<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
[X] Quarterly report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended March 31, 1998 or
[ ] Transition report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934
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 No.)
335 Interlocken Parkway, Broomfield, CO 80021
(Address of principal executive offices) (Zip code)
(303) 466-9500
(Registrant's telephone number, including area code)
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
----- -----
Number of shares of Common Stock Outstanding at April 30, 1998:
18,903,651 shares
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Access Health, Inc.
INDEX
<TABLE>
<CAPTION>
Page No.
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<S> <C>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed consolidated balance sheets - September 30, 1997
and March 31, 1998.......................................... 4
Condensed consolidated statements of income - three months
and six months ended March 31, 1997 and 1998................. 5
Condensed consolidated statements of cash flows - six months
ended March 31, 1997 and 1998............................... 6
Notes to condensed consolidated financial statements.......... 7
Item 2. Management's discussion and analysis of financial
condition and results of operations.......................... 10
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Shareholders......... 18
Item 6. Exhibits and Reports on Form 8-K........................ 18
SIGNATURE........................................................ 19
</TABLE>
2
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PART 1. FINANCIAL INFORMATION
3
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Access Health, Inc.
Condensed Consolidated Balance Sheets
(In thousands, except per share and share amounts)
<TABLE>
<CAPTION>
September 30, March 31,
1997 1998
---------------- --------------
(Audited) (Unaudited)
<S> <C> <C>
Assets:
Current assets:
Cash and equivalents................................................ $ 15,991 $ 43,820
Available-for-sale securities...................................... 41,969 31,936
Accounts and license fees receivable, net of allowance for
doubtful accounts of $874 at March 31, 1998, and $768 at
September 30, 1997............................................... 12,453 14,289
Deferred income taxes.............................................. 5,012 5,012
Income taxes receivable............................................ 3,231 3,220
Prepaid expenses................................................... 2,122 3,344
Other current assets............................................... 1,448 2,104
-------------- ---------------
Total current assets............................................. 82,226 103,725
Property and equipment, net......................................... 16,150 16,046
Purchased intangibles, net of accumulated amortization of $5,163
at March 31, 1998, and $4,911 at September 30, 1997............... 2,894 2,642
Deferred income taxes............................................... 1,042 1,042
Other assets........................................................ 342 427
--------------- ---------------
$ 102,654 $ 123,882
--------------- ---------------
--------------- ---------------
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable..................................................... $ 3,634 $ 2,979
Accrued payroll and related expenses................................. 3,664 4,716
Accrued integration and restructuring costs ......................... 3,109 1,912
Taxes and other accrued expenses..................................... 4,360 9,877
Notes payable to related parties..................................... 1,264 0
Current portion of long-term debt.................................... 198 207
Current portion of capital lease obligation.......................... 457 486
Deferred revenues.................................................... 4,954 5,748
---------------- --------------
Total current liabilities......................................... 21,640 25,925
Capital lease obligations.............................................. 481 221
Long-term debt......................................................... 197 91
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.001 par value-5,000,000 shares authorized,
no shares issued and outstanding................................. - -
Common stock, $.001 par value-75,000,000 shares authorized,
18,815,879 shares issued and outstanding at March 31, 1998, and
18,246,159 shares issued and outstanding at September 30, 1997... 18 19
Additional paid-in capital......................................... 80,806 86,928
Retained earnings (deficit)........................................ (488) 10,698
--------------- ---------------
Total stockholders' equity...................................... 80,336 97,645
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$ 102,654 $ 123,882
--------------- ---------------
--------------- ---------------
</TABLE>
See accompanying notes.
4
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Access Health, Inc.
Condensed Consolidated Statements of Income
(In thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Six months ended
March 31, March 31,
1997 1998 1997 1998
----------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
Revenues:
Care management services........................... $ 22,545 $ 28,111 $ 44,417 $ 54,432
Licensing and support services..................... 2,556 3,105 5,325 5,833
----------- ----------- ----------- -----------
Total revenues............................... 25,101 31,216 49,742 60,265
Costs and expenses:
Cost of revenues:
Care management services........................ 11,542 15,481 22,582 29,886
Licensing and support services.................. 901 684 2,029 1,359
Product and other development...................... 2,041 1,675 4,397 3,173
Sales and marketing................................ 1,908 2,460 4,246 4,659
General and administrative......................... 2,191 2,525 4,558 4,823
Transaction costs.................................. - - 6,345 -
Integration and restructuring costs................ - - 6,961 -
----------- ---------- ----------- -----------
Total costs and expenses..................... 18,583 22,825 51,118 43,900
----------- ---------- ----------- -----------
Income (loss) from operations........................ 6,518 8,391 (1,376) 16,365
Other income......................................... 336 919 715 1,677
----------- ---------- ----------- -----------
Income (loss) before income taxes.................... 6,854 9,310 (661) 18,042
Provision (credit) for income taxes.................. 1,371 3,538 (132) 6,856
----------- ---------- ----------- -----------
Net income (loss) $ 5,483 $ 5,772 $ (529) $ 11,186
----------- ---------- ----------- -----------
----------- ---------- ----------- -----------
Net income (loss) per share
Basic......................................... $ 0.31 $ 0.31 $ (0.03) $ 0.60
----------- ---------- ----------- -----------
----------- ---------- ----------- -----------
Diluted....................................... $ 0.29 $ 0.29 $ (0.03) $ 0.56
----------- ---------- ----------- -----------
----------- ---------- ----------- -----------
Shares used in per share calculations
Basic......................................... 17,868 18,689 17,719 18,556
----------- ---------- ----------- -----------
----------- ---------- ----------- -----------
Diluted....................................... 18,610 20,154 17,719 20,128
----------- ---------- ----------- -----------
----------- ---------- ----------- -----------
</TABLE>
See accompanying notes.
5
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Access Health, Inc.
Condensed Consolidated Statements of Cash Flows
Increase in Cash and Equivalents
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six months ended
March 31,
--------------------------
1997 1998
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<S> <C> <C>
Cash flows from operating activities:
Net income (loss)................................................ $ (529) $ 11,186
Adjustments to reconcile net income to net cash provided by
operations:
Allowance for doubtful accounts................................. 22 20
Depreciation and amortization................................... 3,091 3,565
Deferred stock compensation..................................... 443 -
Common stock issued for services rendered....................... 2,233 -
Changes in:
Accounts and license fees receivable........................... 2,669 (1,856)
Prepaid expenses and other current assets...................... 196 (1,867)
Accounts payable............................................... (780) (655)
Accrued payroll and related expenses........................... (214) 1,052
Accrued integration and restructuring costs.................... 5,469 (1,197)
Taxes and other accrued expenses............................... (2,326) 5,517
Deferred revenues.............................................. (13) 794
---------- ----------
Net cash provided by operating activities.................... 10,261 16,559
Cash flows from investing activities:
Purchase of available-for-sale securities, net................... 2,396 10,033
Purchase of property and equipment............................... (2,716) (3,209)
Notes receivable from AHN........................................ (5,000) -
Other assets..................................................... (50) (85)
---------- ----------
Net cash provided by (used in) by investing activities....... (5,370) 6,739
---------- ----------
Cash flows from financing activities:
Notes payable to related parties................................. (206) (1,264)
Payment of long-term debt and capital leases..................... (311) (328)
Sale of common stock............................................. 1,397 6,123
----------- ----------
Net cash provided by financing activities.................... 880 4,531
----------- ----------
Net increase in cash and equivalents.............................. 5,771 27,829
Cash and equivalents at beginning of period....................... 26,533 15,991
----------- ----------
Cash and equivalents at end of period............................. $32,304 $ 43,820
----------- ----------
----------- ----------
</TABLE>
See accompanying notes.
6
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Access Health, Inc.
Notes to Condensed Consolidated Financial Statements
March 31, 1998
(Unaudited)
Note 1: Summary of Significant Accounting Policies
INTERIM FINANCIAL STATEMENTS
The accompanying consolidated condensed interim financial statements have
been prepared by the Company, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission (the "Commission").
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been omitted pursuant to such rules and regulations. The
accompanying consolidated condensed interim financial statements should be
read in conjunction with the financial statements and notes thereto included
in the Company's Form 10-K for the fiscal year ended September 30, 1997.
In the opinion of management, the unaudited interim financial statements
reflect all adjustments, consisting of only normal recurring adjustments,
necessary to present fairly the Company's consolidated financial position at
March 31, 1998, consolidated results of operations for the three month and
six month periods ended March 31, 1997 and 1998 and cash flows for the six
month periods ended March 31, 1997 and 1998. Results for the periods ended
March 31, 1998 are not necessarily indicative of the results to be expected
for the entire fiscal year.
IMPAIRMENT OF LONG-LIVED ASSETS
The Company reviews its long-lived assets for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may
not be recoverable from future undiscounted cash flows. Impairment losses
are recorded for the difference between the carrying value and fair value of
the long-lived asset.
REVENUE RECOGNITION
Revenues include care management services, which consist of program
membership, member communications and teleservicing fees from the Company's
Personal Health Advisor/FirstHelp and ASK-A-NURSE contracts with managed care
organizations, self-insured employers and hospitals. Revenues also include
licensing and support services related to certain of the Company's products
including ASK-A-NURSE, FirstHelp, patient education software, Access Care
Management System, HealthSelect, and CANCER HELPLINK.
Program membership fees from Personal Health Advisor/FirstHelp contracts are
recognized ratably in accordance with contract terms typically on the basis
of per-member fees. Member communications 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.
License revenues from ASK-A-NURSE, FirstHelp, and CANCER Helplink products
are recognized ratably over the term of the contract. HealthSelect and
patient education software revenue is recognized upon delivery of the
software. Support revenues are comprised of ASK-A-NURSE, CANCER HELPLINK, and
Access Care Management System support revenue, LIFE MATCH software support
revenue and direct marketing fees. Revenue from support contracts and
software maintenance contracts is recognized ratably over the contract term.
Direct marketing fees are recognized upon the delivery of services.
7
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PRODUCT AND OTHER DEVELOPMENT COSTS
Product and other development costs are expensed as incurred and consist
primarily of salaries, supplies and contract services related to the
development of the Company's products and services.
TRANSACTION COSTS AND INTEGRATION AND RESTRUCTURING COSTS
Transaction costs of $6.3 million reflect charges associated directly with
the merger of the Company with Informed Access and CRS and included
professional fees of approximately $5.2 million. Also related to the mergers
were integration and restructuring costs recorded in the first and fourth
quarters of fiscal 1997, which included approximately $6.3 million for
severance and related expenses, approximately $400,000 for elimination of
redundant technology, approximately $1.2 million for discontinuation of
facilities, approximately $900,000 for disposal of assets and approximately
$900,000 for relocation and other costs.
New Accounting Pronouncements
STATEMENT OF ACCOUNTING STANDARDS NO. 128
During fiscal 1998, Access Health adopted SFAS 128. This statement
establishes standards for computing and presenting basic and diluted earnings
per share. Under this statement, basic earnings or loss per share is computed
by dividing the net earnings or loss by the weighted average number of shares
of common stock outstanding. Diluted earnings or loss per share is determined
by dividing the net earnings or loss by the sum of (1) the weighted average
number of common shares outstanding, (2) if not anti-dilutive, the number of
shares of convertible preferred stock as if converted upon issuance, and (3)
if not anti-dilutive, the effect of outstanding stock options determined
utilizing the treasury stock method.
A reconciliation of the numerator and denominators used in computing per
share net income (loss) from continuing operations is as follows:
<TABLE>
<CAPTION>
Three months ended Six months ended
March 31, March 31,
1997 1998 1997 1998
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<S> <C> <C> <C> <C>
Numerator for basic and diluted net income (loss) per share:
Net income (loss) $ 5,483 $ 5,772 $ (529) $ 11,186
------------------------------------------------------------
------------------------------------------------------------
Denominator for basic net income (loss) per share:
Weighted average common shares outstanding 17,868 18,689 17,719 18,556
------------------------------------------------------------
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Denominator for diluted net income (loss) per share:
Weighted average common shares outstanding 17,868 18,689 17,719 18,556
Outstanding stock options 742 1,465 - 1,572
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Denominator for diluted net income (loss) per share 18,610 20,154 17,719 20,128
------------------------------------------------------------
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</TABLE>
Options to purchase approximately 1.1 million shares of Access Health's
common stock were outstanding at March 31, 1997, but were not included in the
computation of diluted earnings per share because they were anti-dilutive.
8
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STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 130
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income,"
which is required to be adopted for fiscal years beginning after December 15,
1997. This statement establishes standards for reporting and display of
comprehensive income and its components in a full set of general-purpose
financial statements. This statement requires that all items that are
required to be recognized under accounting standards as components of
comprehensive income be reported in a financial statement that is displayed
with the same prominence as other financial statements. Reclassification of
financial statements for earlier periods provided for comparative purposes
are required. Management has determined this change will not significantly
affect its financial reporting. The Company expects to adopt Statement No.
130 beginning in the first quarter of fiscal 1999.
STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 131
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, "Disclosures about Segments of an
Enterprise and Related Information," effective for fiscal years beginning
after December 15, 1997. This statement requires that a public company report
financial and descriptive information about its reportable operating segments
using the management approach. Management has determined this change will
not significantly affect its financial reporting. The Company expects to
adopt Statement No. 131 in the first quarter of fiscal 1999.
STATEMENT OF POSITION 98-1
In March 1998, the AICPA issued SOP 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use". This statement is
effective for fiscal years beginning after December 15, 1998, although
earlier application is permitted. In general, SOP 98-1 requires that certain
costs to develop software for internal use be capitalized. These
requirements are to be applied prospectively from the date of the Company's
adoption. The Company historically has not capitalized such costs.
Note 2: Business combinations
During November 1996, the Company consummated business combinations with
Informed Access which included the exchange of 5,375,000 shares of Access
Health 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 CRS, which included the exchange of 170,000 shares of
Access Health common stock. These business combinations were accounted for
as pooling-of-interests and, accordingly, the historical financial statements
of the Company have been restated to include the consolidated financial
statements of Access Health, Informed Access and CRS for all periods
presented.
As of February 17, 1998, the Company announced a definitive agreement to
acquire privately held InterQual, Inc. of Marlborough, Massachusetts. Under
the terms of the acquisition, 4,290,000 shares of the Company's stock will be
exchanged for the outstanding shares of InterQual, Inc. The number of shares
issuable is subject to adjustment of up to an additional 500,000 shares to be
issued based upon a minimum transaction value of $130 million. It is
anticipated that the transaction would be accounted for as a pooling of
interests under APB Opinion No. 16 and is expected to close in the third
fiscal quarter of this year. The merger transaction is subject to
stockholder approval by both companies and customary closing conditions. The
Company expects to recognize a one-time charge in the third fiscal quarter of
this year for integration and transaction charges of approximately $8 to $9
million.
9
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Note 3: Notes payable to related parties
Notes payable to related parties arising from bonuses are payable to members
of management, who are also stockholders of the Company. The final
installment due was paid in January 1998.
Note 4: Long-term debt
The Company has a term facility agreement (the "Term Agreement") consisting
of note payable and capital lease facilities. At March 31, 1998, principal
balances under the note payable facility and capital lease facility totaled
$298,000 and $523,000, respectively. Principal balances under the Term
Agreement are secured by certain of the Company's equipment with an aggregate
carrying value of approximately $763,000 at March 31, 1998. Amounts payable
under the Term Agreement bear interest at 14.48%, are due at varying dates
through September 1999, and require monthly payments of principal and
interest totaling approximately $52,000. Payments due under the note payable
facility of the Term Agreement for the next twelve months are approximately
$542,000.
Note 5: Income taxes
The Company's state net operating loss carryforwards of approximately $6.7
million as of September 30, 1997 expire between 2007 and 2011. The Company
also has approximately $161,000 of federal research and development tax
credits available, which expire between 2007 and 2011.
Realization of the Company's net deferred tax assets is dependent upon the
Company generating sufficient taxable income in future years in the United
States to obtain benefit from the reversal of temporary differences and from
tax credit and state net operating loss carryforwards. The amount of deferred
tax assets considered realizable is subject to adjustment in future periods
if estimates of future taxable income are reduced.
Note 6: Commitments
OPERATING LEASES
The Company leases its offices under the terms of operating leases that
expire between September 1998 and December 2012. Annual minimum rental
payments for fiscal 1998, 1999, 2000, 2001, 2002 and thereafter are
$3,032,000, $2,920,000, $2,695,000, $2,641,000, $1,597,000 and $17,381,000
respectively. Rental expenses are recorded on a straight-line basis over the
respective lease terms.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
THIS DISCUSSION CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS, INCLUDING BUT
NOT LIMITED TO STATEMENTS IDENTIFIED BY ASTERISK, 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 AND IN THE COMPANY'S ANNUAL REPORT AS
FILED ON FORM 10-K FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1997.
RESULTS OF OPERATIONS
REVENUES. Revenues consist of revenues from care management services and
licensing and support services. Revenues increased from $25.1 million during
the three months ended March 31, 1997 to $31.2 million during the three
months ended March 31, 1998, or 24%, and increased from $49.7 million for the
six months ended March 31, 1997 to $60.3 million, or 21% for the six months
ended March 31, 1998.
10
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Revenues from care management services increased from $22.5 million during
the second quarter of fiscal 1997 to $28.1 million during the second quarter
of fiscal 1998, or 25%, and increased from $44.4 million during the first six
months of fiscal 1997 to $54.4, or 23% during the first six months of fiscal
1998, due to increases in membership levels related to the Company's
contracts during these periods. As of March 31, 1998, approximately 26.1
million members were enrolled compared to approximately 17.9 million members
enrolled as of March 31, 1997. Revenue from the Company's contracts is
recognized ratably in accordance with contract terms on the basis of
per-member fees.
Revenues from licensing and support services increased from $2.6 million
during the second quarter of fiscal 1997 to $3.1 million, or 19%, during the
first quarter of fiscal 1998, and from $5.3 million during the first six
months of fiscal 1997 to $5.8 million, or 9%, for the first six months of
fiscal 1998. Licensing and support services revenues include licensing
implementations and program support activities for FirstHelp, the
ASK-A-NURSE-Registered Trademark- family of products, CANCER
HelpLink-Registered Trademark-, Access Care Management System-Registered
Trademark- ("ACMS") and the LIFE MATCH-Registered Trademark- family of
products.
COST OF REVENUES. The cost of care management services revenues includes the
costs of operating the Company's services centers, on-going client
consultation and charges for providing care management member communications
services. The gross margins for care management services were 48.8% during
the second quarter of fiscal 1997 and 44.9% during the second quarter of
fiscal 1998, and 49.2% during the first six months of fiscal 1997 compared to
45.1% for the first six months of fiscal 1998. The decrease in gross margin
during the second quarter of fiscal 1998 and for the six months ended March
31, 1998 compared to the same periods in fiscal 1997, is primarily due to
adjusting pricing terms on older contracts typically effective upon renewal
dates during fiscal 1997. The Company does not anticipate that downward price
adjustments to contracts during the remainder of fiscal 1998 will have a
material effect on operating results. * Additional factors contributing to
the decrease in gross margin were operational inefficiencies experienced as a
result of implementing a common service platform in all care centers and
absorbing the costs associated with new product beta sites. The Company
expects that gross margins for care management services will be lower during
the second half of the fiscal year than in the first half due primarily to a
continuation of operating inefficiencies related to the implementation of the
common system platform.
The cost of licensing and support services revenues includes the costs of
license implementations, on-going client consultation, annual users'
conferences, advertising materials, and other support services for FirstHelp,
ASK-A-NURSE, CANCER HelpLink, Access Care Management System and LIFE MATCH
licensees. The gross margin percentages for licensing and support services
increased from 64.7% during the second quarter of fiscal 1997 to 78.0% during
the second quarter of fiscal 1998, and from 61.9% during the first six months
of fiscal 1997 to 76.7% for the first six months of fiscal 1998 due to
changes in product licensing mix and increased efficiency resulting from
organizational adjustments. While gross margins for licensing and support can
fluctuate, the Company believes it is currently operating near targeted gross
margin levels for licensing and support services.
PRODUCT AND OTHER DEVELOPMENT EXPENSES. Product and other development
expenses were $2.0 million, or 8.1% of revenues, during the second quarter of
fiscal 1997 and $1.7 million, or 5.4% of revenues, during the second quarter
of fiscal 1998. For the first six months of fiscal 1997, product and other
development expenses totaled $4.4 million, or 8.8% of revenues compared to
$3.2 million, or 5.3% of revenues during the first six months of fiscal 1998.
The decrease of 15.0% from the second quarter of fiscal 1997 to the second
quarter of fiscal 1998, and the decrease of 27.3% for the first six months of
fiscal 1997 to the first six months of fiscal 1998 is due to realizing cost
savings from the integration of the development teams of Access Health and
Informed Access Systems. The Company expects product and other development
expenses to increase in coming quarters, but generally consistent with the
current percentage of revenues.*
SALES AND MARKETING EXPENSES. Sales and marketing expenses were $1.9
million, or 7.6% of revenues, during the second quarter of fiscal 1997 and
$2.5 million, or 7.9% of revenues, during the second quarter of fiscal 1998.
