disposes of the Shares.
5. Tax Consultation. Purchaser understands that Purchaser may suffer
----------------
adverse tax consequences as a result of Purchaser's purchase or disposition of
the Shares. Purchaser represents that Purchaser has consulted with any tax
consultants Purchaser deems advisable in connection with the purchase or
disposition of the Shares and that Purchaser is not relying on the Company for
any tax advice.
<PAGE>
6. Entire Agreement; Governing Law. The Option Agreement is incorporated
-------------------------------
herein by reference. This Agreement and the Option Agreement constitute the
entire agreement of the parties and supersede in their entirety all prior
undertakings and agreements of the Company and Purchaser with respect to the
subject matter hereof, and such agreement is governed by California law except
for that body of law pertaining to conflict of laws.
Submitted by: Accepted by:
PURCHASER: ACCESS HEALTH, INC.
__________________________ By:__________________________
Signature
Thomas E. Gardner Its:
- -------------------------- _________________________
Print Name
Address: Address:
- ------- -------
__________________________
11020 White Rock Road, Suite 100
Rancho Cordova, CA 95670
-2-
<PAGE>
EXHIBIT C
---------
1989 INCENTIVE STOCK PLAN
STOCK OPTION AGREEMENT
Unless otherwise defined herein, the terms defined in the Plan shall have
the same defined meanings in this Option Agreement.
I. NOTICE OF STOCK OPTION GRANT
----------------------------
Thomas E. Gardner
You have been granted an option to purchase Common Stock of the Company,
subject to the terms and conditions of the Plan and this Option Agreement, as
follows:
Grant Number _____
Date of Grant November 18, 1996
Vesting Commencement Date May 8, 1997
Exercise Price per Share $34.625
Total Number of Shares Granted 250,000
Total Exercise Price $8,656,250
Type of Option: X Incentive Stock Option (refer to
---
Section 6(a)(ii))
X Nonstatutory Stock Option (refer to
---
Section 6(a)(i))
Term/Expiration Date Tenth Anniversary of Grant Date
Vesting Schedule:
----------------
This Option shall be exercisable cumulatively to the extent of one-fifth of
the total number of shares subject to the Option on the Vesting Commencement
Date set forth above and an additional one fifth of the total shares subject to
the Option at the end of each 12-month period thereafter.
Notwithstanding the foregoing, in the event of any "Change in Control," as that
term is defined in the Employment Agreement entered into as of December 1,
1996, by the Company and the Optionee (the "Employment Agreement"), the Option
shall become fully exercisable.
<PAGE>
Termination Period:
------------------
This Option may be exercised for 30 days after termination of employment or
consulting relationship, or such longer period as may be applicable upon death
or Disability of Optionee as provided in the Plan or the Employment Agreement,
but in no event later than the Term/Expiration Date as provided on Page 1.
II. AGREEMENT
---------
1. Grant of Option. The Plan Administrator of the Company hereby grants
---------------
to the Optionee named in the Notice of Grant attached as Part I of this
Agreement (the "Optionee"), an option (the "Option") to purchase a number of
Shares, as set forth in the Notice of Grant, at the exercise price per share set
forth in the Notice of Grant (the "Exercise Price"), subject to the terms and
conditions of the Plan and of the Employment Agreement, which are incorporated
herein by reference. Subject to Section 14(c) of the Plan, in the event of a
conflict between the terms and conditions of the Plan and the terms and
conditions of this Option Agreement, the terms and conditions of the Plan shall
prevail. In the event of any inconsistency between the provisions of this Option
Agreement and the provisions of the Employment Agreement, the provisions of the
Employment Agreement (to the extent more favorable to the Optionee) shall
control. In the event of any inconsistency between the provisions of the Plan
and the provisions of the Employment Agreement, the Plan shall be deemed amended
to the extent necessary to conform the Plan to the provisions of the Employment
Agreement, and the provisions of the Employment Agreement shall control.
If designated in the Notice of Grant as an Incentive Stock Option,
this Option is intended to qualify as an Incentive Stock Option under Section
422 of the Code.
2. Exercise of Option.
------------------
(a) Right to Exercise. This Option is exercisable during its term in
-----------------
accordance with the Vesting Schedule set out in the Notice of Grant and the
applicable provisions of the Employment Agreement, the Plan and this Option
Agreement. In the event of Optionee's death, disability or other termination of
Optionee's employment or consulting relationship, the exercisability of the
Option is governed by the applicable provisions of the Employment Agreement,
Plan and this Option Agreement.
(b) Method of Exercise. This Option is exercisable (in whole or in
------------------
part) by delivery of an exercise notice, in the form attached as Exhibit A (the
"Exercise Notice"), which shall state the election to exercise the Option, the
number of Shares in respect of which the Option is being exercised (the
"Exercised Shares"), and such other representations and agreements as may
reasonably be required by the Company pursuant to the provisions of the Plan.
The Exercise Notice shall be signed by the Optionee and shall be delivered in
person or by certified mail to the Secretary of the Company. The Exercise
Notice shall be accompanied by payment of the aggregate Exercise Price as to all
Exercised Shares. This Option shall be deemed to be exercised upon receipt by
the Company of such fully executed Exercise Notice accompanied by such aggregate
Exercise Price.
-2-
<PAGE>
No Shares shall be issued pursuant to the exercise of this Option
unless such issuance and exercise complies with all relevant provisions of law
and the requirements of any stock exchange or quotation service upon which the
Shares are then listed. Assuming such compliance, for income tax purposes the
Exercised Shares shall be considered transferred to the Optionee on the date the
Option is exercised with respect to such Exercised Shares. To the extent that
Exercise Shares are not promptly issued to the Optionee upon any exercise of the
Option, the Company shall make the Optionee whole for any resulting expense or
loss of benefit.