For the first six months of fiscal 1997, sales and marketing expenses totaled
$4.2 million, or 8.5% of revenues, compared to $4.7 million, or 7.7% of
revenues for the first six months of fiscal 1998. For the quarter, as a
percentage of revenue, sales and marketing expenses increased slightly by 3%
over the second quarter of fiscal 1997. As a percentage of revenue, sales and
marketing expenses declined for the six months ended March 31, 1998 due to
realizing cost
11
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savings from the integration of the sales teams of Access Health and Informed
Access. The Company expects sales and marketing expenses to increase in
coming quarters, but generally consistent with the current percentage of
revenues.*
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
were $2.2 million, or 8.7% of revenues, during the second quarter of fiscal
1997 and $2.5 million, or 8.1% of revenues, during the second quarter of
fiscal 1998. For the first six months of fiscal 1997, general and
administrative expenses totaled $4.6 million, or 9.2% of revenues, compared
to $4.8 million, or 8.0% of revenues for the first six months of fiscal 1998.
As a percent of revenue, general and administrative expenses decreased during
the second quarter of fiscal 1998 and the first six months of fiscal 1998
when compared to the prior fiscal year due to realizing cost savings from the
integration of Access Health and Informed Access Systems' management teams.
The Company expects general and administrative expenses to increase in coming
quarters, but generally consistent with the current percentage of revenues. *
TRANSACTION COSTS. Transaction costs of $6.3 million were one-time charges
recorded in the first quarter of fiscal 1997 associated directly with the
merger of the Company with Informed Access and CRS and consists primarily of
professional fees and services of approximately $5.2 million.
Transaction costs associated with the pending InterQual, Inc. acquisition are
referenced in Note 2: Business Combinations.
INTEGRATION AND RESTRUCTURING COSTS. Integration and restructuring costs
related to the mergers of Informed Access and CRS were recorded in the
amounts of $7.0 million and $2.7 million during the first and fourth quarters
of fiscal 1997, respectively. Integration and restructuring costs include:
$7.1 million for severance, outplacement and relocation costs specifically
related to the merger; $1.2 million related to the closure and elimination of
duplicate leased facilities, primarily corporate headquarters, a sales office
and a call center; and $1.3 million related to the write-off of computer
hardware and other assets which were made obsolete as a result of the merger
and duplicate information systems. The remaining merger-related accrual at
March 31, 1998 was approximately $1.9 million. Total expected cash
expenditures relating to the merger charge are estimated to be approximately
$7.1 million of which approximately $5.2 million was disbursed prior to March
31, 1998. Termination benefits received by employees terminated through
September 30, 1997 were approximately $5.6 million. The remaining severance
and outplacement amounts are expected to be paid during the current fiscal
year.
Integration costs associated with the pending InterQual, Inc. acquisition are
referenced in Note 2: Business Combinations.
INCOME FROM OPERATIONS. Operating income increased from $6.5 million during
the second quarter of fiscal 1997 to $8.4 million during the second quarter
of fiscal 1998, and increased from a loss of $1.4 million for the first six
months of fiscal 1997 to a profit of $16.4 million during the same period in
fiscal 1998. As indicated above, the changes are attributable to increasing
revenues and decreased ongoing operating expenses, and to the transaction,
integration and restructuring expenses recorded during the first six months
of fiscal 1997, but absent from the results for the first six months of
fiscal 1998.
OTHER INCOME. The Company generates interest and other income from cash
balances and available-for-sale securities. Interest and other income
increased from $336,000 to $919,000, or 173.5% in the second quarter of
fiscal 1997 and 1998, respectively, and from $715,000 to $1,677,000, or
134.6% for the first six months of fiscal 1997 and 1998, respectively due to
the increase in cash and equivalents and available for sale securities from
$44.0 million at March 31, 1997 to $75.8 million at March 31, 1998.
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*.
12
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LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 1998, the Company held cash and equivalents and
available-for-sale securities totaling $75.8 million compared to a balance of
$58.0 million as of September 30, 1997. Cash provided by operations during
the first six months of fiscal 1998 was $15.3 million compared with $10.0
million for the first six months of fiscal 1997.
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 1998 or beyond*.
During the first six months of fiscal 1998, the Company purchased
approximately $3.2 million of property and equipment. The Company expects to
purchase additional capital equipment during the balance of fiscal 1998 to
further integrate and expand call centers and system capacity, and to expand
the Company's corporate infrastructure*.
* 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
The following factors should be carefully considered in evaluating the
Company and its business.
UNCERTAINTY RELATED TO OBTAINING, EXPANDING AND RETAINING CONTRACTS MAY
IMPACT RESULTS OF OPERATIONS. The Company's ability to increase revenues and
profitability is largely dependent on the Company's ability to secure
additional care management contracts and to retain and expand existing
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 care
management revenue. For example, in fiscal 1997, the Company renegotiated
various older care management contracts, typically upon renewal, to bring
price terms based on minimum membership and utilization rates previously
negotiated in line with actual membership and utilization rates. Any factors
adversely affecting the market for the care management product or the
licensing and support services products, including factors outside of the
Company's control, such as adverse publicity or government regulatory action,
could have a material adverse effect on the Company.
DEPENDENCE ON PRINCIPAL CUSTOMERS. Significant portions of the Company's
revenues are generated by a limited number of customers. The Company's care
management contracts range from approximately 800 members to 3.0 million
members per contract. In fiscal 1997, the five largest single care management
enrollments totaled 3.0 million, 2.4 million, 1.9 million, 1.5 million and
1.5 million members. In fiscal 1997, the Company's three largest customers
accounted for approximately 8.0%, 7.8%, and 6.9% of the Company's total
revenues and the Company's top five customers, in the aggregate, accounted
for approximately 33.4% of the Company's total revenues. After an initial
term of approximately one to four years, contracts generally can be
terminated upon 60 to 360 days notice to the Company. Three of the Company's
five largest contracts are up for renewal in the second half of fiscal year
1998. The Company's contracts could 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
such agreements could have a material adverse effect on the Company's
operating results. See "Government Regulation."
13
<PAGE>
UNCERTAINTY OF FUTURE OPERATING RESULTS. The Company's quarterly operating
results may fluctuate significantly in the future as a result of a variety of
factors, many of which are outside the Company's control. There can be no
assurance that the Company's revenues and profitability will increase during
fiscal 1998 and beyond. The Company's revenues may be materially adversely
affected by the termination or non-renewal of the Company's contracts or by
the renegotiation of the terms of such contracts. The Company may incur
significantly increased sales, marketing, and promotional expenses during
fiscal 1998, and may devote additional resources to the further development
of care management, disease management 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
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. In particular, several small competitors have recently been acquired
or are expected to be acquired by companies with substantially greater
financial, marketing and technical resources than the Company, and this could
lead to increased competition. There can be no assurance that the Company
will continue to compete successfully.
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.
CARE CENTER OPERATIONS. The Company maintains member service and data
centers ("care 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.
The successful operation of the Company's care centers is based on a
networked information system. The information system provides care center
nurses and health care counselors with access to care management applications
and a database of information including member information, plan rules,
physician information and clinical algorithms and guidelines. The Company is
in the process of developing a new information system which combines certain
aspects of the different systems developed by Access Health and Informed
Access. Failure to successfully develop and implement this new information
system could delay revenues or increase operating costs and could have a
material adverse effect on the Company. The ability to continue to develop,
implement and support the Company's information systems is dependent on its
ability to employ and retain experienced technical personnel. If the Company
is unable to hire and retain required personnel or is required to pay
compensation at significantly higher levels to attract and retain technical
personnel it could have a material adverse effect on the Company's financial
results.
14
<PAGE>
LIMITATIONS ON PROTECTION OF PROPRIETARY RIGHTS. The Company regards its
software, clinical algorithms and nursing assessment tools, clinical
operational expertise and marketing and program operation materials as
proprietary and takes action to protect its intellectual property with
patents, copyrights, 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. 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
market its products and services either in the United States or in
international markets. The Company could incur substantial costs defending
itself in suits against the Company or its proprietary rights or in bringing
suits against those parties to enforce the Company's proprietary rights. The
Company has been issued patents on its clinical algorithms in the United
States and has filed for patent protection in some foreign countries. There
is no assurance that such patents will not be challenged or invalidated.
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 depending upon into which countries outside the
United States the Company expands.
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, operational infrastructure,
working capital and financial and management control systems. The
difficulties of managing growth may be increased by the necessity of
coordinating geographically separated organizations. 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 procedures 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 the Company 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 part through mergers
and acquisitions. The Company has entered into an agreement to acquire
InterQual, Inc. and intends to evaluate acquisitions of other product lines
and businesses as part of its business strategy. 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. Future
acquisitions by the Company could result in potentially dilutive issuance of
equity securities, the incurrence of debt and contingent liabilities and
amortization expenses related to goodwill and other intangible assets, which
could materially adversely affect the Company's operating results and
financial condition. In addition, acquisitions involve numerous risks,
including difficulties in managing diverse geographic operations, 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, the addition of unanticipated administrative and other expense,
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.
KEY EMPLOYEES AND MANAGEMENT OF CHANGE. The Company's success depends on a
limited number of key management employees, most of whom are subject to
post-employment non-competition restrictions. 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,
nursing, technical, marketing, and sales 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.
15
<PAGE>
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 market for the Company's stock is highly
volatile. The trading price of the Company's common stock is subject to wide
fluctuations in response to a variety of factors including the signing or
loss of a major contract, changes in market analyst estimates and
recommendations for the Company's common stock, fluctuations in operating
results, the failure of operating results to meet market analyst's estimates,
changes in government regulation and general conditions in the health care
industry and the economy, any of which could cause the price of the Company's
common stock to fluctuate, perhaps substantially. In addition, in recent
years stock prices have experienced significant fluctuations, which have
particularly affected the market price for the securities of health care
companies and which often have been unrelated to the operating performance of
these companies.
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, and health care referral programs. 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 care 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 understands that state regulators in some states have informed
some entities that they are adopting such a construction. The Company has
taken steps to comply with such regulatory interpretation, but there can be
no assurance that such steps will be sufficient to protect the Company from
the effects of any such regulatory action. 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 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
16
<PAGE>
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 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 clinical
algorithms and 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 clinical algorithms,
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 or other clients of
on-site call centers. 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. Further, there can be no assurance that the
Company has appropriate or sufficient coverage under the existing insurance
plans or that they will be able to obtain appropriate or sufficient amounts
of insurance in the future to address the foregoing risks on terms that are
commercially reasonable.
IMPACT OF THE YEAR 2000 ON COMPUTER SYSTEMS. The architectural design on
the Company's computer systems and infrastructure have taken into account the
effect of integrating existing date data with date data from the Year 2000
and beyond. As a result, the Company believes it will address and resolve
any possible issue associated with the integration of Year 2000 date data in
a timely fashion and will not materially affect future financial results or
cause reported financial information to be inaccurate. * Nevertheless,
unforeseen internal problems or unanticipated events including the inability
of third party vendors to integrate Year 2000 date data could occur causing a
material adverse effect on the Company's business, results of operations and
financial condition.
17
<PAGE>
PART II - OTHER INFORMATION
ITEM 4. SUBMISSIONS OF MATTERS TO A VOTE OF SECURITY HOLDERS
a) The annual meeting of stockholders was held on February 25, 1998 to
elect directors, approve the adoption of the 1998 stock option plan
and the reservation of 900,000 shares for issuance thereunder, and
ratify independent auditors.
b) The following directors were elected at the meeting to serve a one
year term:
Richard C. Miller
Joseph P. Tallman
John R. Durant, M.D.
Kinney L. Johnson
Frank Washington
c) The matters voted upon at the meeting and the results of the voting
with respect to those matters were as follows:
<TABLE>
<CAPTION>
1) Election of Directors: For Withheld
------------------------------------
<S> <C> <C>
Richard C. Miller 15,967,131 41,315
Joseph P. Tallman 15,967,131 41,315
John R. Durant, M.D. 15,967,131 41,315
Kinney L. Johnson 15,967,131 41,315
Frank Washington 15,967,131 41,315
</TABLE>
<TABLE>
<CAPTION>
Broker
For Against Abstain Non-Votes
------------- ------------ ------------- --------------
<S> <C> <C> <C> <C>
2) Approval of Adoption of Stockplan 10,507,910 5,224,568 275,968 0
3) Ratification of Arthur Andersen
LLP as the Company's independent
auditors for fiscal year 1998 14,750,468 11,471 1,246,507 0
</TABLE>
The foregoing matters are described in detail in the Registrant's definitive
proxy statement dated January 20, 1998 for the Annual Meeting of Stockholders
held on February 25, 1998.
d) Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits:
<TABLE>
<CAPTION>
EXHIBIT DECRIPTION
- -------- ----------
<S> <C>
3.1 (A) Amended and Restated Certificate of Incorporation
3.2 (A) Amended and Restated Bylaws
3.3 (B) Certificate of Designation of Rights, Preferences and Privileges of Series A
Participating Preferred Stock of Access Health, Inc. filed on
March 13, 1997.
4.1 (A) Specimen Stock Certificate
4.2 1998 Stock Option Plan
4.3 (A) Shareholder's Representation Statement and Registration Rights
Agreement dates as of November 25, 1996 between Registrant and various investors
4.4 (A) Registration Rights Agreement dated November 18, 1996
4.5 Form of Preferred Shares Rights Agreement, dated as of March 12,
1997 as amended on December 8, 1997 between the
Company and First Chicago Trust Company of New York
27 Financial Data Schedule.
</TABLE>
(A) Incorporated by reference to Registrant's Form 10-K for the year ended
September 30, 1996.
(B) Incorporated by reference to Registrant's Registration Statement on
Form 8-A filed March 13, 1997 (No. 000-19758).
b) Reports on Form 8-K. Change of auditors Form 8-K filed on January 9,
1998.
18
<PAGE>
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ACCESS HEALTH, INC.
Date: May 15, 1998 /s/ Timothy H. Connor
----------------------------------------
Timothy H. Connor
Senior Vice President and Chief
Financial Officer (principal financial
officer of Registrant)
19
<PAGE>
ACCESS HEALTH, INC.
1998 STOCK PLAN
1. PURPOSES OF THE PLAN. The purposes of this Stock Plan are:
- to attract and retain the best available personnel for positions
of substantial responsibility,
- to provide additional incentive to Employees, Directors and
Consultants, and
- to promote the success of the Company's business.
Options granted under the Plan may be Incentive Stock Options or
Nonstatutory Stock Options, as determined by the Administrator at the time of
grant. Stock Purchase Rights may also be granted under the Plan.
2. DEFINITIONS. As used herein, the following definitions shall apply:
(a) "ADMINISTRATOR" means the Board or any of its Committees as shall
be administering the Plan, in accordance with Section 4 of the Plan.
(b) "APPLICABLE LAWS" means the requirements relating to the
administration of stock option plans under U. S. state corporate laws, U.S.
federal and state securities laws, the Code, any stock exchange or quotation
system on which the Common Stock is listed or quoted and the applicable laws of
any foreign country or jurisdiction where Options or Stock Purchase Rights 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 of Directors appointed by the
Board in accordance with Section 4 of the Plan.
(f) "COMMON STOCK" means the common stock of the Company.
(g) "COMPANY" means Access Health, Inc., a Delaware corporation.
(h) "CONSULTANT" means any person, including an advisor, engaged by
the Company or a Parent or Subsidiary to render services to such entity.
<PAGE>
(i) "DIRECTOR" means a member of the Board.
(j) "DISABILITY" means total and permanent disability as defined in
Section 22(e)(3) of the Code.
(k) "EMPLOYEE" means any person, including Officers and Directors,
employed by the Company or any Parent or Subsidiary of the Company. A Service
Provider shall not cease to be an Employee in the case of (i) any leave of
absence approved by the Company or (ii) transfers between locations of the
Company or between the Company, its Parent, any Subsidiary, or any successor.
For purposes of Incentive Stock Options, no such leave may exceed ninety days,
unless reemployment upon expiration of such leave is guaranteed by statute or
contract. If reemployment upon expiration of a leave of absence approved by the
Company is not so guaranteed, on the 181st day of such leave any Incentive Stock
Option held by the Optionee shall cease to be treated as an Incentive Stock
Option and shall be treated for tax purposes as a Nonstatutory Stock Option.
Neither service as a Director nor payment of a director's fee by the Company
shall be sufficient to constitute "employment" by the Company.
(l) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
(m) "FAIR MARKET VALUE" means, as of any date, the value of Common
Stock determined as follows:
(i) If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the Nasdaq
National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its
Fair Market Value shall be the closing sales price for such stock (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;
(ii) If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, the Fair Market Value of
a Share of Common Stock shall be the mean between the high bid and low asked
prices for the Common Stock on the last market trading day prior to the day of
determination, as reported in THE WALL STREET JOURNAL or such other source as
the Administrator deems reliable; or
(iii) In the absence of an established market for the Common
Stock, the Fair Market Value shall be determined in good faith by the
Administrator.
(n) "INCENTIVE STOCK OPTION" means an Option intended to qualify as
an incentive stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.
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<PAGE>
(o) "NONSTATUTORY STOCK OPTION" means an Option not intended to
qualify as an Incentive Stock Option.
(p) "NOTICE OF GRANT" means a written or electronic notice evidencing
certain terms and conditions of an individual Option or Stock Purchase Right
grant. The Notice of Grant is part of the Option Agreement.
(q) "OFFICER" means a person who is an officer of the Company within
the meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
(r) "OPTION" means a stock option granted pursuant to the Plan.
(s) "OPTION AGREEMENT" means an agreement between the Company and an
Optionee evidencing the terms and conditions of an individual Option grant. The
Option Agreement is subject to the terms and conditions of the Plan.
(t) "OPTION EXCHANGE PROGRAM" means a program whereby outstanding
Options are surrendered in exchange for Options with a lower exercise price.
(u) "OPTIONED STOCK" means the Common Stock subject to an Option or
Stock Purchase Right.
(v) "OPTIONEE" means the holder of an outstanding Option or Stock
Purchase Right granted under the Plan.
(w) "PARENT" means a "parent corporation," whether now or hereafter
existing, as defined in Section 424(e) of the Code.
(x) "PLAN" means this 1998 Stock Plan.
(y) "RESTRICTED STOCK" means shares of Common Stock acquired pursuant
to a grant of Stock Purchase Rights under Section 11 of the Plan.
(z) "RESTRICTED STOCK PURCHASE AGREEMENT" means a written agreement
between the Company and the Optionee evidencing the terms and restrictions
applying to stock purchased under a Stock Purchase Right. The Restricted Stock
Purchase Agreement is subject to the terms and conditions of the Plan and the
Notice of Grant.
(aa) "RULE 16b-3" means Rule 16b-3 of the Exchange Act or any
successor to Rule 16b-3, as in effect when discretion is being exercised with
respect to the Plan.
(bb) "SECTION 16(b)" means Section 16(b) of the Exchange Act.
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<PAGE>
(cc) "SERVICE PROVIDER" means an Employee, Director or Consultant.
(dd) "SHARE" means a share of the Common Stock, as adjusted in
accordance with Section 13 of the Plan.
(ee) "STOCK PURCHASE RIGHT" means the right to purchase Common Stock
pursuant to Section 11 of the Plan, as evidenced by a Notice of Grant.
(ff) "SUBSIDIARY" means a "subsidiary corporation", whether now or
hereafter existing, as defined in Section 424(f) of the Code.
3. STOCK SUBJECT TO THE PLAN. Subject to the provisions of Section 13 of
the Plan, the maximum aggregate number of Shares which may be optioned and sold
under the Plan is 900,000 Shares. The Shares may be authorized, but unissued,
or reacquired Common Stock.
If an Option or Stock Purchase Right expires or becomes unexercisable
without having been exercised in full, or is surrendered pursuant to an Option
Exchange Program, the unpurchased Shares which were subject thereto shall become
available for future grant or sale under the Plan (unless the Plan has
terminated); PROVIDED, however, that Shares that have actually been issued under
the Plan, whether upon exercise of an Option or Right, shall not be returned to
the Plan and shall not become available for future distribution under the Plan,
except that if Shares of Restricted Stock are repurchased by the Company at
their original purchase price, such Shares shall become available for future
grant under the Plan.
4. ADMINISTRATION OF THE PLAN.
(a) PROCEDURE.
(i) MULTIPLE ADMINISTRATIVE BODIES. The Plan may be
administered by different Committees with respect to different groups of Service
Providers.
(ii) SECTION 162(m). To the extent that the Administrator
determines it to be desirable to qualify Options granted hereunder as
"performance-based compensation" within the meaning of Section 162(m) of the
Code, the Plan shall be administered by a Committee of two or more "outside
directors" within the meaning of Section 162(m) of the Code.
(iii) RULE 16b-3. To the extent desirable to qualify
transactions hereunder as exempt under Rule 16b-3, the transactions contemplated
hereunder shall be structured to satisfy the requirements for exemption under
Rule 16b-3.
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<PAGE>
(iv) OTHER ADMINISTRATION. Other than as provided above, the
Plan shall be administered by (A) the Board or (B) a Committee, which committee
shall be constituted to satisfy Applicable Laws.