3. Method of Payment. Payment of the aggregate Exercise Price shall be
-----------------
by any of the following, or a combination thereof, at the election of the
Optionee:
(a) cash; or
(b) check; or
(c) delivery of a properly executed exercise notice together with
such other documentation as the Administrator and the broker, if applicable,
shall require to effect an exercise of the Option and delivery to the Company of
the sale or loan proceeds required to pay the exercise price; or
(d) surrender of other Shares which (i) in the case of Shares
acquired upon exercise of an option and to the extent reasonably required by the
Administrator, have been owned by the Optionee for more than six (6) months on
the date of surrender, and (ii) have a Fair Market Value on the date of
surrender equal to the aggregate Exercise Price of the Exercised Shares.
4. Non-Transferability of Option. This Option may not be transferred
-----------------------------
in any manner otherwise than by will or by the laws of descent or distribution
or by gratuitous transfers to immediate family members or to trusts for their
benefit (collectively, "Permitted Transferees") and may be exercised during the
lifetime of Optionee only by the Optionee or by his Permitted Transferees. The
terms of the Plan and this Option Agreement shall be binding upon the executors,
administrators, heirs, successors and assigns of the Optionee.
5. Term of Option. This Option may be exercised only within the term
--------------
set out in the Notice of Grant, and may be exercised during such term only in
accordance with the Employment Agreement, the Plan and the terms of this Option
Agreement.
6. Tax Consequences. Some of the federal and state tax consequences
----------------
relating to this Option, as of the date of this Option, are set forth below.
THIS SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE
SUBJECT TO CHANGE. THE OPTIONEE SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING
THIS OPTION OR DISPOSING OF THE SHARES.
-3-
<PAGE>
(a) Exercising the Option.
---------------------
(i) Nonqualified Stock Option ("NSO"). If this Option does not
---------------------------------
qualify as an ISO, the Optionee may incur regular federal income tax and state
income tax liability upon exercise. The Optionee will be treated as having
received compensation income (taxable at ordinary income tax rates) equal to the
excess, if any, of the fair market value of the Exercised Shares on the date of
exercise over their aggregate Exercise Price. If the Optionee is an employee,
the Company will be required to withhold from his or her compensation or collect
from Optionee and pay to the applicable taxing authorities an amount equal to
the percentage of this compensation income at the time of exercise required by
law. The portion of the Option which does not qualify as an ISO as provided in
Section 6(a)(ii) below shall be treated as an NSO. Accordingly, the Option is
an NSO to the extent of 235,560 shares of which 47,112 shares shall vest
annually pursuant to the Vesting Schedule.
(ii) Incentive Stock Option ("ISO"). If this Option qualifies as
------------------------------
an ISO, the Optionee will have no regular federal income tax or state income tax
liability upon its exercise, although the excess, if any, of the fair market
value of the Exercised Shares on the date of exercise over their aggregate
Exercise Price will be treated as an adjustment to the alternative minimum tax
for federal tax purposes and may subject the Optionee to alternative minimum tax
in the year of exercise. Part of the Option qualifies as an ISO to the extent of
14,440 shares of which 2,888 shares shall vest annually pursuant to the Vesting
Schedule.
(b) Disposition of Shares.
---------------------
(i) NSO. If the Optionee holds NSO Shares for at least one
---
year, any gain realized on disposition of the Shares will be treated as long-
term capital gain for federal income tax purposes.
(ii) ISO. If the Optionee holds ISO Shares for at least one year
---
after exercise AND two years after the grant date, any gain realized on
disposition of the Shares will be treated as long-term capital gain for federal
income tax purposes. If the Optionee disposes of ISO Shares within one year
after exercise or two years after the grant date, any gain realized on such
disposition will be treated as compensation income (taxable at ordinary income
rates) to the extent of the excess, if any, of the LESSER OF (A) the difference
between the FAIR MARKET VALUE OF THE SHARES ACQUIRED ON THE DATE OF EXERCISE and
the aggregate Exercise Price, or (B) the difference between the SALE PRICE of
such Shares and the aggregate Exercise Price.
(c) Notice of Disqualifying Disposition of ISO Shares. If the
-------------------------------------------------
Optionee sells or otherwise disposes of any of the Shares acquired pursuant to
an ISO on or before the later of (i) two years after the grant date, or (ii) one
year after the exercise date, the Optionee shall immediately notify the Company
in writing of such disposition. The Optionee agrees that he or she may be
subject to income tax withholding by the Company on the compensation income
recognized from such early disposition of ISO Shares by payment in cash or out
of the current earnings paid to the Optionee.
-4-
<PAGE>
By your signature and the signature of the Company's representative below,
you and the Company agree that this Option is granted under and governed by the
terms and conditions of the Employment Agreement, the Plan and this Option
Agreement. Optionee has reviewed the Employment Agreement, the Plan and this
Option Agreement in their entirety, has had an opportunity to obtain the advice
of counsel prior to executing this Option Agreement and understands the
Employment Agreement, the Plan and Option Agreement.
OPTIONEE: ACCESS HEALTH, INC.
____________________________________ By:___________________________________
Signature
____________________________________ Title:________________________________
Print Name
-5-
<PAGE>
EXHIBIT A
---------
[LETTERHEAD OF ACCESS HEALTH]
1989 INCENTIVE STOCK PLAN
EXERCISE NOTICE
Access Health, Inc.
11020 White Rock Road, Suite 100
Rancho Cordova, CA 95670
Attention: Secretary
1. Exercise of Option. Effective as of today, ___________, 199__, the
------------------
undersigned ("Purchaser") hereby elects to purchase _________ shares (the
"Shares") of the Common Stock of Access Health, Inc. (the "Company") under and
pursuant to the 1989 Incentive Stock Plan (the "Plan") and the Stock Option
Agreement dated _____________ (the "Option Agreement"). The purchase price for
the Shares shall be _____________$, as required by the Option Agreement.
2. Delivery of Payment. Purchaser herewith delivers to the Company the
-------------------
full purchase price for the Shares.
3. Representations of Purchaser. Purchaser acknowledges that Purchaser
----------------------------
has received, read and understood the Plan and the Option Agreement and agrees
to abide by and be bound by their terms and conditions.
4. Rights as Shareholder. Subject to the terms and conditions of this
---------------------
Agreement, Purchaser shall have all of the rights of a shareholder of the
Company with respect to the Shares from and after the date that Purchaser
delivers full payment of the Exercise Price until such time as Purchaser
disposes of the Shares.
5. Tax Consultation. Purchaser understands that Purchaser may suffer
----------------
adverse tax consequences as a result of Purchaser's purchase or disposition of
the Shares. Purchaser represents that Purchaser has consulted with any tax
consultants Purchaser deems advisable in connection with the purchase or
disposition of the Shares and that Purchaser is not relying on the Company for
any tax advice.
-6-
<PAGE>
6. Entire Agreement; Governing Law. The Plan and Option Agreement are
-------------------------------
incorporated herein by reference. This Agreement, the Plan and the Option
Agreement constitute the entire agreement of the parties and supersede in their
entirety all prior undertakings and agreements of the Company and Purchaser with
respect to the subject matter hereof, and such agreement is governed by
California law except for that body of law pertaining to conflict of laws.
Submitted by: Accepted by:
PURCHASER: ACCESS HEALTH, INC.
____________________________________ By:___________________________________
Signature
____________________________________ Title:________________________________
Print Name
Address: Address:
- ------- -------
____________________________________ 11020 White Rock Road, Suite 100
Rancho Cordova, CA 95670
-7-
<PAGE>
EXHIBIT D
---------
ACCESS HEALTH, INC.
RESTRICTED STOCK AGREEMENT
THIS AGREEMENT is made as of May 30, 1996, by and between Access Health,
Inc., a Delaware corporation (the "Company"), and Thomas E. Gardner ("Gardner").
WHEREAS, Gardner is joining the Company as an officer and director of the
Company and Gardner's continued participation is considered by the Company to be
important for the Company's continued growth; and
WHEREAS, in order to award Gardner an equity interest in the Company as an
incentive for Gardner to participate in the affairs of the Company, the Board of
Directors of the Company has granted to Gardner a restricted stock award subject
to the terms and conditions of this Restricted Stock Agreement (the
"Agreement").
THEREFORE, the parties agree as follows:
1. Grant of Stock Award. The Company hereby grants a stock award to
--------------------
Gardner and Gardner hereby accepts the stock award for 2,000 shares of the
Company's Common Stock (the "Shares").
2. Forfeiture Option. In the event Gardner's continuous status as an
-----------------
employee terminates by voluntary resignation (other than in a "Constructive
Termination Without Cause") or for "Cause" for any reason before all of the
Shares are released from the Company's forfeiture option set forth in Section 3
below, the Company shall, upon the date of such termination (as reasonably fixed
and determined by the Company) cause Gardner to forfeit that number of shares
which constitute the Unreleased Shares (as defined in Section 3) by delivering
written notice to Gardner or Gardner's executor. Upon delivery of such notice,
the Company shall become the legal and beneficial owner of the Unreleased Shares
being forfeited and all rights and interests therein or relating thereto, and
the Company shall cancel the number of Unreleased Shares being forfeited by
Gardner.
For purposes of this Agreement, "Cause" and "Constructive Termination
Without Cause" shall be as defined in Gardner's then current employment
agreement with the Company.
3. Release of Shares From Forfeiture Option.
----------------------------------------
(a) One-half (1/2) of the Shares shall be released from the Company's
forfeiture option on May 8, 1997 and the remaining one-half (1/2) of the shares
shall be released on May 8, 1998, provided in each case that Gardner's
continuous status as an employee has not terminated prior to the date of any
such release either by reason of voluntary resignation or for Cause.
<PAGE>
(b) Notwithstanding the foregoing, in the event of (i) a
reorganization or merger of the Company with or into any other corporation which
will result in the Company's shareholders immediately prior to such transaction
not holding, as a result of such transaction, at least 50% of the voting power
of the surviving or continuing entity; (ii) a sale of all or substantially all
of the assets of the corporation which will result in the Company's shareholders
immediately prior to such sale not holding, as a result of such sale, at least
5% of the voting power of the purchasing entity; or (iii) a transaction or
series of related transactions which result in more than 50% of the voting power
of the Company being controlled by a single holder, the Shares shall be released
from the Company's forfeiture option.
(c) Any of the Shares which have not yet been released from the
Company's forfeiture option are referred to herein as "Unreleased Shares."
4. Restriction on Transfer. Except for transfer of the Shares to the
-----------------------
Company or its assignees contemplated by this Agreement, none of the Shares or
any beneficial interest therein shall be transferred, encumbered or otherwise
disposed of in any way until the release of such Shares from the Company's
forfeiture option in accordance with the provisions of this Agreement, other
than by will or the laws of descent and distribution or by gratuitous transfers
to immediate family members or to trusts for their benefit.
5. Legends.
-------
(a) Gardner understands and agrees that the Company shall cause the
legends set forth below or legends substantially equivalent thereto, to be
placed upon any certificate(s) evidencing ownership of the Shares together with
any other legends that may be required by the Company or by applicable state or
federal securities laws:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR
HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE ACT OR,
IN THE OPINION OF COUNSEL SATISFACTORY TO THE ISSUER OF
THESE SECURITIES, SUCH OFFER, SALE OR TRANSFER, PLEDGE OR
HYPOTHECATION IS IN COMPLIANCE THEREWITH.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
CERTAIN RESTRICTIONS ON TRANSFER AND A FORFEITURE OPTION
HELD BY THE ISSUER OR ITS ASSIGNEE(S) AS SET FORTH IN THE
RESTRICTED STOCK AGREEMENT BETWEEN THE ISSUER AND THE
ORIGINAL HOLDER OF THESE SHARES, A COPY OF WHICH MAY BE
OBTAINED AT THE PRINCIPAL OFFICE OF THE ISSUER. SUCH
TRANSFER RESTRICTIONS AND FORFEITURE OPTION ARE BINDING ON
TRANSFEREES OF THESE SHARES.