(b) POWERS OF THE ADMINISTRATOR. Subject to the provisions of the
Plan, and in the case of a Committee, subject to the specific duties delegated
by the Board to such Committee, the Administrator shall have the authority, in
its discretion:
(i) to determine the Fair Market Value;
(ii) to select the Service Providers to whom Options and Stock
Purchase Rights may be granted hereunder;
(iii) to determine the number of shares of Common Stock to be
covered by each Option and Stock Purchase Right granted hereunder;
(iv) to approve forms of agreement for use under the Plan;
(v) to determine the terms and conditions, not inconsistent
with the terms of the Plan, of any Option or Stock Purchase Right granted
hereunder. Such terms and conditions include, but are not limited to, the
exercise price, the time or times when Options or Stock Purchase Rights may
be exercised (which may be based on performance criteria), any vesting
acceleration or waiver of forfeiture restrictions, and any restriction or
limitation regarding any Option or Stock Purchase Right or the shares of
Common Stock relating thereto, based in each case on such factors as the
Administrator, in its sole discretion, shall determine;
(vi) to reduce the exercise price of any Option or Stock
Purchase Right to the then current Fair Market Value if the Fair Market Value
of the Common Stock covered by such Option or Stock Purchase Right shall have
declined since the date the Option or Stock Purchase Right was granted;
(vii) to institute an Option Exchange Program;
(viii) to construe and interpret the terms of the Plan and
awards granted pursuant to the Plan;
(ix) to prescribe, amend and rescind rules and regulations
relating to the Plan, including rules and regulations relating to sub-plans
established for the purpose of qualifying for preferred tax treatment under
foreign tax laws;
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(x) to modify or amend each Option or Stock Purchase Right
(subject to Section 15(c) of the Plan), including the discretionary authority to
extend the post-termination exercisability period of Options longer than is
otherwise provided for in the Plan;
(xi) to allow Optionees to satisfy withholding tax obligations by
electing to have the Company withhold from the Shares to be issued upon exercise
of an Option or Stock Purchase Right that number of Shares having a Fair Market
Value equal to the amount required to be withheld. The Fair Market Value of the
Shares to be withheld shall be determined on the date that the amount of tax to
be withheld is to be determined. All elections by an Optionee to have Shares
withheld for this purpose shall be made in such form and under such conditions
as the Administrator may deem necessary or advisable;
(xii) to authorize any person to execute on behalf of the
Company any instrument required to effect the grant of an Option or Stock
Purchase Right previously granted by the Administrator;
(xiii) to make all other determinations deemed necessary or
advisable for administering the Plan.
(c) EFFECT OF ADMINISTRATOR'S DECISION. The Administrator's
decisions, determinations and interpretations shall be final and binding on all
Optionees and any other holders of Options or Stock Purchase Rights.
5. ELIGIBILITY. Nonstatutory Stock Options and Stock Purchase Rights may
be granted to Service Providers. Incentive Stock Options may be granted only to
Employees.
6. LIMITATIONS.
(a) Each Option shall be designated in the Option Agreement as either
an Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designation, to the extent that the aggregate Fair Market
Value of the Shares with respect to which Incentive Stock Options are
exercisable for the first time by the Optionee during any calendar year (under
all plans of the Company and any Parent or Subsidiary) exceeds $100,000, such
Options shall be treated as Nonstatutory Stock Options. For purposes of this
Section 6(a), Incentive Stock Options shall be taken into account in the order
in which they were granted. The Fair Market Value of the Shares shall be
determined as of the time the Option with respect to such Shares is granted.
(b) Neither the Plan nor any Option or Stock Purchase Right shall
confer upon an Optionee any right with respect to continuing the Optionee's
relationship as a Service Provider with the Company, nor shall they interfere in
any way with the Optionee's right or the Company's right to terminate such
relationship at any time, with or without cause.
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(c) The following limitations shall apply to grants of Options:
(i) No Service Provider shall be granted, in any fiscal year of
the Company, Options to purchase more than 1,000,000 Shares.
(ii) In connection with his or her initial service, a Service
Provider may be granted Options to purchase up to an additional 500,000 Shares
which shall not count against the limit set forth in subsection (i) above.
(iii) The foregoing limitations shall be adjusted
proportionately in connection with any change in the Company's capitalization as
described in Section 13.
(iv) If an Option is cancelled in the same fiscal year of
the Company in which it was granted (other than in connection with a transaction
described in Section 13), the cancelled Option will be counted against the
limits set forth in subsections (i) and (ii) above. For this purpose, if the
exercise price of an Option is reduced, the transaction will be treated as a
cancellation of the Option and the grant of a new Option.
7. TERM OF PLAN. Subject to Section 19 of the Plan, the Plan shall
become effective upon its adoption by the Board. It shall continue in effect
for a term of ten (10) years unless terminated earlier under Section 15 of the
Plan.
8. TERM OF OPTION. The term of each Option shall be stated in the Option
Agreement. In the case of an Incentive Stock Option, the term shall be ten (10)
years from the date of grant or such shorter term as may be provided in the
Option Agreement. Moreover, in the case of an Incentive Stock Option granted to
an Optionee who, at the time the Incentive Stock Option is granted, owns stock
representing more than ten percent (10%) of the total combined voting power of
all classes of stock of the Company or any Parent or Subsidiary, the term of the
Incentive Stock Option shall be five (5) years from the date of grant or such
shorter term as may be provided in the Option Agreement.
9. OPTION EXERCISE PRICE AND CONSIDERATION.
(a) EXERCISE PRICE. The per share exercise price for the Shares to
be issued pursuant to exercise of an Option shall be determined by the
Administrator, subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time the Incentive
Stock Option is granted, owns stock representing more than ten percent (10%) of
the voting power of all classes of stock of the Company or any Parent or
Subsidiary, the per Share exercise price shall be no less than 110% of the Fair
Market Value per Share on the date of grant.
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(B) granted to any Employee other than an Employee
described in paragraph (A) immediately above, the per Share exercise price shall
be no less than 100% of the Fair Market Value per Share on the date of grant.
(ii) In the case of a Nonstatutory Stock Option, the per Share
exercise price shall be determined by the Administrator. In the case of a
Nonstatutory Stock Option intended to qualify as "performance-based
compensation" within the meaning of Section 162(m) of the Code, the per Share
exercise price shall be no less than 100% of the Fair Market Value per Share on
the date of grant.
(iii) Notwithstanding the foregoing, Options may be granted
with a per Share exercise price of less than 100% of the Fair Market Value per
Share on the date of grant pursuant to a merger or other corporate transaction.
(b) WAITING PERIOD AND EXERCISE DATES. At the time an Option is
granted, the Administrator shall fix the period within which the Option may be
exercised and shall determine any conditions which must be satisfied before the
Option may be exercised.
(c) FORM OF CONSIDERATION. The Administrator shall determine the
acceptable form of consideration for exercising an Option, including the method
of payment. In the case of an Incentive Stock Option, the Administrator shall
determine the acceptable form of consideration at the time of grant. Such
consideration may consist entirely of:
(i) cash;
(ii) check;
(iii) promissory note;
(iv) other Shares which (A) in the case of Shares acquired upon
exercise of an option, have been owned by the Optionee for more than six months
on the date of surrender, and (B) have a Fair Market Value on the date of
surrender equal to the aggregate exercise price of the Shares as to which said
Option shall be exercised;
(v) consideration received by the Company under a cashless
exercise program implemented by the Company in connection with the Plan;
(vi) a reduction in the amount of any Company liability to
the Optionee, including any liability attributable to the Optionee's
participation in any Company-sponsored deferred compensation program or
arrangement;
(vii) any combination of the foregoing methods of payment; or
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(viii) such other consideration and method of payment for the
issuance of Shares to the extent permitted by Applicable Laws.
10. EXERCISE OF OPTION.
(a) PROCEDURE FOR EXERCISE; RIGHTS AS A SHAREHOLDER. Any Option
granted hereunder shall be exercisable according to the terms of the Plan and at
such times and under such conditions as determined by the Administrator and set
forth in the Option Agreement. Unless the Administrator provides otherwise,
vesting of Options granted hereunder shall be tolled during any unpaid leave of
absence. An Option may not be exercised for a fraction of a Share.
An Option shall be deemed exercised when the Company receives:
(i) written or electronic notice of exercise (in accordance with the Option
Agreement) from the person entitled to exercise the Option, and (ii) full
payment for the Shares with respect to which the Option is exercised. Full
payment may consist of any consideration and method of payment authorized by the
Administrator and permitted by the Option Agreement and the Plan. Shares issued
upon exercise of an Option shall be issued in the name of the Optionee or, if
requested by the Optionee, in the name of the Optionee and his or her spouse.
Until the Shares are issued (as evidenced by the appropriate entry on the books
of the Company or of a duly authorized transfer agent of the Company), no right
to vote or receive dividends or any other rights as a shareholder shall exist
with respect to the Optioned Stock, notwithstanding the exercise of the Option.
The Company shall issue (or cause to be issued) such Shares promptly after the
Option is exercised. No adjustment will be made for a dividend or other right
for which the record date is prior to the date the Shares are issued, except as
provided in Section 13 of the Plan.
Exercising an Option in any manner shall decrease the number of
Shares thereafter available, both for purposes of the Plan and for sale under
the Option, by the number of Shares as to which the Option is exercised.
(b) TERMINATION OF RELATIONSHIP AS A SERVICE PROVIDER. If an
Optionee ceases to be a Service Provider, other than upon the Optionee's death
or Disability, the Optionee may exercise his or her Option within such period of
time as is specified in the Option Agreement to the extent that the Option is
vested on the date of termination (but in no event later than the expiration of
the term of such Option as set forth in the Option Agreement). In the absence
of a specified time in the Option Agreement, the Option shall remain exercisable
for three (3) months following the Optionee's termination. If, on the date of
termination, the Optionee is not vested as to his or her entire Option, the
Shares covered by the unvested portion of the Option shall revert to the Plan.
If, after termination, the Optionee does not exercise his or her Option within
the time specified by the Administrator, the Option shall terminate, and the
Shares covered by such Option shall revert to the Plan.
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(c) DISABILITY OF OPTIONEE. If an Optionee ceases to be a Service
Provider as a result of the Optionee's Disability, the Optionee may exercise his
or her Option within such period of time as is specified in the Option Agreement
to the extent the Option is vested on the date of termination (but in no event
later than the expiration of the term of such Option as set forth in the Option
Agreement). In the absence of a specified time in the Option Agreement, the
Option shall remain exercisable for twelve (12) months following the Optionee's
termination. If, on the date of termination, the Optionee is not vested as to
his or her entire Option, the Shares covered by the unvested portion of the
Option shall revert to the Plan. If, after termination, the Optionee does not
exercise his or her Option within the time specified herein, the Option shall
terminate, and the Shares covered by such Option shall revert to the Plan.
(d) DEATH OF OPTIONEE. If an Optionee dies while a Service Provider,
the Option may be exercised within such period of time as is specified in the
Option Agreement (but in no event later than the expiration of the term of such
Option as set forth in the Notice of Grant), by the Optionee's estate or by a
person who acquires the right to exercise the Option by bequest or inheritance,
but only to the extent that the Option is vested on the date of death. In the
absence of a specified time in the Option Agreement, the Option shall remain
exercisable for twelve (12) months following the Optionee's termination. If, at
the time of death, the Optionee is not vested as to his or her entire Option,
the Shares covered by the unvested portion of the Option shall immediately
revert to the Plan. The Option may be exercised by the executor or
administrator of the Optionee's estate or, if none, by the person(s) entitled to
exercise the Option under the Optionee's will or the laws of descent or
distribution. If the Option is not so exercised within the time specified
herein, the Option shall terminate, and the Shares covered by such Option shall
revert to the Plan.
(e) BUYOUT PROVISIONS. The Administrator may at any time offer to
buy out for a payment in cash or Shares an Option previously granted based on
such terms and conditions as the Administrator shall establish and communicate
to the Optionee at the time that such offer is made.
11. STOCK PURCHASE RIGHTS.
(a) RIGHTS TO PURCHASE. Stock Purchase Rights may be issued either
alone, in addition to, or in tandem with other awards granted under the Plan
and/or cash awards made outside of the Plan. After the Administrator determines
that it will offer Stock Purchase Rights under the Plan, it shall advise the
offeree in writing or electronically, by means of a Notice of Grant, of the
terms, conditions and restrictions related to the offer, including the number of
Shares that the offeree shall be entitled to purchase, the price to be paid, and
the time within which the offeree must accept such offer. The offer shall be
accepted by execution of a Restricted Stock Purchase Agreement in the form
determined by the Administrator.
(b) REPURCHASE OPTION. Unless the Administrator determines
otherwise, the Restricted Stock Purchase Agreement shall grant the Company a
repurchase option exercisable upon the voluntary or involuntary termination of
the purchaser's service with the Company for any reason
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(including death or Disability). The purchase price for Shares repurchased
pursuant to the Restricted Stock Purchase Agreement shall be the original
price paid by the purchaser and may be paid by cancellation of any
indebtedness of the purchaser to the Company. The repurchase option shall
lapse at a rate determined by the Administrator.
(c) OTHER PROVISIONS. The Restricted Stock Purchase Agreement
shall contain such other terms, provisions and conditions not inconsistent
with the Plan as may be determined by the Administrator in its sole
discretion.
(d) RIGHTS AS A SHAREHOLDER. Once the Stock Purchase Right is
exercised, the purchaser shall have the rights equivalent to those of a
shareholder, and shall be a shareholder when his or her purchase is entered
upon the records of the duly authorized transfer agent of the Company. No
adjustment will be made for a dividend or other right for which the record
date is prior to the date the Stock Purchase Right is exercised, except as
provided in Section 13 of the Plan.
12. NON-TRANSFERABILITY OF OPTIONS AND STOCK PURCHASE RIGHTS. Unless
determined otherwise by the Administrator, an Option or Stock Purchase Right
may not be sold, pledged, assigned, hypothecated, transferred, or disposed of
in any manner other than by will or by the laws of descent or distribution
and may be exercised, during the lifetime of the Optionee, only by the
Optionee. If the Administrator makes an Option or Stock Purchase Right
transferable, such Option or Stock Purchase Right shall contain such
additional terms and conditions as the Administrator deems appropriate.
13. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, DISSOLUTION, MERGER OR
ASSET SALE.
(a) CHANGES IN CAPITALIZATION. Subject to any required action by
the shareholders of the Company, the number of shares of Common Stock covered
by each outstanding Option and Stock Purchase Right, and the number of shares
of Common Stock which have been authorized for issuance under the Plan but as
to which no Options or Stock Purchase Rights have yet been granted or which
have been returned to the Plan upon cancellation or expiration of an Option
or Stock Purchase Right, as well as the price per share of Common Stock
covered by each such outstanding Option or Stock Purchase Right, 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, whose determination in that respect
shall be final, binding and conclusive. 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 an Option or Stock Purchase Right.
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<PAGE>
(b) DISSOLUTION OR LIQUIDATION. In the event of the proposed
dissolution or liquidation of the Company, the Administrator shall notify
each Optionee as soon as practicable prior to the effective date of such
proposed transaction. The Administrator in its discretion may provide for an
Optionee to have the right to exercise his or her Option until ten (10) days
prior to such transaction as to all of the Optioned Stock covered thereby,
including Shares as to which the Option would not otherwise be exercisable.
In addition, the Administrator may provide that any Company repurchase option
applicable to any Shares purchased upon exercise of an Option or Stock
Purchase Right shall lapse as to all such Shares, provided the proposed
dissolution or liquidation takes place at the time and in the manner
contemplated. To the extent it has not been previously exercised, an Option
or Stock Purchase Right will terminate immediately prior to the consummation
of such proposed action.
(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, each outstanding Option and Stock Purchase Right shall
be assumed or an equivalent option or right substituted by the successor
corporation or a Parent or Subsidiary of the successor corporation. In the
event that the successor corporation refuses to assume or substitute for the
Option or Stock Purchase Right, the Optionee shall fully vest in and have the
right to exercise the Option or Stock Purchase Right as to all of the
Optioned Stock, including Shares as to which it would not otherwise be vested
or exercisable. If an Option or Stock Purchase Right becomes fully vested
and exercisable in lieu of assumption or substitution in the event of a
merger or sale of assets, the Administrator shall notify the Optionee in
writing or electronically that the Option or Stock Purchase Right shall be
fully vested and exercisable for a period of fifteen (15) days from the date
of such notice, and the Option or Stock Purchase Right shall terminate upon
the expiration of such period. For the purposes of this paragraph, the
Option or Stock Purchase Right shall be considered assumed if, following the
merger or sale of assets, the option or right confers the right to purchase
or receive, for each Share of Optioned Stock subject to the Option or Stock
Purchase Right immediately prior to the merger or sale of assets, the
consideration (whether stock, cash, or other securities or property) received
in the merger or sale of assets by holders of Common Stock for each Share
held on the effective date of the transaction (and if holders were offered a
choice of consideration, the type of consideration chosen by the holders of a
majority of the outstanding Shares); provided, however, that if such
consideration received in the merger or sale of assets is not solely common
stock of the successor corporation or its Parent, the Administrator may, with
the consent of the successor corporation, provide for the consideration to be
received upon the exercise of the Option or Stock Purchase Right, for each
Share of Optioned Stock subject to the Option or Stock Purchase Right, to be
solely common stock of the successor corporation or its Parent equal in fair
market value to the per share consideration received by holders of Common
Stock in the merger or sale of assets.
14. DATE OF GRANT. The date of grant of an Option or Stock Purchase
Right shall be, for all purposes, the date on which the Administrator makes
the determination granting such Option or Stock Purchase Right, or such other
later date as is determined by the Administrator. Notice of the
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<PAGE>
determination shall be provided to each Optionee within a reasonable time
after the date of such grant.
15. AMENDMENT AND TERMINATION OF THE PLAN.
(a) AMENDMENT AND TERMINATION. The Board may at any time amend,
alter, suspend or terminate the Plan.
(b) SHAREHOLDER APPROVAL. The Company shall obtain shareholder
approval of any Plan amendment to the extent necessary and desirable to comply
with Applicable Laws.
(c) EFFECT OF AMENDMENT OR TERMINATION. No amendment, alteration,
suspension or termination of the Plan shall impair the rights of any Optionee,
unless mutually agreed otherwise between the Optionee and the Administrator,
which agreement must be in writing and signed by the Optionee and the Company.
Termination of the Plan shall not affect the Administrator's ability to exercise
the powers granted to it hereunder with respect to Options granted under the
Plan prior to the date of such termination.
16. CONDITIONS UPON ISSUANCE OF SHARES.
(a) LEGAL COMPLIANCE. Shares shall not be issued pursuant to the
exercise of an Option or Stock Purchase Right unless the exercise of such Option
or Stock Purchase Right and the issuance and delivery of such Shares shall
comply with Applicable Laws and shall be further subject to the approval of
counsel for the Company with respect to such compliance.
(b) INVESTMENT REPRESENTATIONS. As a condition to the exercise of an
Option or Stock Purchase Right, the Company may require the person exercising
such Option or Stock Purchase Right to represent and warrant at the time of any
such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation is required.
17. INABILITY TO OBTAIN AUTHORITY. The inability of the Company to obtain
authority from any regulatory body having jurisdiction, which authority is
deemed by the Company's counsel to be necessary to the lawful issuance and sale
of any Shares hereunder, shall relieve the Company of any liability in respect
of the failure to issue or sell such Shares as to which such requisite authority
shall not have been obtained.
18. RESERVATION OF SHARES. The Company, during the term of this Plan,
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
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19. SHAREHOLDER APPROVAL. The Plan shall be subject to approval by the
shareholders of the Company within twelve (12) months after the date the Plan is
adopted. Such shareholder approval shall be obtained in the manner and to the
degree required under Applicable Laws.
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1998 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
[Optionee's Name and Address]
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
-------------------------
Vesting Commencement Date
-------------------------
Exercise Price per Share
$------------------------
Total Number of Shares Granted
-------------------------
Total Exercise Price
$------------------------
Type of Option: ---- Incentive Stock Option
---- Nonstatutory Stock Option
Term/Expiration Date:
-------------------------
VESTING SCHEDULE:
This Option may be exercised, in whole or in part, in accordance with the
following schedule:
20% of the Shares subject to the Option shall vest twelve months after the
Vesting Commencement Date, and 20% of the Shares subject to the Option shall
vest every twelve months thereafter, subject to the Optionee continuing to be a
Service Provider on such dates.
<PAGE>
TERMINATION PERIOD:
This Option may be exercised for three (3) months after Optionee ceases
to be a Service Provider. Upon the death or Disability of the Optionee, this
Option may be exercised for one year after Optionee ceases to be a Service
Provider. In no event shall this Option be exercised later than the
Term/Expiration Date as provided above.
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 the
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, which is incorporated herein by
reference. Subject to Section 15(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.
If designated in the Notice of Grant as an Incentive Stock Option
("ISO"), this Option is intended to qualify as an Incentive Stock Option
under Section 422 of the Code. However, if this Option is intended to be an
Incentive Stock Option, to the extent that it exceeds the $100,000 rule of
Code Section 422(d) it shall be treated as a Nonstatutory Stock Option
("NSO").
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 Plan and this Option Agreement.
(b) METHOD OF EXERCISE. This Option is exercisable 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 be required by
the Company pursuant to the provisions of the Plan. The Exercise Notice
shall be completed by the Optionee and delivered to the Manager of
Shareholder Services 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 Applicable Laws. 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.
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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) consideration received by the Company under a cashless exercise
program implemented by the Company in connection with the Plan; or
(d) surrender of other Shares which (i) in the case of Shares
acquired upon exercise of an option, 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; or
(e) with the Administrator's consent, delivery of Optionee's
promissory note (the "Note") in the form attached hereto as Exhibit C, in the
amount of the aggregate Exercise Price of the Exercised Shares together with
the execution and delivery by the Optionee of the Security Agreement attached
hereto as Exhibit B. The Note shall bear interest at the "applicable federal
rate" prescribed under the Code and its regulations at time of purchase, and
shall be secured by a pledge of the Shares purchased by the Note pursuant to
the Security Agreement.
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 and may be exercised during the lifetime of Optionee only by the
Optionee. 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 Plan and the terms of this Option Agreement.