-2-
<PAGE>
(b) Stop-Transfer Notices. Gardner agrees that, in order to ensure
---------------------
compliance with the restrictions referred to herein, the Company may issue
appropriate "stop transfer" instructions to its transfer agent, if any, and
that, if the Company transfers its own securities, it may make appropriate
notations to the same effect in its own records.
(c) Refusal to Transfer. The Company shall not be required (i) to
-------------------
transfer on its books any Shares that have been sold or otherwise transferred in
violation of any of the provisions of this Agreement or (ii) to treat as owner
of such Shares or to accord the right to vote or pay dividends to any purchaser
or other transferee to whom such Shares shall have been so transferred.
6. Adjustment for Stock Split. All references to the number of Shares
--------------------------
and the purchase price of the Shares in this Agreement shall be appropriately
adjusted to reflect any stock split, stock dividend or other change in the
Shares which may be made by the Company after the date of this Agreement.
7. Gardner's Representations. In connection with this Agreement, Gardner
-------------------------
hereby represents and warrants to the Company as follows:
(a) Restricted Securities. Gardner understands and acknowledges
---------------------
that:
(i) the Shares have not been registered under the Securities
Act of 1933, as amended (the "Act"), and the Shares must
be held indefinitely unless subsequently registered under
the Act or an exemption from such registra tion is
available and the Company is under no obligation to
register the Shares;
(ii) the share certificates representing the Shares will be
stamped with the legends specified in Section 6 hereof;
and
(iii) the Company will make a notation in its records of the
aforementioned restrictions on transfer and legends.
(b) Disposition under Rule 144. Gardner understands that the Shares
--------------------------
are restricted securities within the meaning of Rule 144 promulgated under the
Act; that the exemption from registration under Rule 144 will not be available
in any event for at least two years from the date of purchase and payment (the
"Holding Period") of the Shares, and even then will not be available unless (i)
a public trading market then exists for the Common Stock of the Company, (ii)
adequate information concerning the Company is then available to the public, and
(iii) other terms and conditions of Rule 144 are complied with; and that any
sale of the Shares may be made only in limited amounts in accordance with such
terms and conditions.
8. Tax Consequences. Gardner has had the opportunity to review with his
----------------
own tax advisors the federal, state, local and foreign tax consequences of this
investment and the transactions contemplated by this Agreement. Gardner is not
relying on any statements or representations of the Company or any
-3-
<PAGE>
of its agents. Gardner understands that Gardner (and not the Company) shall be
responsible for the his own tax liability that may arise as a result of this
investment or the transactions contemplated by this Agreement. Gardner
understands that Section 83 of the Internal Revenue Code of 1986, as amended
(the "Code"), taxes as ordinary income the difference between the purchase price
for the Shares and the fair market value of the Shares as of the date any
restrictions on the Shares lapse. In this context, "restriction" includes the
right of the Company to cause Gardner to forfeit the Shares pursuant to its
forfeiture option. Gardner understands that Gardner may elect to be taxed at the
time the Shares are awarded rather than when and as the Company's forfeiture
option expires by filing an election under Section 83(b) of the Code with the
I.R.S. within thirty (30) days from the date of the award.
GARDNER ACKNOWLEDGES THAT IT IS GARDNER'S SOLE RESPONSIBILITY AND NOT THE
COMPANY'S TO FILE TIMELY THE ELECTION UNDER SECTION 83(B), EVEN IF GARDNER
REQUESTS THE COMPANY OR ITS REPRESENTATIVES TO MAKE THIS FILING ON GARDNER'S
BEHALF.
9. General Provisions.
------------------
(a) In the event of any inconsistency between the provisions of this
Option Agreement and the provisions of any written employment agreement that
Gardner and the Company may enter into, the employment agreement provisions (to
the extent more favorable to Gardner) shall control.
(b) This Agreement shall be governed by the laws of the State of
California. This Agreement represents the entire agreement between the parties
with respect to the award of Common Stock by the Company to Gardner.
(c) Any notice, demand or request required or permitted to be given
by either the Company or Gardner pursuant to the terms of this Agreement shall
be in writing and shall be deemed given when delivered personally or deposited
in the U.S. mail, First Class with postage prepaid, and addressed to the parties
at the addresses of the parties set forth at the end of this Agreement or such
other address as a party may request by notifying the other in writing.
(d) The rights and benefits of the Company under this Agreement shall
be transferable to any one or more persons or entities, and all covenants and
agreements hereunder shall inure to the benefit of, and be enforceable by the
Company's successors and assigns. The rights and obligations of Gardner under
this Agreement may only be assigned with the prior written consent of the
Company.
(e) Either party's failure to enforce any provision or provisions of
this Agreement shall not in any way be construed as a waiver of any such
provision or provisions, nor prevent that party from thereafter enforcing each
and every other provision of this Agreement. The rights granted both parties
herein are cumulative and shall not constitute a waiver of either party's right
to assert all other legal remedies available to it under the circumstances.
(f) Gardner agrees upon reasonable request to execute any further
documents or instruments necessary or desirable to carry out the purposes or
intent of this Agreement.