6. TAX CONSEQUENCES. Some of the federal 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 OPTION.
(i) NONSTATUTORY STOCK OPTION. The Optionee may incur regular
federal income tax liability upon exercise of a NSO. 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
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Market Value of the Exercised Shares on the date of exercise over their
aggregate Exercise Price. If the Optionee is an Employee or a former
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 in cash equal to a percentage of this compensation
income at the time of exercise, and may refuse to honor the exercise and
refuse to deliver Shares if such withholding amounts are not delivered at the
time of exercise.
(ii) INCENTIVE STOCK OPTION. If this Option qualifies as an
ISO, the Optionee will have no regular federal 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 alternative minimum taxable income for
federal tax purposes and may subject the Optionee to alternative minimum tax
in the year of exercise. In the event that the Optionee ceases to be an
Employee but remains a Service Provider, any Incentive Stock Option of the
Optionee that remains unexercised shall cease to qualify as an Incentive
Stock Option and will be treated for tax purposes as a Nonstatutory Stock
Option on the date three (3) months and one (1) day following such change of
status.
(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. Any
additional gain will be taxed as capital gain, short-term or long-term
depending on the period that the ISO Shares were held.
(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>
7. ENTIRE AGREEMENT; GOVERNING LAW. The Plan is incorporated herein by
reference. The Plan and this Option Agreement constitute the entire
agreement of the parties with respect to the subject matter hereof and
supersede in their entirety all prior undertakings and agreements of the
Company and Optionee with respect to the subject matter hereof, and may not
be modified adversely to the Optionee's interest except by means of a writing
signed by the Company and Optionee. This agreement is governed by the
internal substantive laws, but not the choice of law rules, of Delaware.
8. NO GUARANTEE OF CONTINUED SERVICE. OPTIONEE ACKNOWLEDGES AND AGREES
THAT THE VESTING OF SHARES PURSUANT TO THE VESTING SCHEDULE HEREOF IS EARNED
ONLY BY CONTINUING AS A SERVICE PROVIDER AT THE WILL OF THE COMPANY (AND NOT
THROUGH THE ACT OF BEING HIRED, BEING GRANTED AN OPTION OR PURCHASING SHARES
HEREUNDER). OPTIONEE 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 A SERVICE PROVIDER FOR THE VESTING PERIOD, FOR ANY PERIOD, OR
AT ALL, AND SHALL NOT INTERFERE WITH OPTIONEE'S RIGHT OR THE COMPANY'S RIGHT
TO TERMINATE OPTIONEE'S RELATIONSHIP AS A SERVICE PROVIDER AT ANY TIME, WITH
OR WITHOUT CAUSE.
9. VESTING ACCELERATION ON CHANGE OF CONTROL.
(a) VESTING ACCELERATION. In the event of a "Change of
Control," all of the Optionee's rights to purchase stock under this Agreement
with the Company shall be automatically vested in their entirety on an
accelerated basis and be fully exercisable:
(i) as of the date immediately preceding such "Change of
Control" in the event this stock option agreement is or will be terminated or
canceled (except by mutual consent) or any successor to the Company fails to
assume and agree to perform such stock option agreement as provided in
Section 9(a) hereof at or prior to such time as any such person becomes a
successor to the Company; or
(ii) as of the date immediately preceding such "Change of
Control" in the event the Optionee does not or will not receive upon exercise
of the Optionee's stock purchase rights under such stock option agreement the
same identical securities and/or other consideration as is received by all
other shareholders in any merger, consolidation, sale, exchange or similar
transaction occurring upon or after such "Change of Control;" or
(iii) as of the date immediately preceding any "Involuntary
Termination" of the Optionee occurring upon or after any such "Change of
Control;" or
-5-
<PAGE>
(iv) as of the date one (1) year following the first such
"Change of Control," provided that the Optionee shall have remained an
employee of the Company continuously throughout such one-year period, other
than a termination as a result of death or disability;
whichever shall first occur (all quoted terms as defined below).
(b) CHANGE OF CONTROL. "Change of Control" means the
occurrence of any of the following events:
(i) Any "person" (as such term is used in
Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended)
is or becomes the "beneficial owner" (as defined in Rule 13d-3 under said
Act), directly or indirectly, of securities of the Company representing fifty
percent (50%) or more of the total voting power represented by the Company's
then outstanding voting securities; or
(ii) A change in the composition of the Board of
Directors of the Company occurring within a two-year period as a result of
which fewer than a majority of the directors are "Incumbent Directors."
"Incumbent Directors" shall mean directors who either (A) are directors of
the Company as of the date hereof, or (B) are elected, or nominated for
election, to the Board of Directors with the affirmative votes (either by a
specific vote or by approval of the proxy statement of the Company in which
such person is named as a nominee for election as a director without
objection to such nomination) of at least a majority of the Incumbent
Directors at the time of such election or nomination; or
(iii) The consummation of (A) a merger or
consolidation of the Company with any other entity, other than a merger or
consolidation which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity or the entity that controls the Company or such surviving
entity) at least fifty percent (50%) of the total voting power represented by
the voting securities of the Company or such surviving entity or the entity
that controls the Company or such surviving entity outstanding immediately
after such merger or consolidation, or (B) the sale or disposition by the
Company of all or substantially all the Company's assets; or
(iv) The shareholders approve a plan of complete
liquidation of the Company.
(c) INVOLUNTARY TERMINATION. "Involuntary Termination" shall
mean without the Optionee's written consent: (i) a termination by the
Company of the Optionee's employment with the Company other than for Cause;
(ii) a material reduction of or variation in the Optionee's duties, authority
or responsibilities, relative to the Optionee's duties, authority or
responsibilities as in effect immediately prior to such reduction or
variation; (iii) a reduction by the
-6-
<PAGE>
Company in the base salary of the Optionee as in effect immediately prior to
such reduction; (iv) a material reduction by the Company in the kind or level
of employee benefits, including bonuses, to which the Optionee was entitled
immediately prior to such reduction, with the result that the Optionee's
overall benefits package is materially reduced; (v) the relocation of the
Optionee to a facility or a location more than thirty (30) miles from the
Optionee's then present location; (vi) the failure of the Company to obtain
the assumption of this Agreement by any successor as required in Section 12,
or (vii) any act or set of facts that would under applicable law constitute a
constructive termination of Optionee.
(d) CAUSE. "Cause" shall mean (i) any willful act of
personal dishonesty, fraud or misrepresentation taken by the Optionee in
connection with his or her responsibilities as an employee which was intended
to result in substantial gain or personal enrichment of the Optionee at the
expense of the Company and was materially and demonstrably injurious to the
Company; (ii) the Optionee's conviction of a felony on account of any act
which was materially and demonstrably injurious to the Company; or (iii) the
Optionee's willful and continued failure to substantially perform his or her
principal duties and obligations of employment including under any written
agreements (other than any such failure resulting from incapacity due to
physical or mental illness), which failure is not remedied in a reasonable
period of time after receipt of written notice from the Company. For the
purposes of this Section 9(d), no act or failure to act shall be considered
"willful" unless done or omitted to be done in bad faith and without
reasonable belief that the act or omission was in or not opposed to the best
interests of the Company. Any act or failure to act based upon authority
given pursuant to a resolution duly adopted by the Board of Directors of the
Company or based upon the advice of counsel for the Company shall be
conclusively presumed to be done or omitted to be done in good faith and in
the best interests of the Company.
(e) VOLUNTARY RESIGNATION; TERMINATION FOR CAUSE. If the
Optionee terminates employment as a result of an Involuntary Termination, the
Optionee shall be entitled to receive accelerated vesting under Section 9(a)
hereof. If the Optionee's continuous status as an employee of the Company
terminates by reason of the Optionee's voluntary resignation (and not
Involuntary Termination) or if the Optionee's continuous status as an
employee of the Company is terminated for Cause, in either case prior to such
time as accelerated vesting occurs as provided in Section 9(a) hereof, then
the Optionee shall not be entitled to receive accelerated vesting under
Section 9(a) hereof.
10. SUCCESSORS. Any successor to the Company (whether direct or
indirect and whether by purchase, merger or consolidation) shall assume the
obligations under this Agreement and agree expressly to perform the
obligations under this Agreement in the same manner and to the same extent as
the Company would be required to perform such obligations in the absence of a
succession. The terms of this Agreement and all rights of the Optionee
hereunder shall inure to the benefit of, and be enforceable by, the
Optionee's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees
-7-
<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 Plan and this Option Agreement.
Optionee has reviewed 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 fully understands all provisions of the Plan and
Option Agreement. Optionee hereby agrees to accept as binding, conclusive and
final all decisions or interpretations of the Administrator upon any
questions relating to the Plan and Option Agreement. Optionee further agrees
to notify the Company upon any change in the residence address indicated
below.
OPTIONEE: ACCESS HEALTH, INC.
- ------------------------------------ --------------------------------------
Signature By
- ------------------------------------ --------------------------------------
Print Name Title
- ------------------------------------
Residence Address
- ------------------------------------
CONSENT OF SPOUSE
The undersigned spouse of Optionee has read and hereby approves the terms
and conditions of the Plan and this Option Agreement. In consideration of the
Company's granting his or her spouse the right to purchase Shares as set forth
in the Plan and this Option Agreement, the undersigned hereby agrees to be
irrevocably bound by the terms and conditions of the Plan and this Option
Agreement and further agrees that any community property interest shall be
similarly bound. The undersigned hereby appoints the undersigned's spouse as
attorney-in-fact for the undersigned with respect to any amendment or exercise
of rights under the Plan or this Option Agreement.
_______________________________________
Spouse of Optionee
-8-
<PAGE>
EXHIBIT A
1998 STOCK PLAN
EXERCISE NOTICE
Access Health, Inc.
310 Interlocken Parkway, Suite A
Broomfield, CO 80021
Attention: Manager of Shareholder Services
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 1998 Stock Plan (the "Plan") and the
Stock Option Agreement dated _______________ , 19___ (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. Until the issuance (as evidenced by the
appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company) of the Shares, no right to vote or receive dividends or
any other rights as a shareholder shall exist with respect to the Optioned
Stock, notwithstanding the exercise of the Option. The Shares so acquired shall
be issued to the Optionee as soon as practicable after exercise of the Option.
No adjustment will be made for a dividend or other right for which the record
date is prior to the date of issuance, except as provided in Section 13 of the
Plan.
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. 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 with respect to the
subject matter hereof and supersede in their entirety all prior undertakings and
agreements of the Company and Purchaser with respect to the subject matter
hereof, and may not be modified adversely to the Purchaser's interest except by
means of a writing
<PAGE>
signed by the Company and Purchaser. This agreement is governed by the
internal substantive laws, but not the choice of law rules, of Delaware.
Submitted by: Accepted by:
PURCHASER: ACCESS HEALTH, INC.
- ---------------------------------- -------------------------------------
Signature By
- ---------------------------------- -------------------------------------
Print Name Its
ADDRESS: ADDRESS:
- ---------------------------------- Access Health, Inc.
310 Interlocken Parkway, Suite A
- ---------------------------------- Broomfield, CO 80021
-------------------------------------
Date Received
-2-
<PAGE>
EXHIBIT B
SECURITY AGREEMENT
This Security Agreement is made as of __________, 19___ between Access
Health, Inc., a Delaware corporation ("Pledgee"), and _________________________
("Pledgor").
RECITALS
Pursuant to Pledgor's election to purchase Shares under the Option
Agreement dated ________ (the "Option"), between Pledgor and Pledgee under
Pledgee's 1998 Stock Plan, and Pledgor's election under the terms of the Option
to pay for such shares with his promissory note (the "Note"), Pledgor has
purchased _________ shares of Pledgee's Common Stock (the "Shares") at a price
of $________ per share, for a total purchase price of $__________. The Note and
the obligations thereunder are as set forth in Exhibit C to the Option.
NOW, THEREFORE, it is agreed as follows:
1. CREATION AND DESCRIPTION OF SECURITY INTEREST. In consideration of
the transfer of the Shares to Pledgor under the Option Agreement, Pledgor,
pursuant to the Delaware Commercial Code, hereby pledges all of such Shares
(herein sometimes referred to as the "Collateral") represented by certificate
number ______, duly endorsed in blank or with executed stock powers, and
herewith delivers said certificate to the Secretary of Pledgee ("Pledgeholder"),
who shall hold said certificate subject to the terms and conditions of this
Security Agreement.
The pledged stock (together with an executed blank stock assignment for use
in transferring all or a portion of the Shares to Pledgee if, as and when
required pursuant to this Security Agreement) shall be held by the Pledgeholder
as security for the repayment of the Note, and any extensions or renewals
thereof, to be executed by Pledgor pursuant to the terms of the Option, and the
Pledgeholder shall not encumber or dispose of such Shares except in accordance
with the provisions of this Security Agreement.
2. PLEDGOR'S REPRESENTATIONS AND COVENANTS. To induce Pledgee to enter
into this Security Agreement, Pledgor represents and covenants to Pledgee, its
successors and assigns, as follows:
a. PAYMENT OF INDEBTEDNESS. Pledgor will pay the principal sum of
the Note secured hereby, together with interest thereon, at the time and in the
manner provided in the Note.
b. ENCUMBRANCES. The Shares are free of all other encumbrances,
defenses and liens, and Pledgor will not further encumber the Shares without the
prior written consent of Pledgee.
<PAGE>
c. MARGIN REGULATIONS. In the event that Pledgee's Common Stock is
now or later becomes margin-listed by the Federal Reserve Board and Pledgee is
classified as a "lender" within the meaning of the regulations under Part 207 of
Title 12 of the Code of Federal Regulations ("Regulation G"), Pledgor agrees to
cooperate with Pledgee in making any amendments to the Note or providing any
additional collateral as may be necessary to comply with such regulations.
3. VOTING RIGHTS. During the term of this pledge and so long as all
payments of principal and interest are made as they become due under the terms
of the Note, Pledgor shall have the right to vote all of the Shares pledged
hereunder.
4. STOCK ADJUSTMENTS. In the event that during the term of the pledge
any stock dividend, reclassification, readjustment or other changes are declared
or made in the capital structure of Pledgee, all new, substituted and additional
shares or other securities issued by reason of any such change shall be
delivered to and held by the Pledgee under the terms of this Security Agreement
in the same manner as the Shares originally pledged hereunder. In the event of
substitution of such securities, Pledgor, Pledgee and Pledgeholder shall
cooperate and execute such documents as are reasonable so as to provide for the
substitution of such Collateral and, upon such substitution, references to
"Shares" in this Security Agreement shall include the substituted shares of
capital stock of Pledgor as a result thereof.
5. OPTIONS AND RIGHTS. In the event that, during the term of this
pledge, subscription Options or other rights or options shall be issued in
connection with the pledged Shares, such rights, Options and options shall be
the property of Pledgor and, if exercised by Pledgor, all new stock or other
securities so acquired by Pledgor as it relates to the pledged Shares then held
by Pledgeholder shall be immediately delivered to Pledgeholder, to be held under
the terms of this Security Agreement in the same manner as the Shares pledged.
6. DEFAULT. Pledgor shall be deemed to be in default of the Note and of
this Security Agreement in the event:
a. Payment of principal or interest on the Note shall be delinquent
for a period of 10 days or more; or
b. Pledgor fails to perform any of the covenants set forth in the
Option or contained in this Security Agreement for a period of 10 days after
written notice thereof from Pledgee.
In the case of an event of Default, as set forth above, Pledgee shall have
the right to accelerate payment of the Note upon notice to Pledgor, and Pledgee
shall thereafter be entitled to pursue its remedies under the Delaware
Commercial Code.
-2-
<PAGE>
7. RELEASE OF COLLATERAL. Subject to any applicable contrary rules under
Regulation G, there shall be released from this pledge a portion of the pledged
Shares held by Pledgeholder hereunder upon payments of the principal of the
Note. The number of the pledged Shares which shall be released shall be that
number of full Shares which bears the same proportion to the initial number of
Shares pledged hereunder as the payment of principal bears to the initial full
principal amount of the Note.
8. WITHDRAWAL OR SUBSTITUTION OF COLLATERAL. Pledgor shall not sell,
withdraw, pledge, substitute or otherwise dispose of all or any part of the
Collateral without the prior written consent of Pledgee.
9. TERM. The within pledge of Shares shall continue until the payment of
all indebtedness secured hereby, at which time the remaining pledged stock shall
be promptly delivered to Pledgor, subject to the provisions for prior release of
a portion of the Collateral as provided in paragraph 7 above.
10. INSOLVENCY. Pledgor agrees that if a bankruptcy or insolvency
proceeding is instituted by or against it, or if a receiver is appointed for the
property of Pledgor, or if Pledgor makes an assignment for the benefit of
creditors, the entire amount unpaid on the Note shall become immediately due and
payable, and Pledgee may proceed as provided in the case of default.
11. PLEDGEHOLDER LIABILITY. In the absence of willful or gross
negligence, Pledgeholder shall not be liable to any party for any of his acts,
or omissions to act, as Pledgeholder.
12. INVALIDITY OF PARTICULAR PROVISIONS. Pledgor and Pledgee agree that
the enforceability or invalidity of any provision or provisions of this Security
Agreement shall not render any other provision or provisions herein contained
unenforceable or invalid.
13. SUCCESSORS OR ASSIGNS. Pledgor and Pledgee agree that all of the
terms of this Security Agreement shall be binding on their respective successors
and assigns, and that the term "Pledgor" and the term "Pledgee" as used herein
shall be deemed to include, for all purposes, the respective designees,
successors, assigns, heirs, executors and administrators.
14. GOVERNING LAW. This Security Agreement shall be interpreted and
governed under the internal substantive laws, but not the choice of law rules,
of Delaware.
-3-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
"PLEDGOR"
---------------------------------
Signature
---------------------------------
Print Name
Address:
---------------------------------
---------------------------------
"PLEDGEE" Access Health, Inc.,
a Delaware corporation
--------------------------------
Signature
--------------------------------
Print Name
--------------------------------
Title
"PLEDGEHOLDER"
--------------------------------
Secretary of
Access Health, Inc.
-4-
<PAGE>
EXHIBIT C
NOTE
$ Broomfield, Colorado
---------------
______________, 19___
FOR VALUE RECEIVED, _______________ promises to pay to Access Health, Inc.,
a Delaware corporation (the "Company"), or order, the principal sum of
_______________________ ($_____________), together with interest on the unpaid
principal hereof from the date hereof at the rate of _______________ percent
(____%) per annum, compounded semiannually.
Principal and interest shall be due and payable on __________, 19___.
Payment of principal and interest shall be made in lawful money of the United
States of America.
The undersigned may at any time prepay all or any portion of the principal
or interest owing hereunder.
This Note is subject to the terms of the Option, dated as of
________________. This Note is secured in part by a pledge of the Company's
Common Stock under the terms of a Security Agreement of even date herewith and
is subject to all the provisions thereof.
The holder of this Note shall have full recourse against the undersigned,
and shall not be required to proceed against the collateral securing this Note
in the event of default.
In the event the undersigned shall cease to be an employee, director or
consultant of the Company for any reason, this Note shall, at the option of the
Company, be accelerated, and the whole unpaid balance on this Note of principal
and accrued interest shall be immediately due and payable.
Should any action be instituted for the collection of this Note, the
reasonable costs and attorneys' fees therein of the holder shall be paid by the
undersigned.
------------------------------------
------------------------------------
<PAGE>
1998 STOCK PLAN
NOTICE OF GRANT OF STOCK PURCHASE RIGHT
Unless otherwise defined herein, the terms defined in the Plan shall have
the same defined meanings in this Notice of Grant.
[Grantee's Name and Address]
You have been granted the right to purchase Common Stock of the Company,
subject to the Company's Repurchase Option and your ongoing status as a Service
Provider (as described in the Plan and the attached Restricted Stock Purchase
Agreement), as follows:
Grant Number
-------------------------
Date of Grant
-------------------------
Price Per Share $
------------------------
Total Number of Shares Subject
to This Stock Purchase Right -------------------------
Expiration Date:
-------------------------
YOU MUST EXERCISE THIS STOCK PURCHASE RIGHT BEFORE THE EXPIRATION DATE OR
IT WILL TERMINATE AND YOU WILL HAVE NO FURTHER RIGHT TO PURCHASE THE SHARES. By
your signature and the signature of the Company's representative below, you and
the Company agree that this Stock Purchase Right is granted under and governed
by the terms and conditions of the 1998 Stock Plan and the Restricted Stock
Purchase Agreement, attached hereto as Exhibit A-1, both of which are made a
part of this document. You further agree to execute the attached Restricted
Stock Purchase Agreement as a condition to purchasing any shares under this
Stock Purchase Right.
GRANTEE: ACCESS HEALTH, INC.
- --------------------------- --------------------------------
Signature By
- --------------------------- --------------------------------
Print Name Title
<PAGE>
EXHIBIT A-1
1998 STOCK PLAN
RESTRICTED STOCK PURCHASE AGREEMENT
Unless otherwise defined herein, the terms defined in the Plan shall have
the same defined meanings in this Restricted Stock Purchase Agreement.
WHEREAS the Purchaser named in the Notice of Grant, (the "Purchaser") is an
Service Provider, and the Purchaser's continued participation is considered by
the Company to be important for the Company's continued growth; and
WHEREAS in order to give the Purchaser an opportunity to acquire an equity
interest in the Company as an incentive for the Purchaser to participate in the
affairs of the Company, the Administrator has granted to the Purchaser a Stock
Purchase Right subject to the terms and conditions of the Plan and the Notice of
Grant, which are incorporated herein by reference, and pursuant to this
Restricted Stock Purchase Agreement (the "Agreement").
NOW THEREFORE, the parties agree as follows:
1. SALE OF STOCK. The Company hereby agrees to sell to the Purchaser and
the Purchaser hereby agrees to purchase shares of the Company's Common Stock
(the "Shares"), at the per Share purchase price and as otherwise described in
the Notice of Grant.
2. PAYMENT OF PURCHASE PRICE. The purchase price for the Shares may be
paid by delivery to the Company at the time of execution of this Agreement of
cash, a check, or some combination thereof.
3. REPURCHASE OPTION.
(a) In the event the Purchaser ceases to be a Service Provider for
any or no reason (including death or disability) before all of the Shares are
released from the Company's Repurchase Option (see Section 4), the Company
shall, upon the date of such termination (as reasonably fixed and determined by
the Company) have an irrevocable, exclusive option (the "Repurchase Option") for
a period of sixty (60) days from such date to repurchase up to that number of
shares which constitute the Unreleased Shares (as defined in Section 4) at the
original purchase price per share (the "Repurchase Price"). The Repurchase
Option shall be exercised by the Company by delivering written notice to the
Purchaser or the Purchaser's executor (with a copy to the Escrow Holder) AND, at
the Company's option, (i) by delivering to the Purchaser or the Purchaser's
executor a check in the amount of the aggregate Repurchase Price, or (ii) by
cancelling an amount of the Purchaser's indebtedness to the Company equal to the
aggregate Repurchase Price, or (iii) by a combination of (i) and (ii) so that
the combined payment and cancellation of indebtedness equals the aggregate
Repurchase Price. Upon delivery of such notice and the payment of the aggregate
Repurchase Price, the Company shall become the legal and beneficial owner of the
Shares being repurchased and all
<PAGE>
rights and interests therein or relating thereto, and the Company shall have
the right to retain and transfer to its own name the number of Shares being
repurchased by the Company.
(b) Whenever the Company shall have the right to repurchase Shares
hereunder, the Company may designate and assign one or more employees, officers,
directors or shareholders of the Company or other persons or organizations to
exercise all or a part of the Company's purchase rights under this Agreement and
purchase all or a part of such Shares. If the Fair Market Value of the Shares
to be repurchased on the date of such designation or assignment (the "Repurchase
FMV") exceeds the aggregate Repurchase Price of such Shares, then each such
designee or assignee shall pay the Company cash equal to the difference between
the Repurchase FMV and the aggregate Repurchase Price of such Shares.
4. RELEASE OF SHARES FROM REPURCHASE OPTION.
(a) _______________________ percent (______%) of the Shares shall be
released from the Company's Repurchase Option [ONE YEAR] after the Date of
Grant and __________________ percent (______%) of the Shares [AT THE END OF EACH
YEAR THEREAFTER], provided that the Purchaser does not cease to be a Service
Provider prior to the date of any such release.
(b) Any of the Shares that have not yet been released from the
Repurchase Option are referred to herein as "Unreleased Shares."
(c) The Shares that have been released from the Repurchase Option
shall be delivered to the Purchaser at the Purchaser's request (see Section 6).
5. RESTRICTION ON TRANSFER. Except for the escrow described in Section 6
or the 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 such Shares
are released from the Company's Repurchase Option in accordance with the
provisions of this Agreement, other than by will or the laws of descent and
distribution.
6. ESCROW OF SHARES.
(a) To ensure the availability for delivery of the Purchaser's
Unreleased Shares upon repurchase by the Company pursuant to the Repurchase
Option, the Purchaser shall, upon execution of this Agreement, deliver and
deposit with an escrow holder designated by the Company (the "Escrow Holder")
the share certificates representing the Unreleased Shares, together with the
stock assignment duly endorsed in blank, attached hereto as Exhibit A-2. The
Unreleased Shares and stock assignment shall be held by the Escrow Holder,
pursuant to the Joint Escrow Instructions of the Company and Purchaser attached
hereto as Exhibit A-3, until such time as the Company's Repurchase Option
expires. As a further condition to the Company's obligations under this
-2-
<PAGE>
Agreement, the Company may require the spouse of Purchaser, if any, to execute
and deliver to the Company the Consent of Spouse attached hereto as Exhibit A-4.
(b) The Escrow Holder shall not be liable for any act it may do or
omit to do with respect to holding the Unreleased Shares in escrow while acting
in good faith and in the exercise of its judgment.
(c) If the Company or any assignee exercises the Repurchase Option
hereunder, the Escrow Holder, upon receipt of written notice of such exercise
from the proposed transferee, shall take all steps necessary to accomplish such
transfer.
(d) When the Repurchase Option has been exercised or expires
unexercised or a portion of the Shares has been released from the Repurchase
Option, upon request the Escrow Holder shall promptly cause a new certificate to
be issued for the released Shares and shall deliver the certificate to the
Company or the Purchaser, as the case may be.
(e) Subject to the terms hereof, the Purchaser shall have all the
rights of a shareholder with respect to the Shares while they are held in
escrow, including without limitation, the right to vote the Shares and to
receive any cash dividends declared thereon. If, from time to time during the
term of the Repurchase Option, there is (i) any stock dividend, stock split or
other change in the Shares, or (ii) any merger or sale of all or substantially
all of the assets or other acquisition of the Company, any and all new,
substituted or additional securities to which the Purchaser is entitled by
reason of the Purchaser's ownership of the Shares shall be immediately subject
to this escrow, deposited with the Escrow Holder and included thereafter as
"Shares" for purposes of this Agreement and the Repurchase Option.
7. LEGENDS. The share certificate evidencing the Shares, if any, issued
hereunder shall be endorsed with the following legend (in addition to any legend
required under applicable state securities laws):
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
RESTRICTIONS UPON TRANSFER AND RIGHTS OF REPURCHASE AS SET FORTH IN AN AGREEMENT
BETWEEN THE COMPANY AND THE SHAREHOLDER, A COPY OF WHICH IS ON FILE WITH THE
SECRETARY OF THE COMPANY.
8. 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.
9. TAX CONSEQUENCES. The Purchaser has reviewed with the Purchaser's own
tax advisors the federal, state, local and foreign tax consequences of this
investment and the transactions
-3-
<PAGE>
contemplated by this Agreement. The Purchaser is relying solely on such
advisors and not on any statements or representations of the Company or any
of its agents. The Purchaser understands that the Purchaser (and not the
Company) shall be responsible for the Purchaser's own tax liability that may
arise as a result of the transactions contemplated by this Agreement. The
Purchaser 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 buy back the Shares
pursuant to the Repurchase Option. The Purchaser understands that the
Purchaser may elect to be taxed at the time the Shares are purchased rather
than when and as the Repurchase Option expires by filing an election under
Section 83(b) of the Code with the IRS within 30 days from the date of
purchase. The form for making this election is attached as Exhibit A-5
hereto.
THE PURCHASER ACKNOWLEDGES THAT IT IS THE PURCHASER'S SOLE
RESPONSIBILITY AND NOT THE COMPANY'S TO FILE TIMELY THE ELECTION UNDER
SECTION 83(b), EVEN IF THE PURCHASER REQUESTS THE COMPANY OR ITS REPRESENTATIVES
TO MAKE THIS FILING ON THE PURCHASER'S BEHALF.
10. GENERAL PROVISIONS.
(a) This Agreement shall be governed by the internal substantive
laws, but not the choice of law rules of [state]. This Agreement, subject to
the terms and conditions of the Plan and the Notice of Grant, represents the
entire agreement between the parties with respect to the purchase of the Shares
by the Purchaser. Subject to Section 15(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 Agreement, the terms and conditions of the Plan shall
prevail. Unless otherwise defined herein, the terms defined in the Plan shall
have the same defined meanings in this Agreement.
(b) Any notice, demand or request required or permitted to be given
by either the Company or the Purchaser 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.
Any notice to the Escrow Holder shall be sent to the Company's address
with a copy to the other party hereto.
(c) The rights 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 the Purchaser
under this Agreement may only be assigned with the prior written consent of the
Company.
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<PAGE>
(d) Either party's failure to enforce any provision of this Agreement
shall not in any way be construed as a waiver of any such provision, nor prevent
that party from thereafter enforcing any other provision of this Agreement. The
rights granted both parties hereunder are cumulative and shall not constitute a
waiver of either party's right to assert any other legal remedy available to it.
(e) The Purchaser agrees upon request to execute any further
documents or instruments necessary or desirable to carry out the purposes or
intent of this Agreement.
(f) PURCHASER ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES
PURSUANT TO SECTION 4 HEREOF IS EARNED ONLY BY CONTINUING SERVICE AS A SERVICE
PROVIDER AT THE WILL OF THE COMPANY (AND NOT THROUGH THE ACT OF BEING HIRED OR
PURCHASING SHARES HEREUNDER). PURCHASER 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 A SERVICE PROVIDER FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT
ALL, AND SHALL NOT INTERFERE WITH PURCHASER'S RIGHT OR THE COMPANY'S RIGHT TO
TERMINATE PURCHASER'S RELATIONSHIP AS A SERVICE PROVIDER AT ANY TIME, WITH OR
WITHOUT CAUSE.
By Purchaser's signature below, Purchaser represents that he or she is
familiar with the terms and provisions of the Plan, and hereby accepts this
Agreement subject to all of the terms and provisions thereof. Purchaser has
reviewed the Plan and this Agreement in their entirety, has had an opportunity
to obtain the advice of counsel prior to executing this Agreement and fully
understands all provisions of this Agreement. Purchaser agrees to accept as
binding, conclusive and final all decisions or interpretations of the
Administrator upon any questions arising under the Plan or this Agreement.
Purchaser further agrees to notify the Company upon any change in the residence
indicated in the Notice of Grant.
DATED:
---------------------
PURCHASER: ACCESS HEALTH, INC.
- ------------------------------ ----------------------------------
Signature By
- ------------------------------ ----------------------------------
Print Name Title
-5-
<PAGE>
EXHIBIT A-2
-----------
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED I, ________________________, hereby sell, assign and
transfer unto ___________________(_______) shares of the Common Stock of Access
Health, Inc. standing in my name of the books of said corporation represented by
Certificate No. __________ herewith and do hereby irrevocably constitute and
appoint__________________to transfer the said stock on the books of the within
named corporation with full power of substitution in the premises.
This Stock Assignment may be used only in accordance with the Restricted
Stock Purchase Agreement (the "Agreement") between _____________________ and
the undersigned dated ______________, 19__.
Dated:___________________________, 19____
Signature:_______________________________
INSTRUCTIONS: Please do not fill in any blanks other than the signature line.
The purpose of this assignment is to enable the Company to exercise the
Repurchase Option, as set forth in the Agreement, without requiring additional
signatures on the part of the Purchaser.
<PAGE>
EXHIBIT A-3
JOINT ESCROW INSTRUCTIONS
, 19
------------ --
Corporate Secretary
Access Health, Inc.
310 Interlocken Parkway, Suite A
Broomfield, CO 80021
Dear :
------------------
As Escrow Agent for both Access Health, Inc., a Delaware corporation
(the "Company"), and the undersigned purchaser of stock of the Company (the
"Purchaser"), you are hereby authorized and directed to hold the documents
delivered to you pursuant to the terms of that certain Restricted Stock
Purchase Agreement ("Agreement") between the Company and the undersigned, in
accordance with the following instructions:
1. In the event the Company and/or any assignee of the Company
(referred to collectively as the "Company") exercises the Company's
Repurchase Option set forth in the Agreement, the Company shall give to
Purchaser and you a written notice specifying the number of shares of stock
to be purchased, the purchase price, and the time for a closing hereunder at
the principal office of the Company. Purchaser and the Company hereby
irrevocably authorize and direct you to close the transaction contemplated by
such notice in accordance with the terms of said notice.
2. At the closing, you are directed (a) to date the stock assignments
necessary for the transfer in question, (b) to fill in the number of shares
being transferred, and (c) to deliver same, together with the certificate
evidencing the shares of stock to be transferred, to the Company or its
assignee, against the simultaneous delivery to you of the purchase price (by
cash, a check, or some combination thereof) for the number of shares of stock
being purchased pursuant to the exercise of the Company's Repurchase Option.
3. Purchaser irrevocably authorizes the Company to deposit with you
any certificates evidencing shares of stock to be held by you hereunder and
any additions and substitutions to said shares as defined in the Agreement.
Purchaser does hereby irrevocably constitute and appoint you as Purchaser's
attorney-in-fact and agent for the term of this escrow to execute with
respect to such securities all documents necessary or appropriate to make
such securities negotiable and to complete any transaction herein
contemplated, including but not limited to the filing with any applicable
state blue sky authority of any required applications for consent to, or
notice of transfer of, the securities. Subject to the provisions of this
paragraph 3, Purchaser shall exercise all rights and privileges of a
shareholder of the Company while the stock is held by you.
<PAGE>
4. Upon written request of the Purchaser, but no more than once per
calendar year, unless the Company's Repurchase Option has been exercised, you
shall deliver to Purchaser a certificate or certificates representing so many
shares of stock as are not then subject to the Company's Repurchase Option.
Within 90 days after Purchaser ceases to be a Service Provider, you shall
deliver to Purchaser a certificate or certificates representing the aggregate
number of shares held or issued pursuant to the Agreement and not purchased
by the Company or its assignees pursuant to exercise of the Company's
Repurchase Option.
5. If at the time of termination of this escrow you should have in
your possession any documents, securities, or other property belonging to
Purchaser, you shall deliver all of the same to Purchaser and shall be
discharged of all further obligations hereunder.
6. Your duties hereunder may be altered, amended, modified or revoked
only by a writing signed by all of the parties hereto.
7. You shall be obligated only for the performance of such duties as
are specifically set forth herein and may rely and shall be protected in
relying or refraining from acting on any instrument reasonably believed by
you to be genuine and to have been signed or presented by the proper party or
parties. You shall not be personally liable for any act you may do or omit to
do hereunder as Escrow Agent or as attorney-in-fact for Purchaser while
acting in good faith, and any act done or omitted by you pursuant to the
advice of your own attorneys shall be conclusive evidence of such good faith.
8. You are hereby expressly authorized to disregard any and all
warnings given by any of the parties hereto or by any other person or
corporation, excepting only orders or process of courts of law, and are
hereby expressly authorized to comply with and obey orders, judgments or
decrees of any court. In case you obey or comply with any such order,
judgment or decree, you shall not be liable to any of the parties hereto or
to any other person, firm or corporation by reason of such compliance,
notwithstanding any such order, judgment or decree being subsequently
reversed, modified, annulled, set aside, vacated or found to have been
entered without jurisdiction.
9. You shall not be liable in any respect on account of the identity,
authorities or rights of the parties executing or delivering or purporting to
execute or deliver the Agreement or any documents or papers deposited or
called for hereunder.
10. You shall not be liable for the outlawing of any rights under the
statute of limitations with respect to these Joint Escrow Instructions or any
documents deposited with you.
11. You shall be entitled to employ such legal counsel and other
experts as you may deem necessary properly to advise you in connection with
your obligations hereunder, may rely upon the advice of such counsel, and may
pay such counsel reasonable compensation therefor.
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<PAGE>
12. Your responsibilities as Escrow Agent hereunder shall terminate if
you shall cease to be an officer or agent of the Company or if you shall
resign by written notice to each party. In the event of any such
termination, the Company shall appoint a successor Escrow Agent.
13. If you reasonably require other or further instruments in
connection with these Joint Escrow Instructions or obligations in respect
hereto, the necessary parties hereto shall join in furnishing such
instruments.
14. It is understood and agreed that should any dispute arise with
respect to the delivery and/or ownership or right of possession of the
securities held by you hereunder, you are authorized and directed to retain
in your possession without liability to anyone all or any part of said
securities until such disputes shall have been settled either by mutual
written agreement of the parties concerned or by a final order, decree or
judgment of a court of competent jurisdiction after the time for appeal has
expired and no appeal has been perfected, but you shall be under no duty
whatsoever to institute or defend any such proceedings.
15. Any notice required or permitted hereunder shall be given in
writing and shall be deemed effectively given upon personal delivery or upon
deposit in the United States Post Office, by registered or certified mail
with postage and fees prepaid, addressed to each of the other parties
thereunto entitled at the following addresses or at such other addresses as a
party may designate by ten days' advance written notice to each of the other
parties hereto.
COMPANY: Access Health, Inc.
310 Interlocken Parkway, Suite A
Broomfield, CO 80021
PURCHASER:
----------------------------------
----------------------------------
----------------------------------
ESCROW AGENT: Corporate Secretary
Access Health, Inc.
310 Interlocken Parkway, Suite A
Broomfield, CO 80021
16. By signing these Joint Escrow Instructions, you become a party hereto
only for the purpose of said Joint Escrow Instructions; you do not become a
party to the Agreement.
17. This instrument shall be binding upon and inure to the benefit of the
parties hereto, and their respective successors and permitted assigns.
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<PAGE>
18. These Joint Escrow Instructions shall be governed by, and construed
and enforced in accordance with, the internal substantive laws, but not the
choice of law rules, of Delaware.
Very truly yours,
ACCESS HEALTH, INC.
--------------------------------------
By
--------------------------------------
Title
PURCHASER:
--------------------------------------
Signature
--------------------------------------
Print Name
ESCROW AGENT:
- ------------------------------------
Corporate Secretary
-4-
<PAGE>
EXHIBIT A-4
CONSENT OF SPOUSE
-----------------
I,____________________ , spouse of ________________________, have read and
approve the foregoing Restricted Stock Purchase Agreement (the "Agreement"). In
consideration of the Company's grant to my spouse of the right to purchase
shares of Access Health, Inc., as set forth in the Agreement, I hereby appoint
my spouse as my attorney-in-fact in respect to the exercise of any rights under
the Agreement and agree to be bound by the provisions of the Agreement insofar
as I may have any rights in said Agreement or any shares issued pursuant thereto
under the community property laws or similar laws relating to marital property
in effect in the state of our residence as of the date of the signing of the
foregoing Agreement.
Dated: ______________, 19_____
__________________________________
Signature of Spouse
<PAGE>
EXHIBIT A-5
ELECTION UNDER SECTION 83(b)
OF THE INTERNAL REVENUE CODE OF 1986
The undersigned taxpayer hereby elects, pursuant to Section 83(b) of the
Internal Revenue Code of 1986, as amended, to include in taxpayer's gross income
for the current taxable year the amount of any compensation taxable to taxpayer
in connection with his or her receipt of the property described below:
1. The name, address, taxpayer identification number and taxable year of the
undersigned are as follows:
NAME: TAXPAYER: SPOUSE:
ADDRESS:
IDENTIFICATION NO.: TAXPAYER: SPOUSE:
TAXABLE YEAR:
2. The property with respect to which the election is made is described as
follows: ____________ shares (the "Shares") of the Common Stock of Access
Health, Inc. (the "Company").
3. The date on which the property was transferred is:______________, 19_____.
4. The property is subject to the following restrictions:
The Shares may be repurchased by the Company, or its assignee, upon certain
events. This right lapses with regard to a portion of the Shares based on
the continued performance of services by the taxpayer over time.
5. The fair market value at the time of transfer, determined without regard to
any restriction other than a restriction which by its terms will never
lapse, of such property is:
$ ______________________.
6. The amount (if any) paid for such property is:
$ ______________________.
The undersigned has submitted a copy of this statement to the person for whom
the services were performed in connection with the undersigned's receipt of the
above-described property. The transferee of such property is the person
performing the services in connection with the transfer of said property.
THE UNDERSIGNED UNDERSTANDS THAT THE FOREGOING ELECTION MAY NOT BE REVOKED
EXCEPT WITH THE CONSENT OF THE COMMISSIONER.
Dated:________________, 19 ____ __________________________________________
Taxpayer
The undersigned spouse of taxpayer joins in this election.
Dated:________________, 19 ______ __________________________________________
Spouse of Taxpayer
<PAGE>
ACCESS HEALTH, INC.