-4-
<PAGE>
(g) GARDNER ACKNOWLEDGES AND AGREES THAT, EXCEPT AS OTHERWISE
PROVIDED IN ANY WRITTEN EMPLOYMENT AGREEMENT GARDNER AND THE COMPANY MAY ENTER
INTO, THE RELEASE OF SHARES FROM THE FORFEITURE OPTION OF THE COMPANY PURSUANT
TO SECTION 3 HEREOF IS EARNED ONLY BY CONTINUING SERVICE AS AN EMPLOYEE AT THE
WILL OF THE COMPANY (NOT THROUGH THE ACT OF BEING HIRED OR BEING AWARDED SHARES
HEREUNDER). GARDNER FURTHER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE
TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET FORTH HEREIN DO
NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS AN
EMPLOYEE FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL NOT
INTERFERE WITH GARDNER'S RIGHT OR THE COMPANY'S RIGHT TO TERMINATE GARDNER'S
EMPLOYMENT AT ANY TIME, WITH OR WITHOUT CAUSE.
By his signature below, Gardner hereby accepts this Agreement subject to
all of the terms and provisions contained herein. Gardner has reviewed this
Agreement in its entirety, has had an opportunity to obtain the advice of
counsel prior to executing this Agreement and fully understands all provisions
of this Agreement. Gardner agrees to accept as binding, conclusive and final all
decisions or interpretations of the Board of Directors upon any questions
arising under this Agreement. Gardner further agrees to notify the Company upon
any change in the residence set forth below.
GARDNER: ACCESS HEALTH, INC.
_________________________________ By:________________________________
Thomas E. Gardner
_________________________________ Title:_____________________________
Address
-5-
<PAGE>
EXHIBIT E
---------
ACCESS HEALTH, INC.
INDEMNIFICATION AGREEMENT
This INDEMNIFICATION AGREEMENT is made as of the 1st day of December,
1996 by and between Access Health, Inc., a Delaware corporation (the
"Corporation"), and the individual whose name appears on the signature page
hereof (such individual being referred to herein as the "Indemnified
Representative" and, together with other persons who may execute similar
agreements, as "Indemnified Representatives").
WHEREAS, the Indemnified Representative currently is and will be in
the future serving in one or more capacities as a director, officer, employee,
or agent the Corporation or, at the request of the Corporation, as a director,
officer, employee, agent fiduciary, or trustee of, or in a similar capacity for,
another corporation, partnership, joint venture, trust, employee benefit plan,
or other entity, and in so doing is and will be performing a valuable service to
or on behalf of the Corporation;
WHEREAS, the Board of Directors of the Corporation has determined
that, in order to attract and retain qualified individuals, the Corporation will
attempt to maintain, at its sole expense, liability insurance to protect persons
serving the Corporation and its subsidiaries from certain liabilities. Although
the furnishing of such insurance has been a customary and widespread practice
among United States based corporations and other business enterprises, the
Corporation believes that, given current market conditions and trends, such
insurance may be available to it in the future only at higher premiums and with
more exclusions. At the same time, directors, officers, and other persons in
service to corporations or business enterprises are being increasingly subjected
to expensive and time-consuming litigation relating to, among other things,
matters that traditionally would have been brought only against the Corporation
or business enterprise itself;
WHEREAS, the Indemnified Representative is willing to continue to
serve and to undertake additional duties and responsibilities for and on behalf
of the Corporation on the condition that he or she be indemnified contractually
by the Corporation; and
WHEREAS, as an inducement to the Indemnified Representative to
continue to serve the Corporation, and in consideration for such continued
service, the Corporation has agreed to indemnify the Indemnified Representative
upon the terms set forth herein.
NOW, THEREFORE, in consideration of the promises and mutual covenants
contained herein, and intending to be legally bound hereby, the Corporation and
the Indemnified Representative agree as follows.
1. Agreement to Serve. The Indemnified Representative agrees to
------------------
serve or continue to serve for or on behalf of the Corporation in each Official
Capacity (as hereinafter defined) held now or in the future for so long as the
Indemnified Representative is duly elected or appointed or until such time as
the
<PAGE>
Indemnified Representative tenders a resignation in writing. This Agreement
shall not be deemed an employment contract between the Corporation or any of its
subsidiaries and any Indemnified Representative who is an employee of the
Corporation or any of its subsidiaries. The Indemnified Representative
specifically acknowledges that the Indemnified Representative's employment with
the Corporation or any of its subsidiaries, if any, is at will, and that the
Indemnified Representative may be discharged at any time for any reason, with or
without cause, except as may be otherwise provided in any written employment
contract between the Indemnified Representative and the Corporation or any of
its subsidiaries, other applicable formal severance policies duly adopted by the
board of directors of the Indemnified Representative's employer, or, with
respect to service as a director of the Corporation, by the Corporation's
Certificate of Incorporation, by-laws, and the Delaware General Corporation Law.
The foregoing notwithstanding, this Agreement shall continue in force after the
Indemnified Representative has ceased to serve in any Official Capacity for or
on behalf of the Corporation or any of its subsidiaries.
2. Indemnification.
---------------
(a) Except as provided in Section 3 and 5 hereof, the
Corporation shall indemnify the Indemnified Representative to the fullest extent
permitted or authorized under the Corporation's certificate of incorporation,
by-laws, or Board resolutions or, if greater, by applicable law, against any
Liability (as hereinafter defined) incurred by or assessed against the
Indemnified Representative in connection with any Proceeding (as hereinafter
defined) in which the Indemnified Representative may be involved, as a party or
otherwise, by reason of the fact that the Indemnified Representative is or was
serving in any Official Capacity held now or in the future or that arises out of
or relates to the Indemnified Representative's service in any Official Capacity,
including, without limitation, any Liability resulting from actual or alleged
breach or neglect of duty, error, misstatement, misleading statement, omission,
negligence, act giving rise to strict or product liability, act giving rise to
liability for environmental contamination, or other act or omission, whether
occurring prior to or after the date of this Agreement. As used in this
Agreement.