AND
FIRST CHICAGO TRUST COMPANY OF NEW YORK
RIGHTS AGENT
PREFERRED SHARES RIGHTS AGREEMENT
DATED AS OF MARCH 12, 1997,
AS AMENDED ON
DECEMBER 8, 1997
<PAGE>
TABLE OF CONTENTS
PAGE
----
Section 1. Certain Definitions . . . . . . . . . . . . . . . . 1
Section 2. Appointment of Rights Agent . . . . . . . . . . . . 7
Section 3. Issuance of Rights Certificates . . . . . . . . . . 7
Section 4. Form of Rights Certificates . . . . . . . . . . . . 9
Section 5. Countersignature and Registration . . . . . . . . .10
Section 6. Transfer, Split Up, Combination and Exchange of
Rights Certificates; Mutilated, Destroyed, Lost or
Stolen Rights Certificates. . . . . . . . . . . . .10
Section 7. Exercise of Rights; Exercise Price; Expiration
Date of Rights . . . . . . . . . . . . . . . . . .11
Section 8. Cancellation and Destruction of Rights
Certificates . . . . . . . . . . . . . . . . . . .13
Section 9. Reservation and Availability of Preferred Shares. .13
Section 10. Record Date . . . . . . . . . . . . . . . . . . . .14
Section 11. Adjustment of Exercise Price, Number of Shares or
Number of Rights. . . . . . . . . . . . . . . . . .15
Section 12. Certificate of Adjusted Exercise Price or Number
of Shares . . . . . . . . . . . . . . . . . . . . .21
Section 13. Consolidation, Merger or Sale or Transfer of
Assets or Earning Power . . . . . . . . . . . . . .21
Section 14. Fractional Rights and Fractional Shares . . . . . .25
Section 15. Rights of Action. . . . . . . . . . . . . . . . . .26
Section 16. Agreement of Rights Holders . . . . . . . . . . . .27
Section 17. Rights Certificate Holder Not Deemed a
Stockholder . . . . . . . . . . . . . . . . . . . .27
Section 18. Concerning the Rights Agent . . . . . . . . . . . .27
Section 19. Merger or Consolidation or Change of Name of
Rights Agent . . . . . . . . . . . . . . . . . . .28
Section 20. Duties of Rights Agent. . . . . . . . . . . . . . .29
Section 21. Change of Rights Agent. . . . . . . . . . . . . . .31
Section 22. Issuance of New Rights Certificates . . . . . . . .31
-i-
<PAGE>
Section 23. Redemption. . . . . . . . . . . . . . . . . . . . .32
Section 24. Exchange. . . . . . . . . . . . . . . . . . . . . .32
Section 25. Notice of Certain Events. . . . . . . . . . . . . .34
Section 26. Notices . . . . . . . . . . . . . . . . . . . . . .35
Section 27. Supplements and Amendments. . . . . . . . . . . . .35
Section 28. Successors. . . . . . . . . . . . . . . . . . . . .36
Section 29. Determinations and Actions by the Board of
Directors, etc. . . . . . . . . . . . . . . . . . .36
Section 30. Benefits of this Agreement. . . . . . . . . . . . .36
Section 31. Severability. . . . . . . . . . . . . . . . . . . .36
Section 32. Governing Law . . . . . . . . . . . . . . . . . . .37
Section 33. Counterparts. . . . . . . . . . . . . . . . . . . .37
Section 34. Descriptive Headings. . . . . . . . . . . . . . . .37
EXHIBITS
Exhibit A Form of Certificate of Designation
Exhibit B Form of Rights Certificate
Exhibit C Summary of Rights
-ii-
<PAGE>
RIGHTS AGREEMENT
Agreement, dated as of March 12, 1997, as amended on December 8, 1997,
between Access Health, Inc., a Delaware corporation (the "COMPANY"), and
First Chicago Trust Company of New York.
WHEREAS, on March 12, 1997 (the "RIGHTS DIVIDEND DECLARATION DATE"), the
Board of Directors of the Company authorized and declared a dividend of one
Preferred Share Purchase Right (a "RIGHT") for each Common Share (as
hereinafter defined) of the Company outstanding as of the Close of Business
(as hereinafter defined) on March 21, 1997 (the "RECORD DATE"), each Right
representing the right to purchase one one-thousandth of a share of Series A
Participating Preferred Stock (as such number may be adjusted pursuant to the
provisions of this Agreement), having the rights, preferences and privileges
set forth in the form of Certificate of Designations of Rights, Preferences
and Privileges of Series A Participating Preferred Stock attached hereto as
EXHIBIT A, upon the terms and subject to the conditions herein set forth, and
further authorized and directed the issuance of one Right (as such number may
be adjusted pursuant to the provisions of this Agreement) with respect to
each Common Share that shall become outstanding between the Record Date and
the earlier of the Distribution Date and the Expiration Date (as such terms
are hereinafter defined), and in certain circumstances after the Distribution
Date; and
WHEREAS, The First National Bank of Boston was originally approved
Rights Agent by the Company on March 12, 1997, and in connection with the
amendments of this Agreement on December 8, 1997, First Chicago Trust Company
of New York has been approved as successor to The First National Bank of
Boston as Rights Agent. Accordingly, this Agreement amends and supersedes in
the entirety that Preferred Shares Rights Agreement dated March 12, 1997.
NOW, THEREFORE, in consideration of the promises and the mutual
agreements herein set forth, the parties hereby agree as follows:
Section 1. CERTAIN DEFINITIONS. For purposes of this Agreement, the
following terms have the meanings indicated:
(a) "ACQUIRING PERSON" shall mean any Person who or which,
together with all Affiliates and Associates of such Person, shall be the
Beneficial Owner of 20% or more of the Common Shares then outstanding, but
shall not include the Company, any Subsidiary of the Company or any employee
benefit plan of the Company or of any Subsidiary of the Company, or any
entity holding Common Shares for or pursuant to the terms of any such plan.
Notwithstanding the foregoing, no Person shall be deemed to be an Acquiring
Person as the result of an acquisition of Common Shares by the Company which,
by reducing the number of shares outstanding, increases the proportionate
number of shares beneficially owned by such Person to 20% or more of the
Common Shares of the Company then outstanding; PROVIDED, HOWEVER, that if a
Person shall become the Beneficial Owner of 20% or more of the Common Shares
of the Company then outstanding by reason of share purchases by the Company
and shall, after such share purchases by the Company, become the Beneficial
Owner of any additional Common Shares of the Company (other than pursuant to
a dividend or distribution paid or made by the
<PAGE>
Company on the outstanding Common Shares in Common Shares or pursuant to a
split or subdivision of the outstanding Common Shares), then such Person
shall be deemed to be an Acquiring Person unless upon becoming the Beneficial
Owner of such additional Common Shares of the Company such Person does not
beneficially own 20% or more of the Common Shares of the Company then
outstanding. Notwithstanding the foregoing, (i) if a majority of the
Continuing Directors then in office determines in good faith that a Person
who would otherwise be an "Acquiring Person," as defined pursuant to the
foregoing provisions of this paragraph (a), has become such inadvertently
(including, without limitation, because (A) such Person was unaware that it
beneficially owned a percentage of the Common Shares that would otherwise
cause such Person to be an "Acquiring Person," as defined pursuant to the
foregoing provisions of this paragraph (a), or (B) such Person was aware of
the extent of the Common Shares it beneficially owned but had no actual
knowledge of the consequences of such beneficial ownership under this
Agreement) and without any intention of changing or influencing control of
the Company, and if such Person divested or divests as promptly as
practicable a sufficient number of Common Shares so that such Person would no
longer be an "Acquiring Person," as defined pursuant to the foregoing
provisions of this paragraph (a), then such Person shall not be deemed to be
or to have become an "Acquiring Person" for any purposes of this Agreement;
and (ii) if, as of the date hereof, any Person is the Beneficial Owner of 20%
or more of the Common Shares outstanding, such Person shall not be or become
an "Acquiring Person," as defined pursuant to the foregoing provisions of
this paragraph (a), unless and until such time as such Person shall become
the Beneficial Owner of additional Common Shares (other than pursuant to a
dividend or distribution paid or made by the Company on the outstanding
Common Shares in Common Shares or pursuant to a split or subdivision of the
outstanding Common Shares), unless, upon becoming the Beneficial Owner of
such additional Common Shares, such Person is not then the Beneficial Owner
of 20% or more of the Common Shares then outstanding.
(b) "ADJUSTMENT FRACTION" shall have the meaning set forth in
Section 11(a)(i) hereof.
(c) "AFFILIATE" and "ASSOCIATE" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations
under the Exchange Act, as in effect on the date of this Agreement.
(d) A Person shall be deemed the "BENEFICIAL OWNER" of and shall
be deemed to "BENEFICIALLY OWN" any securities:
(i) which such Person or any of such Person's Affiliates or
Associates beneficially owns, directly or indirectly, for purposes of
Section 13(d) of the Exchange Act and Rule 13d-3 thereunder (or any
comparable or successor law or regulation);
(ii) which such Person or any of such Person's Affiliates or
Associates has (A) the right to acquire (whether such right is
exercisable immediately or only after the passage of time) pursuant to
any agreement, arrangement or understanding (other than customary
agreements with and between underwriters and selling group members with
respect to a bona fide public offering of securities), or upon the
exercise of conversion rights, exchange rights, rights (other than the
Rights), warrants or options, or otherwise; PROVIDED, HOWEVER, that a
Person shall not be deemed pursuant to this Section 1(d)(ii)(A) to be
the Beneficial Owner of, or to
-2-
<PAGE>
beneficially own, (1) securities tendered pursuant to a tender or
exchange offer made by or on behalf of such Person or any of such
Person's Affiliates or Associates until such tendered securities are
accepted for purchase or exchange, or (2) securities which a Person or
any of such Person's Affiliates or Associates may be deemed to have the
right to acquire pursuant to any merger or other acquisition agreement
between the Company and such Person (or one or more of its Affiliates or
Associates) if such agreement has been approved by the Board of
Directors of the Company prior to there being an Acquiring Person; or
(B) the right to vote pursuant to any agreement, arrangement or
understanding; provided, however, that a Person shall not be deemed the
Beneficial Owner of, or to beneficially own, any security under this
Section 1(d)(ii)(B) if the agreement, arrangement or understanding to
vote such security (1) arises solely from a revocable proxy or consent
given to such Person in response to a public proxy or consent
solicitation made pursuant to, and in accordance with, the applicable
rules and regulations of the Exchange Act and (2) is not also then
reportable on Schedule 13D under the Exchange Act (or any comparable or
successor report); or
(iii) which are beneficially owned, directly or indirectly,
by any other Person (or any Affiliate or Associate thereof) with which
such Person or any of such Person's Affiliates or Associates has any
agreement, arrangement or understanding, whether or not in writing
(other than customary agreements with and between underwriters and
selling group members with respect to a bona fide public offering of
securities) for the purpose of acquiring, holding, voting (except to the
extent contemplated by the proviso to Section 1(d)(ii)(B)) or disposing
of any securities of the Company; PROVIDED, HOWEVER, that in no case
shall an officer or director of the Company be deemed (x) the Beneficial
Owner of any securities beneficially owned by another officer or
director of the Company solely by reason of actions undertaken by such
persons in their capacity as officers or directors of the Company or (y)
the Beneficial Owner of securities held of record by the trustee of any
employee benefit plan of the Company or any Subsidiary of the Company
for the benefit of any employee of the Company or any Subsidiary of the
Company, other than the officer or director, by reason of any influence
that such officer or director may have over the voting of the securities
held in the plan.
(e) "BUSINESS DAY" shall mean any day other than a Saturday,
Sunday or a day on which banking institutions in California are authorized or
obligated by law or executive order to close.
(f) "CLOSE OF BUSINESS" on any given date shall mean 5:00 P.M.,
New York time, on such date; PROVIDED, HOWEVER, that if such date is not a
Business Day it shall mean 5:00 P.M., New York time, on the next succeeding
Business Day.
(g) "COMMON SHARES" when used with reference to the Company shall
mean the shares of Common Stock of the Company, $0.001 par value. Common
Shares when used with reference to any Person other than the Company shall
mean the capital stock (or equity interest) with the greatest voting power of
such other Person or, if such other Person is a Subsidiary of another Person,
the Person or Persons which ultimately control such first-mentioned Person.
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(h) "COMMON STOCK EQUIVALENTS" shall have the meaning set forth in
Section 11(a)(iii) hereof.
(i) "COMPANY" shall mean Access Health, Inc., a Delaware
corporation, subject to the terms of Section 13(a)(iii)(C) hereof.
(j) "CONTINUING DIRECTOR" shall mean (i) any member of the Board
of Directors of the Company who, while a member of the Board, is not an
Acquiring Person, or an Affiliate or Associate of an Acquiring Person, or a
representative of an Acquiring Person or of any such Affiliate or Associate,
and who was a member of the Board prior to there being an Acquiring Person,
and (ii) any Person who subsequently becomes a member of the Board and who,
while a member of the Board, is not an Acquiring Person, or an Affiliate or
Associate of an Acquiring Person, or a representative of an Acquiring Person
or of any such Affiliate or Associate, if such Person's nomination for
election or election to the Board is recommended or approved by a majority of
the Continuing Directors.
(k) "CURRENT PER SHARE MARKET PRICE" on any security (a "Security"
for purposes of this definition), for all computations other than those made
pursuant to Section 11(a)(iii) hereof, shall mean the average of the daily
closing prices per share of such Security for the thirty (30) consecutive
Trading Days immediately prior to such date, and for purposes of computations
made pursuant to Section 11(a)(iii) hereof, the Current Per Share Market
Price of any Security on any date shall be deemed to be the average of the
daily closing prices per share of such Security for the ten (10) consecutive
Trading Days immediately prior to such date; PROVIDED, HOWEVER, that in the
event that the Current Per Share Market Price of the Security is determined
during a period following the announcement by the issuer of such Security of
(i) a dividend or distribution on such Security payable in shares of such
Security or securities convertible into such shares or (ii) any subdivision,
combination or reclassification of such Security, and prior to the expiration
of the applicable thirty (30) Trading Day or ten (10) Trading Day period,
after the ex-dividend date for such dividend or distribution, or the record
date for such subdivision, combination or reclassification, then, and in each
such case, the Current Per Share Market Price shall be appropriately adjusted
to reflect the current market price per share equivalent of such Security.
The closing price for each day shall be the last sale price, regular way, or,
in case no such sale takes place on such day, the average of the closing bid
and asked prices, regular way, in either case as reported in the principal
consolidated transaction reporting system with respect to securities listed
or admitted to trading on the New York Stock Exchange or, if the Security is
not listed or admitted to trading on the New York Stock Exchange, as reported
in the principal consolidated transaction reporting system with respect to
securities listed on the principal national securities exchange on which the
Security is listed or admitted to trading or, if the Security is not listed
or admitted to trading on any national securities exchange, the last sale
price or, if such last sale price is not reported, the average of the high
bid and low asked prices in the over-the-counter market, as reported by
Nasdaq or such other system then in use, or, if on any such date the Security
is not quoted by any such organization, the average of the closing bid and
asked prices as furnished by a professional market maker making a market in
the Security selected by the Board of Directors of the Company. If on any
such date no market maker is making a market in the Security, the fair value
of such shares on such date as determined in good faith by the Board of
Directors of the Company shall be used. If the Preferred Shares are not
publicly traded, the Current Per Share Market Price of the Preferred Shares
shall be conclusively deemed to be the Current Per Share
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Market Price of the Common Shares as determined pursuant to this Section
1(k), as appropriately adjusted to reflect any stock split, stock dividend or
similar transaction occurring after the date hereof, multiplied by 1000. If
the Security is not publicly held or so listed or traded, Current Per Share
Market Price shall mean the fair value per share as determined in good faith
by the Board of Directors of the Company, whose determination shall be
described in a statement filed with the Rights Agent and shall be conclusive
for all purposes.
(l) "CURRENT VALUE" shall have the meaning set forth in Section
11(a)(iii) hereof.
(m) "DISTRIBUTION DATE" shall mean the earlier of (i) the Close of
Business on the tenth day (or such later date as may be determined by action
of a majority of Continuing Directors then in office) after the Shares
Acquisition Date (or, if the tenth day after the Shares Acquisition Date
occurs before the Record Date, the Close of Business on the Record Date) or
(ii) the Close of Business on the tenth Business Day (or such later date as
may be determined by action of a majority of Continuing Directors then in
office) after the date that a tender or exchange offer by any Person (other
than the Company, any Subsidiary of the Company, any employee benefit plan of
the Company or of any Subsidiary of the Company, or any Person or entity
organized, appointed or established by the Company for or pursuant to the
terms of any such plan) is first published or sent or given within the
meaning of Rule 14d-2(a) of the Rules and Regulations under the Exchange Act,
if, assuming the successful consummation thereof, such Person would be an
Acquiring Person.
(n) "EQUIVALENT SHARES" shall mean Preferred Shares and any other
class or series of capital stock of the Company which is entitled to the same
rights, privileges and preferences as the Preferred Shares.
(o) "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934,
as amended.
(p) "EXCHANGE RATIO" shall have the meaning set forth in Section
24(a) hereof.
(q) "EXERCISE PRICE" shall have the meaning set forth in Section
4(a) hereof.
(r) "EXPIRATION DATE" shall mean the earliest of (i) the Close of
Business on the Final Expiration Date, (ii) the Redemption Date, (iii)
consummation of any transaction contemplated by Section 13(f) hereof, or (iv)
the time at which the Board of Directors orders the exchange of the Rights as
provided in Section 24 hereof.
(s) "FINAL EXPIRATION DATE" shall mean March 12, 2007.
(t) "NASDAQ" shall mean the National Association of Securities
Dealers, Inc. Automated Quotations System.
(u) "PERMITTED OFFER" shall mean a tender offer for all
outstanding Common Shares made in the manner prescribed by Section 14(d) of
the Exchange Act and the rules and regulations promulgated thereunder;
PROVIDED, HOWEVER, that such tender offer occurs at a time when Continuing
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Directors are in office and a majority of the Continuing Directors then in
office has determined that the offer is both fair and otherwise in the best
interests of the Company and its stockholders (taking into account all
factors that such Continuing Directors deem relevant).
(v) "PERSON" shall mean any individual, firm, corporation or other
entity, and shall include any successor (by merger or otherwise) of such
entity.
(w) "POST-EVENT TRANSFEREE" shall have the meaning set forth in
Section 7(e) hereof.
(x) "PREFERRED SHARES" shall mean shares of Series A Participating
Preferred Stock, of the Company.
(y) "PRE-EVENT TRANSFEREE" shall have the meaning set forth in
Section 7(e) hereof.
(z) "PRINCIPAL PARTY" shall have the meaning set forth in Section
13(b) hereof.
(aa) "RECORD DATE" shall have the meaning set forth in the recitals
at the beginning of this Agreement.
(bb) "REDEMPTION DATE" shall have the meaning set forth in Section
23(a) hereof.
(cc) "REDEMPTION PRICE" shall have the meaning set forth in Section
23(a) hereof.
(dd) "RIGHTS AGENT" shall mean First Chicago Trust Company of New
York or its successor or replacement as provided in Sections 19 and 21 hereof.
(ee) "RIGHTS CERTIFICATE" shall mean a certificate substantially in
the form attached hereto as Exhibit B.
(ff) "RIGHTS DIVIDEND DECLARATION DATE" shall have the meaning set
forth in the recitals at the beginning of this Agreement.
(gg) "SECTION 11(a)(ii) TRIGGER DATE" shall have the meaning set
forth in Section 11(a)(iii) hereof.
(hh) "SECTION 13 EVENT" shall mean any event described in clause
(i), (ii) or (iii) of Section 13(a) hereof.
(ii) "SECURITIES ACT" shall mean the Securities Act of 1933, as
amended.
(jj) "SHARES ACQUISITION DATE" shall mean the first date of public
announcement (which, for purposes of this definition, shall include, without
limitation, a report filed pursuant to Section 13(d) under the Exchange Act)
by the Company or an Acquiring Person that an Acquiring Person
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has become such; PROVIDED THAT, if such Person is determined not to have
become an Acquiring Person pursuant to Section 1(a) hereof, then no Shares
Acquisition Date shall be deemed to have occurred.
(kk) "SPREAD" shall have the meaning set forth in Section
11(a)(iii) hereof.
(ll) "SUBSIDIARY" of any Person shall mean any corporation or other
entity of which an amount of voting securities sufficient to elect a majority
of the directors or Persons having similar authority of such corporation or
other entity is beneficially owned, directly or indirectly, by such Person,
or any corporation or other entity otherwise controlled by such Person.
(mm) "SUBSTITUTION PERIOD" shall have the meaning set forth in
Section 11(a)(iii) hereof.
(nn) "SUMMARY OF RIGHTS" shall mean a summary of this Agreement
substantially in the form attached hereto as Exhibit C.
(oo) "TOTAL EXERCISE PRICE" shall have the meaning set forth in
Section 4(a) hereof.
(pp) "TRADING DAY" shall mean a day on which the principal national
securities exchange on which a referenced security is listed or admitted to
trading is open for the transaction of business or, if a referenced security
is not listed or admitted to trading on any national securities exchange, a
Business Day.
(qq) A "TRIGGERING EVENT" shall be deemed to have occurred upon any
Person becoming an Acquiring Person.
Section 2. APPOINTMENT OF RIGHTS AGENT. The Company hereby appoints
the Rights Agent to act as agent for the Company and the holders of the
Rights (who, in accordance with Section 3 hereof, shall prior to the
Distribution Date also be the holders of the Common Shares) in accordance
with the terms and conditions hereof, and the Rights Agent hereby accepts
such appointment. The Company may from time to time appoint such co-Rights
Agents as it may deem necessary or desirable, upon ten (10) days' prior
written notice to the Rights Agent. The Rights Agent shall have no duty to
supervise, and shall in no event be liable for, the acts or omissions of any
such co-Rights Agent.
Section 3. ISSUANCE OF RIGHTS CERTIFICATES.
(a) Until the Distribution Date, (i) the Rights will be evidenced
(subject to the provisions of Sections 3(b), 3(c) and 3(d) hereof) by the
certificates for Common Shares registered in the names of the holders thereof
(which certificates shall also be deemed to be Rights Certificates) and not
by separate Rights Certificates and (ii) the right to receive Rights
Certificates will be transferable only in connection with the transfer of
Common Shares. Until the earlier of the Distribution Date or the Expiration
Date, the surrender for transfer of such certificates for Common Shares shall
also constitute the surrender for transfer of the Rights associated with the
Common Shares represented thereby. As soon as practicable after the
Distribution Date, the Company will prepare and execute, the Rights Agent
will countersign, and the Company will send or cause to be sent (and the
Rights Agent will, if requested, send)
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by first-class, postage-prepaid mail, to each record holder of Common Shares
as of the Close of Business on the Distribution Date, at the address of such
holder shown on the records of the Company, a Rights Certificate evidencing
one Right for each Common Share so held, subject to adjustment as provided
herein. In the event that an adjustment in the number of Rights per Common
Share has been made pursuant to Section 11 hereof, then at the time of
distribution of the Rights Certificates, the Company shall make the necessary
and appropriate rounding adjustments (in accordance with Section 14(a)
hereof) so that Rights Certificates representing only whole numbers of Rights
are distributed and cash is paid in lieu of any fractional Rights. As of the
Distribution Date, the Rights will be evidenced solely by such Rights
Certificates and may be transferred by the transfer of the Rights
Certificates as permitted hereby, separately and apart from any transfer of
Common Shares, and the holders of such Rights Certificates as listed in the
records of the Company or any transfer agent or registrar for the Rights
shall be the record holders thereof.
(b) On the Record Date or as soon as practicable there after, the
Company will send a copy of the Summary of Rights by first-class,
postage-prepaid mail, to each record holder of Common Shares as of the Close
of Business on the Record Date, at the address of such holder shown on the
records of the Company's transfer agent and registrar. With respect to
certificates for Common Shares outstanding as of the Record Date, until the
Distribution Date, the Rights will be evidenced by such certificates
registered in the names of the holders thereof together with the Summary of
Rights. Until the Distribution Date (or, if earlier, the Expiration Date),
the surrender for transfer of any certificate for Common Shares outstanding
on the Record Date, with or without a copy of the Summary of Rights, shall
also constitute the transfer of the Rights associated with the Common Shares
represented thereby.
(c) Unless the Board of Directors by resolution adopted at or
before the time of the issuance of any Common Shares specifies to the
contrary, Rights shall be issued in respect of all Common Shares that are
issued after the Record Date but prior to the earlier of the Distribution
Date or the Expiration Date or, in certain circumstances provided in Section
22 hereof, after the Distribution Date. Certificates representing such Common
Shares shall also be deemed to be certificates for Rights, and shall bear the
following legend:
THIS CERTIFICATE ALSO EVIDENCES AND ENTITLES THE HOLDER HEREOF TO
CERTAIN RIGHTS AS SET FORTH IN A RIGHTS AGREEMENT BETWEEN ACCESS
HEALTH, INC. AND FIRST CHICAGO TRUST COMPANY OF NEW YORK AS THE
RIGHTS AGENT, DATED AS OF MARCH 12, 1997, AND AS AMENDED ON
DECEMBER 8, 1997 (THE "RIGHTS AGREEMENT"), THE TERMS OF WHICH ARE
HEREBY INCORPORATED HEREIN BY REFERENCE AND A COPY OF WHICH IS ON
FILE AT THE PRINCIPAL EXECUTIVE OFFICES OF ACCESS HEALTH, INC.
UNDER CERTAIN CIRCUMSTANCES, AS SET FORTH IN THE RIGHTS AGREEMENT,
SUCH RIGHTS WILL BE EVIDENCED BY SEPARATE CERTIFICATES AND WILL NO
LONGER BE EVIDENCED BY THIS CERTIFICATE. ACCESS HEALTH, INC. WILL
MAIL TO THE HOLDER OF THIS CERTIFICATE A COPY OF THE RIGHTS
AGREEMENT WITHOUT CHARGE AFTER RECEIPT OF A WRITTEN REQUEST
THEREFOR. UNDER CERTAIN CIRCUMSTANCES SET FORTH IN THE RIGHTS
AGREEMENT,
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RIGHTS ISSUED TO, OR HELD BY, ANY PERSON WHO IS, WAS OR BECOMES AN
ACQUIRING PERSON OR ANY AFFILIATE OR ASSOCIATE THEREOF (AS SUCH
TERMS ARE DEFINED IN THE RIGHTS AGREEMENT), WHETHER CURRENTLY HELD
BY OR ON BEHALF OF SUCH PERSON OR BY ANY SUBSEQUENT HOLDER, MAY
BECOME NULL AND VOID.
With respect to such certificates containing the foregoing legend, until the
earlier of (i) the Distribution Date or (ii) the Expiration Date, the Rights
associated with the Common Shares represented by such certificates shall be
evidenced by such certificates alone, and the surrender for transfer of any
such certificate shall also constitute the transfer of the Rights associated
with the Common Shares represented thereby.
(d) In the event that the Company purchases or acquires any Common
Shares after the Record Date but prior to the Distribution Date, any Rights
associated with such Common Shares shall be deemed canceled and retired so
that the Company shall not be entitled to exercise any Rights associated with
the Common Shares which are no longer outstanding.
Section 4. FORM OF RIGHTS CERTIFICATES.
(a) The Rights Certificates (and the forms of election to purchase
Common Shares and of assignment to be printed on the reverse thereof) shall
be substantially in the form of Exhibit B hereto and may have such marks of
identification or designation and such legends, summaries or endorsements
printed thereon as the Company may deem appropriate and as are not
inconsistent with the provisions of this Agreement, or as may be required to
comply with any applicable law or with any rule or regulation made pursuant
thereto or with any rule or regulation of any stock exchange or a national
market system, on which the Rights may from time to time be listed or
included, or to conform to usage. Subject to the provisions of Section 11
and Section 22 hereof, the Rights Certificates, whenever distributed, shall
be dated as of the Record Date (or in the case of Rights issued with respect
to Common Shares issued by the Company after the Record Date, as of the date
of issuance of such Common Shares) and on their face shall entitle the
holders thereof to purchase such number of one-thousandths of a Preferred
Share as shall be set forth therein at the price set forth therein (such
exercise price per one one-thousandth of a Preferred Share being hereinafter
referred to as the "EXERCISE PRICE" and the aggregate Exercise Price of all
Preferred Shares issuable upon exercise of one Right being hereinafter
referred to as the "TOTAL EXERCISE PRICE"), but the number and type of
securities purchasable upon the exercise of each Right and the Exercise Price
shall be subject to adjustment as provided herein.
(b) Any Rights Certificate issued pursuant to Section 3(a) or
Section 22 hereof that represents Rights beneficially owned by: (i) an
Acquiring Person or any Associate or Affiliate of an Acquiring Person, (ii) a
transferee of an Acquiring Person (or of any such Associate or Affiliate) who
becomes a transferee after the Acquiring Person becomes such or (iii) a
transferee of an Acquiring Person (or of any such Associate or Affiliate) who
becomes a transferee prior to or concurrently with the Acquiring Person
becoming such and receives such Rights pursuant to either (A) a transfer
(whether or not for consideration) from the Acquiring Person to holders of
equity interests in such Acquiring Person or to any Person with whom such
Acquiring Person has any continuing agreement, arrangement or
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understanding regarding the transferred Rights or (B) a transfer which a
majority of the Continuing Directors then in office has determined is part of
a plan, arrangement or understanding which has as a primary purpose or effect
avoidance of Section 7(e) hereof, and any Rights Certificate issued pursuant
to Section 6 or Section 11 hereof upon transfer, exchange, replacement or
adjustment of any other Rights Certificate referred to in this sentence,
shall contain (to the extent feasible) the following legend:
THE RIGHTS REPRESENTED BY THIS RIGHTS CERTIFICATE ARE OR WERE
BENEFICIALLY OWNED BY A PERSON WHO WAS OR BECAME AN ACQUIRING
PERSON OR AN AFFILIATE OR ASSOCIATE OF AN ACQUIRING PERSON (AS SUCH
TERMS ARE DEFINED IN THE RIGHTS AGREEMENT). ACCORDINGLY, THIS
RIGHTS CERTIFICATE AND THE RIGHTS REPRESENTED HEREBY MAY BECOME
NULL AND VOID IN THE CIRCUMSTANCES SPECIFIED IN SECTION 7(e) OF THE
RIGHTS AGREEMENT.
Section 5. COUNTERSIGNATURE AND REGISTRATION.
(a) The Rights Certificates shall be executed on behalf of the
Company by its Chairman of the Board, its Chief Executive Officer, its Chief
Financial Officer, its President or any Vice President, either manually or by
facsimile signature, and by the Secretary or an Assistant Secretary of the
Company, either manually or by facsimile signature, and shall have affixed
thereto the Company's seal (if any) or a facsimile thereof. The Rights
Certificates shall be manually countersigned by the Rights Agent and shall
not be valid for any purpose unless countersigned. In case any officer of
the Company who shall have signed any of the Rights Certificates shall cease
to be such officer of the Company before countersignature by the Rights Agent
and issuance and delivery by the Company, such Rights Certificates,
nevertheless, may be countersigned by the Rights Agent and issued and
delivered by the Company with the same force and effect as though the person
who signed such Rights Certificates on behalf of the Company had not ceased
to be such officer of the Company; and any Rights Certificate may be signed
on behalf of the Company by any person who, at the actual date of the
execution of such Rights Certificate, shall be a proper officer of the
Company to sign such Rights Certificate, although at the date of the
execution of this Rights Agreement any such person was not such an officer.
(b) Following the Distribution Date, the Rights Agent will keep or
cause to be kept, at its office designated for such purposes, books for
registration and transfer of the Rights Certificates issued hereunder. Such
books shall show the names and addresses of the respective holders of the
Rights Certificates, the number of Rights evidenced on its face by each of
the Rights Certificates and the date of each of the Rights Certificates.
Section 6. TRANSFER, SPLIT UP, COMBINATION AND EXCHANGE OF RIGHTS
CERTIFICATES; MUTILATED, DESTROYED, LOST OR STOLEN RIGHTS CERTIFICATES.
(a) Subject to the provisions of Sections 7(e), 14 and 24 hereof,
at any time after the Close of Business on the Distribution Date, and at or
prior to the Close of Business on the Expiration Date, any Rights Certificate
or Rights Certificates may be transferred, split up, combined or exchanged
for another Rights Certificate or Rights Certificates, entitling the
registered holder to purchase a like
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number of one-thousandths of a Preferred Share (or, following a Triggering
Event, other securities, cash or other assets, as the case may be) as the
Rights Certificate or Rights Certificates surrendered then entitled such
holder to purchase. Any registered holder desiring to transfer, split up,
combine or exchange any Rights Certificate or Rights Certificates shall make
such request in writing delivered to the Rights Agent, and shall surrender
the Rights Certificate or Rights Certificates to be transferred, split up,
combined or exchanged at the office of the Rights Agent designated for such
purpose. Neither the Rights Agent nor the Company shall be obligated to take
any action whatsoever with respect to the transfer of any such surrendered
Rights Certificate until the registered holder shall have completed and
signed the certificate contained in the form of assignment on the reverse
side of such Rights Certificate and shall have provided such additional
evidence of the identity of the Beneficial Owner (or former Beneficial Owner)
or Affiliates or Associates thereof as the Company shall reasonably request.
Thereupon the Rights Agent shall, subject to Sections 7(e), 14 and 24 hereof,
countersign and deliver to the person entitled thereto a Rights Certificate
or Rights Certificates, as the case may be, as so requested. The Company may
require payment of a sum sufficient to cover any tax or governmental charge
that may be imposed in connection with any transfer, split up, combination or
exchange of Rights Certificates.
(b) Upon receipt by the Company and the Rights Agent of evidence
reasonably satisfactory to them of the loss, theft, destruction or mutilation
of a Rights Certificate, and, in case of loss, theft or destruction, of
indemnity or security reasonably satisfactory to them, and, at the Company's
request, reimbursement to the Company and the Rights Agent of all reasonable
expenses incidental thereto, and upon surrender to the Rights Agent and
cancellation of the Rights Certificate if mutilated, the Company will make
and deliver a new Rights Certificate of like tenor to the Rights Agent for
delivery to the registered holder in lieu of the Rights Certificate so lost,
stolen, destroyed or mutilated.
Section 7. EXERCISE OF RIGHTS; EXERCISE PRICE; EXPIRATION DATE OF
RIGHTS.
(a) Subject to Sections 7(e), 23(b) and 24(b) hereof, the
registered holder of any Rights Certificate may exercise the Rights evidenced
thereby (except as otherwise provided herein) in whole or in part at any time
after the Distribution Date and prior to the Close of Business on the
Expiration Date by surrender of the Rights Certificate, with the form of
election to purchase on the reverse side thereof duly executed, to the Rights
Agent at the office of the Rights Agent designated for such purpose, together
with payment of the Exercise Price for each one-thousandth of a Preferred
Share (or, following a Triggering Event, other securities, cash or other
assets as the case may be) as to which the Rights are exercised.
(b) The Exercise Price for each one-thousandth of a Preferred
Share issuable pursuant to the exercise of a Right shall initially be One
Hundred and Fifty Dollars ($150), shall be subject to adjustment from time to
time as provided in Sections 11 and 13 hereof and shall be payable in lawful
money of the United States of America in accordance with paragraph (c) below.
(c) Upon receipt of a Rights Certificate representing exercisable
Rights, with the form of election to purchase duly executed, accompanied by
payment of the Exercise Price for the number of one-thousandths of a
Preferred Share (or, following a Triggering Event, other securities, cash or
other assets as the case may be) to be purchased and an amount equal to any
applicable transfer tax required
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to be paid by the holder of such Rights Certificate in accordance with
Section 9(e) hereof, the Rights Agent shall, subject to Section 20(k) hereof,
thereupon promptly (i) (A) requisition from any transfer agent of the
Preferred Shares (or make available, if the Rights Agent is the transfer
agent for the Preferred Shares) a certificate or certificates for the number
of one-thousandths of a Preferred Share (or, following a Triggering Event,
other securities, cash or other assets as the case may be) to be purchased
and the Company hereby irrevocably authorizes its transfer agent to comply
with all such requests or (B) if the Company shall have elected to deposit
the total number of one-thousandths of a Preferred Share (or, following a
Triggering Event, other securities, cash or other assets as the case may be)
issuable upon exercise of the Rights hereunder with a depositary agent,
requisition from the depositary agent depositary receipts representing such
number of one-thousandths of a Preferred Share (or, following a Triggering
Event, other securities, cash or other assets as the case may be) as are to
be purchased (in which case certificates for the Preferred Shares (or,
following a Triggering Event, other securities, cash or other assets as the
case may be) represented by such receipts shall be deposited by the transfer
agent with the depositary agent) and the Company hereby directs the
depositary agent to comply with such request, (ii) when appropriate,
requisition from the Company the amount of cash to be paid in lieu of
issuance of fractional shares in accordance with Section 14 hereof, (iii)
after receipt of such certificates or depositary receipts, cause the same to
be delivered to or upon the order of the registered holder of such Rights
Certificate, registered in such name or names as may be designated by such
holder and (iv) when appropriate, after receipt thereof, deliver such cash to
or upon the order of the registered holder of such Rights Certificate. The
payment of the Exercise Price (as such amount may be reduced (including to
zero) pursuant to Section 11(a)(iii) hereof) and an amount equal to any
applicable transfer tax required to be paid by the holder of such Rights
Certificate in accordance with Section 9(e) hereof, may be made in cash or by
certified bank check, cashier's check or bank draft payable to the order of
the Company. In the event that the Company is obligated to issue securities
of the Company other than Preferred Shares, pay cash and/or distribute other
property pursuant to Section 11(a) hereof, the Company will make all
arrangements necessary so that such other securities, cash and/or other
property are available for distribution by the Rights Agent, if and when
appropriate.
(d) In case the registered holder of any Rights Certificate shall
exercise less than all the Rights evidenced thereby, a new Rights Certificate
evidencing Rights equivalent to the Rights remaining unexercised shall be
issued by the Rights Agent to the registered holder of such Rights
Certificate or to his or her duly authorized assigns, subject to the
provisions of Section 14 hereof.
(e) Notwithstanding anything in this Agreement to the contrary,
from and after the first occurrence of a Triggering Event, any Rights
beneficially owned by (i) an Acquiring Person or an Associate or Affiliate of
an Acquiring Person, (ii) a transferee of an Acquiring Person (or of any such
Associate or Affiliate) who becomes a transferee after the Acquiring Person
becomes such (a "POST-EVENT TRANSFEREE"), (iii) a transferee of an Acquiring
Person (or of any such Associate or Affiliate) who becomes a transferee prior
to or concurrently with the Acquiring Person becoming such and receives such
Rights pursuant to either (A) a transfer (whether or not for consideration)
from the Acquiring Person to holders of equity interests in such Acquiring
Person or to any Person with whom the Acquiring Person has any continuing
agreement, arrangement or understanding regarding the transferred Rights or
(B) a transfer which a majority of the Continuing Directors then in office
has determined is part of a plan, arrangement or understanding which has as a
primary purpose or effect the avoidance of this Section 7(e)
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(a "PRE-EVENT TRANSFEREE") or (iv) any subsequent transferee receiving
transferred Rights from a Post-Event Transferee or a Pre-Event Transferee,
either directly or through one or more intermediate transferees, shall become
null and void without any further action and no holder of such Rights shall
have any rights whatsoever with respect to such Rights, whether under any
provision of this Agreement or otherwise. The Company shall use all
reasonable efforts to ensure that the provisions of this Section 7(e) and
Section 4(b) hereof are complied with, but shall have no liability to any
holder of Rights Certificates or to any other Person as a result of its
failure to make any determinations with respect to an Acquiring Person or any
of such Acquiring Person's Affiliates, Associates or transferees hereunder.
(f) Notwithstanding anything in this Agreement to the contrary,
neither the Rights Agent nor the Company shall be obligated to undertake any
action with respect to a registered holder upon the occurrence of any
purported exercise as set forth in this Section 7 unless such registered
holder shall, in addition to having complied with the requirements of Section
7(a) above, have (i) completed and signed the certificate contained in the
form of election to purchase set forth on the reverse side of the Rights
Certificate surrendered for such exercise and (ii) provided such additional
evidence of the identity of the Beneficial Owner (or former Beneficial Owner)
or Affiliates or Associates thereof as the Company shall reasonably request.
Section 8. CANCELLATION AND DESTRUCTION OF RIGHTS CERTIFICATES. All
Rights Certificates surrendered for the purpose of exercise, transfer, split
up, combination or exchange shall, if surrendered to the Company or to any of
its agents, be delivered to the Rights Agent for cancellation or in canceled
form, or, if surrendered to the Rights Agent, shall be canceled by it, and no
Rights Certificates shall be issued in lieu thereof except as expressly
permitted by any of the provisions of this Agreement. The Company shall
deliver to the Rights Agent for cancellation and retirement, and the Rights
Agent shall so cancel and retire, any Rights Certificate purchased or
acquired by the Company otherwise than upon the exercise thereof. The Rights
Agent shall deliver all canceled Rights Certificates to the Company, or
shall, at the written request of the Company, destroy such canceled Rights
Certificates, and in such case shall deliver a certificate of destruction
thereof to the Company.
Section 9. RESERVATION AND AVAILABILITY OF PREFERRED SHARES.
(a) The Company covenants and agrees that it will use its best
efforts to cause to be reserved and kept available out of its authorized and
unissued Preferred Shares not reserved for another purpose (and, following
the occurrence of a Triggering Event, out of its authorized and unissued
Common Shares and/or other securities), the number of Preferred Shares (and,
following the occurrence of the Triggering Event, Common Shares and/or other
securities) that will be sufficient to permit the exercise in full of all
outstanding Rights.
(b) If the Company shall hereafter list any of its Preferred
Shares on a national securities exchange, then so long as the Preferred
Shares (and, following the occurrence of a Triggering Event, Common Shares
and/or other securities) issuable and deliverable upon exercise of the Rights
may be listed on such exchange, the Company shall use its best efforts to
cause, from and after such time as the Rights become exercisable (but only to
the extent that it is reasonably likely that the Rights will be
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exercised), all shares reserved for such issuance to be listed on such
exchange upon official notice of issuance upon such exercise.
(c) The Company shall use its best efforts to (i) file, as soon as
practicable following the earliest date after the first occurrence of a
Triggering Event in which the consideration to be delivered by the Company
upon exercise of the Rights is described in Section 11(a)(ii) or Section
11(a)(iii) hereof, or as soon as is required by law following the
Distribution Date, as the case may be, a registration statement under the
Securities Act with respect to the securities purchasable upon exercise of
the Rights on an appropriate form, (ii) cause such registration statement to
become effective as soon as practicable after such filing and (iii) cause
such registration statement to remain effective (with a prospectus at all
times meeting the requirements of the Securities Act) until the earlier of
(A) the date as of which the Rights are no longer exercisable for such
securities and (B) the date of expiration of the Rights. The Company may
temporarily suspend, for a period not to exceed ninety (90) days after the
date set forth in clause (i) of the first sentence of this Section 9(c), the
exercisability of the Rights in order to prepare and file such registration
statement and permit it to become effective. Upon any such suspension, the
Company shall issue a public announcement stating, and notify the Rights
Agent, that the exercisability of the Rights has been temporarily suspended,
as well as a public announcement and notification to the Rights Agent at such
time as the suspension is no longer in effect. The Company will also take
such action as may be appropriate under, or to ensure compliance with, the
securities or "blue sky" laws of the various states in connection with the
exercisability of the Rights. Notwithstanding any provision of this
Agreement to the contrary, the Rights shall not be exercisable in any
jurisdiction, unless the requisite qualification in such jurisdiction shall
have been obtained, or an exemption therefrom shall be available, and until a
registration statement has been declared effective.
(d) The Company covenants and agrees that it will take all such
action as may be necessary to ensure that all Preferred Shares (or other
securities of the Company) delivered upon exercise of Rights shall, at the
time of delivery of the certificates for such securities (subject to payment
of the Exercise Price), be duly and validly authorized and issued and fully
paid and nonassessable shares.
(e) The Company further covenants and agrees that it will pay when
due and payable any and all federal and state transfer taxes and charges
which may be payable in respect of the original issuance or delivery of the
Rights Certificates or of any Preferred Shares (or other securities of the
Company) upon the exercise of Rights. The Company shall not, however, be
required to pay any transfer tax which may be payable in respect of any
transfer or delivery of Rights Certificates to a person other than, or the
issuance or delivery of certificates or depositary receipts for the Preferred
Shares (or other securities of the Company) in a name other than that of, the
registered holder of the Rights Certificate evidencing Rights surrendered for
exercise or to issue or to deliver any certificates or depositary receipts
for Preferred Shares (or other securities of the Company) upon the exercise
of any Rights until any such tax shall have been paid (any such tax being
payable by the holder of such Rights Certificate at the time of surrender) or
until it has been established to the Company's satisfaction that no such tax
is due.