(1) "Liability" means any damage, judgment, amount paid in
settlement, fine, penalty, punitive damage, or expense of any nature (including
attorneys' fees and expenses);
(2) "Proceeding" means any threatened, pending, or
completed action, suit, appeal, arbitration, investigation, or other proceeding
of any nature, whether civil, criminal, administrative, or investigative,
whether formal or informal, and whether brought by or in the right of the
Corporation, a class of its security holders, or any other party; and
(3) "Official Capacity" means service to the Corporation as
a director or officer or, at the request of the Corporation, as a director,
officer, employee, agent, fiduciary, or trustee of, or in a similar capacity
for, another corporation, partnership, joint venture, trust, employee benefit
plan (including a plan qualified under the Employee Retirement Income Security
Act of 1974), or other entity.
(b) Notwithstanding Section 2(a) hereof, except for a Proceeding
brought pursuant to Section 5(d) of this Agreement, the Corporation shall not
indemnify the Indemnified Representative
-2-
<PAGE>
under this Agreement for any Liability incurred in a Proceeding initiated by the
Indemnified Representative (except with respect to Liabilities in connection
with such a Proceeding that relate to counter-claims or other claims brought
against the Indemnified Representative, or to claims for declaratory relief or
to claims brought because of procedural rules encouraging joinder of claims)
unless the Proceeding is authorized, either before or after commencement of the
Proceeding, by the majority vote of a quorum of the Board of Directors of the
Corporation.
(c) If and to the extent the Corporation has a directors and
officers liability insurance policy, the Corporation shall include the
Indemnified Representative as a named insured under such policy during the
period of the Indemnified Representative's employment by the Corporation and for
two years thereafter.
3. Exclusions.
----------
(a) The Corporation shall not be liable under this Agreement to
make any payment in connection with any Liability incurred by the Indemnified
Representative:
(1) to the extent payment for such Liability is made to the
Indemnified Representative under an insurance policy obtained by the
Corporation;
(2) to the extent payment is made to the Indemnified
Representative for such Liability by the Corporation under its Certification of
Incorporation, by-laws, the Delaware General Corporation Law, or otherwise than
pursuant to this Agreement;
(3) to the extent such Liability is determined in a final
determination pursuant to Section 5(d) hereof to be based upon or attributable
to the Indemnified Representative gaining any personal profit to which such
Indemnified Representative was not legally entitled;
(4) for any claim by or on behalf of the Corporation for
recovery of profits resulting from the purchase and sale or sale and purchase by
such Indemnified Representative of equity securities of the Corporation pursuant
to Section 16(b) of the Securities Exchange Act of 1934, as amended;
(5) directly attributable to the conduct of the Indemnified
Representative that has been determined in a final determination pursuant to
Section 5(d) hereof to constitute bad faith or active and deliberate dishonesty,
in either such case material to the cause of action or claim at issue in the
Proceeding, or
(6) to the extent such indemnification has been determined
in a final determination pursuant to Section 5(d) hereof to be unlawful.
(b) Any act, omission, liability, knowledge, or other fact of or
relating to any other person, including any other person who is also an
Indemnified Representative, shall not be imputed to
-3-
<PAGE>
the Indemnified Representative for the purposes of determining the applicability
of any exclusion set forth herein.
(c) The termination of a proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its equivalent
shall not, of itself, create a presumption that the Indemnified Representative
is not entitled to indemnification under this Agreement.
4. Advancement of Expenses. Notwithstanding any other provision of
-----------------------
this Agreement, the Corporation shall pay any Liability in the nature of an
expense (including attorneys' fees and expenses) incurred in good faith by the
Indemnified Representative in connection with any Proceeding within thirty (30)
days of receipt of a demand for payment by the Indemnified Representative;
provided, however, that the Indemnified Representative shall repay such amount
if it shall ultimately be determined, pursuant to Section 5(d) hereof, that the
Indemnified Representative is not entitled to be indemnified by the Corporation
pursuant to this Agreement. The financial ability of the Indemnified
Representative to repay an advance shall not be a prerequisite to the making of
such advance.
5. Indemnification Procedure.
-------------------------
(a) The Indemnified Representative shall use his best reasonable
efforts to notify promptly the Secretary of the Corporation of the commencement
of any Proceeding or the occurrence of any event which might give rise to a
Liability under this Agreement, but the failure to so notify the Corporation
shall not relieve the Corporation of any obligation which it may have to the
Indemnified Representative under this Agreement or otherwise.
(b) The Corporation shall be entitled, upon notice to the
Indemnified Representative, to assume the defense of any Proceeding with counsel
reasonably satisfactory to the Indemnified Representative involved in such
Proceeding or, if there be more than one (1) Indemnified Representatives
involved in such Proceeding, to a majority of the Indemnified Representatives
involved in such Proceeding. If, in accordance with the foregoing, the
Corporation defends the Proceeding, the Corporation shall not be liable for the
expenses (including attorneys' fees and expenses) of the Indemnified
Representative incurred in connection with the defense of such Proceeding
subsequent to the required notice, unless (i) such expenses (including
attorneys' fees) have been authorized by the Corporation or (ii) the Corporation
shall not in fact have employed counsel reasonably satisfactory to such
Indemnified Representative, or to the majority of Indemnified Representative if
more than one (1) is involved, to assume the defense of such Proceeding or (iii)
counsel for the Indemnified Representative shall have provided a written legal
opinion that there may be a conflict of interest between such Indemnified
Representative and other persons represented by legal counsel selected by the
Corporation, in any of which events the Indemnified Representative shall be
entitled to have the expenses of separate legal counsel paid by the Corporation.
The foregoing notwithstanding, the Indemnified Representative may elect to
retain counsel at the Indemnified Representative's own cost and expense to
participate in the defense of such Proceeding.
(c) The Corporation shall not be required to obtain the consent
of the Indemnified Representative to the settlement of any Proceeding which the
Corporation has undertaken to defend if
-4-
<PAGE>
the Corporation assumes full and sole responsibility for such settlement and the
settlement grants the Indemnified Representative a complete and unqualified
release in respect of the potential Liability. The Corporation shall not be
liable for any amount paid by an Indemnified Representative in settlement of any
Proceeding that is not defended by the Corporation, unless the Corporation has
consented to such settlement, which consent shall not be unreasonably withheld.
(d) Except as set forth herein, any dispute concerning the right
to indemnification or advancement of expenses under this Agreement and any other
dispute arising hereunder, including but not limited to matters of validity,
interpretation, application, and enforcement, shall be determined in accordance
with the provisions of Section 21 of the Employment Agreement between the
Indemnified Representative and the Corporation entered into as of December 1,
1996.
(e) Upon a payment under this Agreement to the Indemnified
Representative with respect to any Liability, the Corporation shall be
subjugated to the extent of such payment to all of the rights of the Indemnified
Representative to recover against any person with respect to such Liability, and
the Indemnified Representative shall execute all documents and instruments
reasonably required and shall take such other reasonable actions (at the
Corporations's expense) as may reasonably be necessary to secure such rights
including the execution of such documents as may reasonably be necessary for the
Corporation to bring suit to enforce such rights.
6. Contribution. If the indemnification provided for in this
------------
Agreement is unavailable for any reason to hold harmless an Indemnified
Representative in respect of any Liability or portion thereof the Corporation
shall contribute to such Liability or portion thereof in such proportion as is
appropriate to reflect the relative benefits received by the Corporation and the
Indemnified Representative from the transaction giving rise to the Liability.
7. Non-Exclusivity. The rights granted to the Indemnified
---------------
Representative pursuant to this Agreement shall not be deemed exclusive of any
other rights to which the Indemnified Representative may be entitled under
statute, the provisions of any certificate of incorporation, by-laws, or
agreement, a vote of stockholders or directors, or otherwise, both as to action
in an Official Capacity and in any other capacity.
8. Reliance on Provisions. The Indemnified Representative shall be
----------------------
deemed to be acting in any Official Capacity in reliance upon the rights of
indemnification provided by this Agreement and the indemnification provisions of
the Corporation's Certificate of Incorporation and by-laws.
9. Severability and Reformation. Any provision of this Agreement
----------------------------
which is determined to be invalid or unenforceable in any jurisdiction or under
any circumstances shall be ineffective only to the extent of such invalidity or
unenforceability and shall be deemed reformed to the extent necessary to conform
to the applicable law of such jurisdiction and still give maximum effect to the
intent of the parties hereto, which is to provide full and complete
indemnification and advancement protection to the Indemnified Representative.
Any such determination shall not invalidate or render unenforceable the
remaining provisions hereof and shall not invalidate or render unenforceable
such provision in any other jurisdiction or under any other circumstances.
-5-
<PAGE>
10. Notices. Any notice, claim, request, or demand required or
-------
permitted hereunder shall be in writing and shall be deemed given if delivered
personally or sent by telegram or by registered or certified mail, first class,
postage prepaid: (i) if to the Corporation to Access Health, Inc., at its
principal executive offices, Attention: Secretary, or (ii) if to any
Indemnified Representative, to the address of such Indemnified Representative
listed on the signature page hereof, or to such other address as any party
hereto shall have specified in a notice duly given in accordance with this
Section 10, provided that reasonable steps are taken to assure that the notice
is actually received by the Person to be notified.
11. Amendments: Binding Effect. No amendment, modification,
---------------------------
termination, or cancellation of this Agreement shall be effective as to the
Indemnified Representative unless signed in writing by the Corporation and the
Indemnified Representative. This Agreement shall be binding upon the
Corporation and its successors and assigns and shall inure to the benefit of the
Indemnified Representative's heirs, executors, administrators, and personal
representatives.
12. Governing Law. This Agreement shall be governed by and construed
-------------
in accordance with the laws of the State of Delaware, without regard to the
conflict of laws provisions thereof.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the day and year first set forth above.
(Corporate Seal) ACCESS HEALTH, INC.
________________________________________
INDEMNIFIED REPRESENTATIVE
________________________________________
Name
Address
________________________________________
________________________________________
________________________________________
-6-
<PAGE>
EXHIBIT F
---------
PROPRIETARY INFORMATION AND BUSINESS AGREEMENT
The following confirms an agreement between Access Health, a Delaware
corporation (the "Company") and me, which is a material part of the
consideration for my employment by the Company:
1. I understand that the Company possesses Proprietary Information which
is important to its business. For purposes of this Agreement, "Proprietary
Information" is information that is non-public and that was developed, created,
or discovered by the Company, or which became known by, or was conveyed to the
Company, which has commercial value in the Company's business. "Proprietary
Information" includes, but is not limited to, non-public software programs and
subroutines, source and object code, trade secrets, ideas, techniques, business
and product development plans, and other information concerning the Company's
actual or anticipated business, research or development or which is received in
confidence by or for the Company from any other person. For purposes of this
Agreement the term "non-public" shall mean not generally known or available to
the public or to members of the industry in which the Company competes, other
than as a result of a breach of this Agreement by me. I understand that my
employment creates a relationship of confidence and trust between me and the
Company with respect to Proprietary Information.
2. In consideration of my employment by the Company, and the compensation
received by me from the Company from time to time, I hereby agree as follows:
(a) All Proprietary Information and all patents, copyrights and other
rights in connection therewith shall be the sole property of the Company. I
hereby assign to the Company all rights I may have or acquire in such
Proprietary Information. At all times, both during my employment by the Company
and after its termination, I will keep in confidence and trust and will not use
or disclose any Proprietary Information or anything relating to it without the
prior written consent of an officer of the Company, except as may be necessary
in the ordinary course of performing my duties to the Company.
(b) I agree that the assignment set forth in sub-paragraph (a) above
shall not extend to inventions, the assignment of which is prohibited by Labor
Code Section 2870, a copy of which is attached.
(c) In the event of the termination of my employment by me or by the
Company for any reason, I agree to return all Company documents, records,
apparatus, equipment and other physical property, or any reproduction of such
property, whether or not pertaining to Proprietary Information, to the Company
promptly as and when requested by the Company.
<PAGE>
(d) During the term of my employment and for one (1) year thereafter,
I will not encourage or solicit any employee of the Company to leave the Company
for any reason. However, this obligation shall not affect any responsibility I
may have as an employee of the Company with respect to the bona fide hiring and
termination of Company personnel.
(e) I agree that during my employment with the Company, I will not
provide consulting services to or become an employee of any customer of the
Company and I will not provide consulting services or become an employee of any
other firm or person engaged in a business in any way competitive with the
Company, or involved in the design, development or marketing of software
products, without first informing the Company of the existence of such proposed
relationship and obtaining the Company's prior written consent.
(f) I represent that my performance of all the terms of this
Agreement will not breach any agreement to keep in confidence Proprietary
Information acquired by me in confidence or in trust prior to my employment by
the Company. I have not entered into, and I agree I will not enter into, any
agreement either written or oral, in conflict herewith.
3. I hereby give my consent to reproduce, publish, distribute, circulate,
or otherwise use the photographs containing a likeness of me and to identify
same and use my name in any promotional advertising published on behalf of
Access Health and its products. I further agree and consent to any alterations
or retouching of the photograph used as aforesaid.
This consent shall be valid until revoked by me in writing. I further
waive any right to inspect or approve the finished product or the advertising
copy that may be used in connection therewith or the use to which it may be
applied.
4. I agree that I have the right to resign and the Company has the right
to terminate my employment at any time, for any reason, with or without cause,
in accordance with the terms of my Employment Agreement entered into as of
December 1, 1996.
5. If one or more provisions of this Agreement are held to be
unenforceable under applicable law, such provision(s) shall be excluded from
this Agreement and the balance of the Agreement shall be interpreted as if such
provision were so excluded and shall be enforceable in accordance with its
terms.
6. This Agreement shall be effective as of the first day of my employment
with the Company and shall be binding upon me, my heirs, executors, assigns, and
administrators and shall inure to the benefit of the Company, its subsidiaries,
successors and assigns.
-2-
<PAGE>
7. This Agreement can only be modified by a subsequent written agreement
executed by me and a representative of the Company with apparent authority.
Date ________________________
_______________________________________
Employee Signature
Accepted and Agreed to:
ACCESS HEALTH, INC.
_______________________________________
-3-
<PAGE>
EXHIBIT 11.1
ACCESS HEALTH, INC.
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Years ended September 30,
--------------------------------
1994 1995 1996
----------- --------- --------
<S> <C> <C> <C>
PRIMARY:
Weighted average common shares
outstanding......................... 9,456 10,078 11,998
Common equivalent shares from stock
options using the treasury stock
method (using average market price). - 1,067 1,342
------- ------- -------
Shares used in per share calculations 9,456 11,145 13,340
======= ======= =======
Net income (loss).................... $(2,296) $ 1,540 $ 8,125
======= ======= =======
Net income (loss) per share.......... $ (0.24) $ 0.14 $ 0.61
======= ======= =======
FULLY DILUTED:
Weighted average common shares
outstanding......................... 9,456 10,078 11,998
Common equivalent shares from stock
options using the treasury stock
method (using year-end market
price, if higher than average
market price)....................... - 1,294 1,576
------- ------- -------
Shares used in per share calculations(1) 9,456 11,372 13,574
======= ======= =======
Net income (loss).................... $(2,296) $ 1,540 $ 8,125
======= ======= =======
Net income (loss) per share(1)....... $ (0.24) $ 0.14 $ 0.60
======= ======= =======
(1) Shares used in per share calculations have been adjusted for the Company's
three-for-two stock split.
</TABLE>
47
<PAGE>
EXHIBIT 21.1
------------
Listing of Subsidiaries
Access Health Marketing, Inc.
Access Health Marketing Systems, Inc.
Access Health Information, Inc.
Informed Access Systems, Inc.
Clinical Reference Systems, Ltd.
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statements
listed below of our report dated October 31, 1996, except for Note 8 as to which
the date is November 18, 1996, with respect to the consolidated financial
statements and schedule of Access Health, Inc. included in the Annual Report
(Form 10-K) for the year ended September 30, 1996:
Form S-8 Nos. 33-48667, 33-65564, and 33-77320 pertaining to the 1989
Incentive Stock Plan and 1991 Employee Stock Purchase Plan of Access Health
Marketing, Inc.
Form S-8 No. 33-91516 pertaining to the Access Health Marketing, Inc. 1995
Director Option Plan and 1991 Employee Stock Purchase Plan
Form S-8 No. 333-04662 pertaining to the Access Health, Inc. 1989 Incentive
Stock Plan
Form S-8 No. 333-18163 pertaining to the Access Health, Inc. 1989 Incentive
Stock Plan, Supplemental Stock Plan, and Informed Access Systems, Inc.
Stock Option Plan.
ERNST & YOUNG LLP
Sacramento, California
December 24, 1996
48
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FY 1996
AUDITED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> SEP-30-1996
<CASH> 25,655
<SECURITIES> 14,126
<RECEIVABLES> 11,467
<ALLOWANCES> 678
<INVENTORY> 0
<CURRENT-ASSETS> 55,327
<PP&E> 20,740
<DEPRECIATION> 6,271
<TOTAL-ASSETS> 78,831
<CURRENT-LIABILITIES> 14,400
<BONDS> 0
0
0
<COMMON> 13
<OTHER-SE> 64,418
<TOTAL-LIABILITY-AND-EQUITY> 78,831
<SALES> 62,073
<TOTAL-REVENUES> 62,073
<CGS> 33,122
<TOTAL-COSTS> 33,122
<OTHER-EXPENSES> 16,862
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (1,453)
<INCOME-PRETAX> 13,542
<INCOME-TAX> 5,417
<INCOME-CONTINUING> 8,125
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,125
<EPS-PRIMARY> .61
<EPS-DILUTED> .60
</TABLE>