Section 10. RECORD DATE. Each Person in whose name any certificate for
a number of one-thousandths of a Preferred Share (or other securities of the
Company) is issued upon the exercise of Rights shall for all purposes be
deemed to have become the holder of record of Preferred Shares (or other
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securities of the Company) represented thereby on, and such certificate
shall be dated, the date upon which the Rights Certificate evidencing such
Rights was duly surrendered and payment of the Total Exercise Price with
respect to which the Rights have been exercised (and any applicable transfer
taxes) was made; PROVIDED, HOWEVER, that if the date of such surrender and
payment is a date upon which the transfer books of the Company are closed,
such Person shall be deemed to have become the record holder of such shares
on, and such certificate shall be dated, the next succeeding Business Day on
which the transfer books of the Company are open. Prior to the exercise of
the Rights evidenced thereby, the holder of a Rights Certificate shall not be
entitled to any rights of a holder of Preferred Shares (or other securities
of the Company) for which the Rights shall be exercisable, including, without
limitation, the right to vote, to receive dividends or other distributions or
to exercise any preemptive rights, and shall not be entitled to receive any
notice of any proceedings of the Company, except as provided herein.
Section 11. ADJUSTMENT OF EXERCISE PRICE, NUMBER OF SHARES OR NUMBER OF
RIGHTS. The Exercise Price, the number and kind of shares or other property
covered by each Right and the number of Rights outstanding are subject to
adjustment from time to time as provided in this Section 11.
(a) (i) Anything in this Agreement to the contrary
notwithstanding, in the event the Company shall at any time after the date of
this Agreement (A) declare a dividend on the Preferred Shares payable in
Preferred Shares, (B) subdivide the outstanding Preferred Shares, (C) combine
the outstanding Preferred Shares (by reverse stock split or otherwise) into a
smaller number of Preferred Shares, or (D) issue any shares of its capital
stock in a reclassification of the Preferred Shares (including any such
reclassification in connection with a consolidation or merger in which the
Company is the continuing or surviving corporation), then, in each such
event, except as otherwise provided in this Section 11 and Section 7(e)
hereof: (1) the Exercise Price in effect at the time of the record date for
such dividend or of the effective date of such subdivision, combination or
reclassification shall be adjusted so that the Exercise Price thereafter
shall equal the result obtained by dividing the Exercise Price in effect
immediately prior to such time by a fraction (the "ADJUSTMENT FRACTION"), the
numerator of which shall be the total number of Preferred Shares (or shares
of capital stock issued in such reclassification of the Preferred Shares)
outstanding immediately following such time and the denominator of which
shall be the total number of Preferred Shares outstanding immediately prior
to such time; PROVIDED, HOWEVER, that in no event shall the consideration to
be paid upon the exercise of one Right be less than the aggregate par value
of the shares of capital stock of the Company issuable upon exercise of such
Right; and (2) the number of one-thousandths of a Preferred Share (or share
of such other capital stock) issuable upon the exercise of each Right shall
equal the number of one-thousandths of a Preferred Share (or share of such
other capital stock) as was issuable upon exercise of a Right immediately
prior to the occurrence of the event described in clauses (A)-(D) of this
Section 11(a)(i), multiplied by the Adjustment Fraction; provided, however,
that, no such adjustment shall be made pursuant to this Section 11(a)(i) to
the extent that there shall have simultaneously occurred an event described
in clause (A), (B), (C) or (D) of Section 11(n) with a proportionate
adjustment being made thereunder. Each Common Share that shall become
outstanding after an adjustment has been made pursuant to this Section
11(a)(i) shall have associated with the number of Rights, exercisable at the
Exercise Price and for the number of one-thousandths of a Preferred Share (or
shares of such other capital stock) as one Common Share has associated with
it immediately following the adjustment made pursuant to this Section
11(a)(i).
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(ii) Subject to Section 24 of this Agreement, in the event a
Triggering Event shall have occurred, then promptly following such Triggering
Event each holder of a Right, except as provided in Section 7(e) hereof,
shall thereafter have the right to receive for each Right, upon exercise
thereof in accordance with the terms of this Agreement and payment of the
Total Exercise Price in effect immediately prior to the occurrence of the
Triggering Event, in lieu of a number of one-thousandths of a Preferred
Share, such number of Common Shares of the Company as shall equal the result
obtained by multiplying the Exercise Price in effect immediately prior to
the occurrence of the Triggering Event by the number of one-thousandths of a
Preferred Share for which a Right was exercisable (or would have been
exercisable if the Distribution Date had occurred) immediately prior to the
first occurrence of a Triggering Event, and dividing that product by 50% of
the Current Per Share Market Price for Common Shares on the date of
occurrence of the Triggering Event; provided, however, that the Exercise
Price and the number of Common Shares of the Company so receivable upon
exercise of a Right shall be subject to further adjustment as appropriate in
accordance with Section 11(e) hereof to reflect any events occurring in
respect of the Common Shares of the Company after the occurrence of the
Triggering Event. Notwithstanding the foregoing provisions of this Section
11(a)(ii), the right to buy Common Shares of the Company pursuant to Section
11(a)(ii) hereof shall not arise as a result of any Person becoming an
Acquiring Person through an acquisition of Common Shares pursuant to a
Permitted Offer.
(iii) In lieu of issuing Common Shares in accordance with
Section 11(a)(ii) hereof, the Company may, if a majority of the Continuing
Directors then in office determines that such action is necessary or
appropriate and not contrary to the interest of holders of Rights (and, in
the event that the number of Common Shares which are authorized by the
Company's Certificate of Incorporation but not outstanding or reserved for
issuance for purposes other than upon exercise of the Rights are not
sufficient to permit the exercise in full of the Rights, or if any necessary
regulatory approval for such issuance has not been obtained by the Company,
the Company shall): (A) determine the excess of (1) the value of the Common
Shares issuable upon the exercise of a Right (the "CURRENT VALUE") over (2)
the Exercise Price (such excess, the "SPREAD") and (B) with respect to each
Right, make adequate provision to substitute for such Common Shares, upon
exercise of the Rights, (1) cash, (2) a reduction in the Exercise Price, (3)
other equity securities of the Company (including, without limitation, shares
or units of shares of any series of preferred stock which a majority of the
Continuing Directors then in office has deemed to have the same value as
Common Shares (such shares or units of shares of preferred stock are herein
called "COMMON STOCK EQUIVALENTS")), except to the extent that the Company
has not obtained any necessary stockholder or regulatory approval for such
issuance, (4) debt securities of the Company, except to the extent that the
Company has not obtained any necessary stockholder or regulatory approval for
such issuance, (5) other assets or (6) any combination of the foregoing,
having an aggregate value equal to the Current Value, where such aggregate
value has been determined by a majority of the Continuing Directors then in
office based upon the advice of a nationally recognized investment banking
firm selected by a majority of the Continuing Directors then in office;
PROVIDED, HOWEVER, if the Company shall not have made adequate provision to
deliver value pursuant to clause (B) above within thirty (30) days following
the later of (x) the first occurrence of a Triggering Event and (y) the date
on which the Company's right of redemption pursuant to Section 23(a) expires
(the later of (x) and (y) being referred to herein as the "SECTION 11(a)(ii)
TRIGGER DATE"), then the Company shall be obligated to deliver, upon the
surrender for exercise of a Right and without requiring payment of the
Exercise Price, Common Shares (to the extent available), except to the extent
that the Company has not obtained any necessary
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stockholder or regulatory approval for such issuance, and then, if necessary,
cash, which shares and/or cash have an aggregate value equal to the Spread.
If a majority of the Continuing Directors then in office shall determine in
good faith that it is likely that sufficient additional Common Shares could
be authorized for issuance upon exercise in full of the Rights or that any
necessary regulatory approval for such issuance will be obtained, the thirty
(30) day period set forth above may be extended to the extent necessary, but
not more than ninety (90) days after the Section 11(a)(ii) Trigger Date, in
order that the Company may seek stockholder approval for the authorization of
such additional shares or take action to obtain such regulatory approval
(such period, as it may be extended, the "SUBSTITUTION PERIOD"). To the
extent that the Company determines that some action need be taken pursuant to
the first and/or second sentences of this Section 11(a)(iii), the Company (x)
shall provide, subject to Section 7(e) hereof, that such action shall apply
uniformly to all outstanding Rights and (y) may suspend the exercisability of
the Rights until the expiration of the Substitution Period in order to seek
any authorization of additional shares, to take any action to obtain any
required regulatory approval and/or to decide the appropriate form of
distribution to be made pursuant to such first sentence and to determine the
value thereof. In the event of any such suspension, the Company shall issue a
public announcement stating that the exercisability of the Rights has been
temporarily suspended, as well as a public announcement at such time as the
suspension is no longer in effect. For purposes of this Section 11(a)(iii),
the value of the Common Shares shall be the Current Per Share Market Price of
the Common Shares on the Section 11(a)(ii) Trigger Date and the value of any
Common Stock Equivalent shall be deemed to have the same value as the Common
Shares on such date.
(b) In case the Company shall, at any time after the date of this
Agreement, fix a record date for the issuance of rights, options or warrants
to all holders of Preferred Shares entitling such holders (for a period
expiring within forty-five (45) calendar days after such record date) to
subscribe for or purchase Preferred Shares or Equivalent Shares or securities
convertible into Preferred Shares or Equivalent Shares at a price per share
(or having a conversion price per share, if a security convertible into
Preferred Shares or Equivalent Shares) less than the then Current Per Share
Market Price of the Preferred Shares or Equivalent Shares on such record
date, then, in each such case, the Exercise Price to be in effect after such
record date shall be determined by multiplying the Exercise Price in effect
immediately prior to such record date by a fraction, the numerator of which
shall be the number of Preferred Shares and Equivalent Shares (if any)
outstanding on such record date, plus the number of Preferred Shares or
Equivalent Shares, as the case may be, which the aggregate offering price of
the total number of Preferred Shares or Equivalent Shares, as the case may
be, to be offered or issued (and/or the aggregate initial conversion price of
the convertible securities to be offered or issued) would purchase at such
current market price, and the denominator of which shall be the number of
Preferred Shares and Equivalent Shares (if any) outstanding on such record
date, plus the number of additional Preferred Shares or Equivalent Shares, as
the case may be, to be offered for subscription or purchase (or into which
the convertible securities so to be offered are initially convertible);
PROVIDED, HOWEVER, that in no event shall the consideration to be paid upon
the exercise of one Right be less than the aggregate par value of the shares
of capital stock of the Company issuable upon exercise of one Right. In case
such subscription price may be paid in a consideration part or all of which
shall be in a form other than cash, the value of such consideration shall be
as determined in good faith by a majority of the Continuing Directors then in
office, whose determination shall be described in a statement filed with the
Rights Agent and shall be binding on the Rights Agent and the holders of the
Rights. Preferred Shares and Equivalent Shares
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owned by or held for the account of the Company shall not be deemed
outstanding for the purpose of any such computation. Such adjustment shall
be made successively whenever such a record date is fixed, and in the event
that such rights, options or warrants are not so issued, the Exercise Price
shall be adjusted to be the Exercise Price which would then be in effect if
such record date had not been fixed.
(c) In case the Company shall, at any time after the date of this
Agreement, fix a record date for the making of a distribution to all holders
of the Preferred Shares or of any class or series of Equivalent Shares
(including any such distribution made in connection with a consolidation or
merger in which the Company is the continuing or surviving corporation) of
evidences of indebtedness or assets (other than a regular quarterly cash
dividend, if any, or a dividend payable in Preferred Shares) or subscription
rights, options or warrants (excluding those referred to in Section 11(b)),
then, in each such case, the Exercise Price to be in effect after such record
date shall be determined by multiplying the Exercise Price in effect
immediately prior to such record date by a fraction, the numerator of which
shall be the Current Per Share Market Price of a Preferred Share or an
Equivalent Share on such record date, less the fair market value per
Preferred Share or Equivalent Share (as determined in good faith by the Board
of Directors of the Company, whose determination shall be described in a
statement filed with the Rights Agent) of the portion of the cash, assets or
evidences of indebtedness so to be distributed or of such subscription rights
or warrants applicable to a Preferred Share or Equivalent Share, as the case
may be, and the denominator of which shall be such Current Per Share Market
Price of a Preferred Share or Equivalent Share on such record date; PROVIDED,
HOWEVER, that in no event shall the consideration to be paid upon the
exercise of one Right be less than the aggregate par value of the shares of
capital stock of the Company issuable upon exercise of one Right. Such
adjustments shall be made successively whenever such a record date is fixed,
and in the event that such distribution is not so made, the Exercise Price
shall be adjusted to be the Exercise Price which would have been in effect if
such record date had not been fixed.
(d) Anything herein to the contrary notwithstanding, no adjustment
in the Exercise Price shall be required unless such adjustment would require
an increase or decrease of at least 1% in the Exercise Price; PROVIDED,
HOWEVER, that any adjustments which by reason of this Section 11(d) are not
required to be made shall be carried forward and taken into account in any
subsequent adjustment. All calculations under this Section 11 shall be made
to the nearest cent or to the nearest ten-thousandth of a Common Share or
other share or one hundred-thousandth of a Preferred Share, as the case may
be. Notwithstanding the first sentence of this Section 11(d), any adjustment
required by this Section 11 shall be made no later than the earlier of (i)
three (3) years from the date of the transaction which requires such
adjustment or (ii) the Expiration Date.
(e) If as a result of an adjustment made pursuant to Section 11(a)
or 13(a) hereof, the holder of any Right thereafter exercised shall become
entitled to receive any shares of capital stock other than Preferred Shares,
thereafter the number of such other shares so receivable upon exercise of any
Right and, if required, the Exercise Price thereof, shall be subject to
adjustment from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to the Preferred Shares contained
in Sections 11(a), 11(b), 11(c), 11(d), 11(g), 11(h), 11(i), 11(j), 11(k) and
11(l), and the provisions of Sections 7, 9, 10, 13 and 14 with respect to the
Preferred Shares shall apply on like terms to any such other shares.
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(f) All Rights originally issued by the Company subsequent to any
adjustment made to the Exercise Price hereunder shall evidence the right to
purchase, at the adjusted Exercise Price, the number of one-thousandths of a
Preferred Share purchasable from time to time hereunder upon exercise of the
Rights, all subject to further adjustment as provided herein.
(g) Unless the Company shall have exercised its election as
provided in Section 11(h), upon each adjustment of the Exercise Price as a
result of the calculations made in Sections 11(b) and (c), each Right
outstanding immediately prior to the making of such adjustment shall
thereafter evidence the right to purchase, at the adjusted Exercise Price,
that number of Preferred Shares (calculated to the nearest one
hundred-thousandth of a share) obtained by (i) multiplying (x) the number of
Preferred Shares covered by a Right immediately prior to this adjustment, by
(y) the Exercise Price in effect immediately prior to such adjustment of the
Exercise Price, and (ii) dividing the product so obtained by the Exercise
Price in effect immediately after such adjustment of the Exercise Price.
(h) The Company may elect on or after the date of any adjustment
of the Exercise Price as a result of the calculations made in Section 11(b)
or (c) to adjust the number of Rights, in substitution for any adjustment in
the number of Preferred Shares purchasable upon the exercise of a Right.
Each of the Rights outstanding after such adjustment of the number of Rights
shall be exercisable for the number of one-thousandths of a Preferred Share
for which a Right was exercisable immediately prior to such adjustment. Each
Right held of record prior to such adjustment of the number of Rights shall
become that number of Rights (calculated to the nearest one
hundred-thousandth) obtained by dividing the Exercise Price in effect
immediately prior to adjustment of the Exercise Price by the Exercise Price
in effect immediately after adjustment of the Exercise Price. The Company
shall make a public announcement of its election to adjust the number of
Rights, indicating the record date for the adjustment, and, if known at the
time, the amount of the adjustment to be made. This record date may be the
date on which the Exercise Price is adjusted or any day thereafter, but, if
the Rights Certificates have been issued, shall be at least ten (10) days
later than the date of the public announcement. If Rights Certificates have
been issued, upon each adjustment of the number of Rights pursuant to this
Section 11(h), the Company shall, as promptly as practicable, cause to be
distributed to holders of record of Rights Certificates on such record date
Rights Certificates evidencing, subject to Section 14 hereof, the additional
Rights to which such holders shall be entitled as a result of such
adjustment, or, at the option of the Company, shall cause to be distributed
to such holders of record in substitution and replacement for the Rights
Certificates held by such holders prior to the date of adjustment, and upon
surrender thereof, if required by the Company, new Rights Certificates
evidencing all the Rights to which such holders shall be entitled after such
adjustment. Rights Certificates so to be distributed shall be issued,
executed and countersigned in the manner provided for herein (and may bear,
at the option of the Company, the adjusted Exercise Price) and shall be
registered in the names of the holders of record of Rights Certificates on
the record date specified in the public announcement.
(i) Irrespective of any adjustment or change in the Exercise Price
or the number of Preferred Shares issuable upon the exercise of the Rights,
the Rights Certificates theretofore and thereafter issued may continue to
express the Exercise Price per one one-thousandth of a Preferred Share and
the number of one-thousandths of a Preferred Share which were expressed in
the initial Rights Certificates issued hereunder.
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(j) Before taking any action that would cause an adjustment
reducing the Exercise Price below the par or stated value, if any, of the
number of one-thousandths of a Preferred Share issuable upon exercise of the
Rights, the Company shall take any corporate action which may, in the opinion
of its counsel, be necessary in order that the Company may validly and
legally issue as fully paid and nonassessable shares such number of
one-thousandths of a Preferred Share at such adjusted Exercise Price.
(k) In any case in which this Section 11 shall require that an
adjustment in the Exercise Price be made effective as of a record date for a
specified event, the Company may elect to defer until the occurrence of such
event the issuing to the holder of any Right exercised after such record date
of the number of one-thousandths of a Preferred Share and other capital stock
or securities of the Company, if any, issuable upon such exercise over and
above the number of one-thousandths of a Preferred Share and other capital
stock or securities of the Company, if any, issuable upon such exercise on
the basis of the Exercise Price in effect prior to such adjustment; PROVIDED,
HOWEVER, that the Company shall deliver to such holder a due bill or other
appropriate instrument evidencing such holder's right to receive such
additional shares (fractional or otherwise) upon the occurrence of the event
requiring such adjustment.
(l) Anything in this Section 11 to the contrary notwithstanding,
prior to the Distribution Date, the Company shall be entitled to make such
reductions in the Exercise Price, in addition to those adjustments expressly
required by this Section 11, as and to the extent that it in its sole
discretion shall determine to be advisable in order that any (i)
consolidation or subdivision of the Preferred or Common Shares, (ii) issuance
wholly for cash of any Preferred or Common Shares at less than the current
market price, (iii) issuance wholly for cash of Preferred or Common Shares or
securities which by their terms are convertible into or exchangeable for
Preferred or Common Shares, (iv) stock dividends or (v) issuance of rights,
options or warrants referred to in this Section 11, hereafter made by the
Company to holders of its Preferred or Common Shares shall not be taxable to
such stockholders.
(m) The Company covenants and agrees that, after the Distribution
Date, it will not, except as permitted by Sections 23, 24 or 27 hereof, take
(or permit to be taken) any action if at the time such action is taken it is
reasonably foreseeable that such action will diminish substantially or
otherwise eliminate the benefits intended to be afforded by the Rights.
(n) In the event the Company shall at any time after the date of
this Agreement (A) declare a dividend on the Common Shares payable in Common
Shares, (B) subdivide the outstanding Common Shares, (C) combine the
outstanding Common Shares (by reverse stock split or otherwise) into a
smaller number of Common Shares, or (D) issue any shares of its capital stock
in a reclassification of the Common Shares (including any such
reclassification in connection with a consolidation or merger in which the
Company is the continuing or surviving corporation), then, in each such
event, except as otherwise provided in this Section 11(a) and Section 7(e)
hereof: (1) each Common Share (or shares of capital stock issued in such
reclassification of the Common Shares) outstanding immediately following such
time shall have associated with it the number of Rights as were associated
with one Common Share immediately prior to the occurrence of the event
described in clauses (A)-(D) above; (2) the Exercise Price in effect at the
time of the record date for such dividend or of the effective date of such
subdivision, combination or reclassification shall be adjusted so that the
Exercise Price thereafter shall equal the result
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obtained by multiplying the Exercise Price in effect immediately prior to
such time by a fraction, the numerator of which shall be the total number of
Common Shares outstanding immediately prior to the event described in clauses
(A)-(D) above, and the denominator of which shall be the total number of
Common Shares outstanding immediately after such event; PROVIDED, HOWEVER,
that in no event shall the consideration to be paid upon the exercise of one
Right be less than the aggregate par value of the shares of capital stock of
the Company issuable upon exercise of such Right; and (3) the number of
one-thousandths of a Preferred Share (or shares of such other capital stock)
issuable upon the exercise of each Right outstanding after such event shall
equal the number of one-thousandths of a Preferred Share (or shares of such
other capital stock) as were issuable with respect to one Right immediately
prior to such event. Each Common Share that shall become outstanding after an
adjustment has been made pursuant to this Section 11(n) shall have associated
with it the number of Rights, exercisable at the Exercise Price and for the
number of one-thousandths of a Preferred Share (or shares of such other
capital stock) as one Common Share has associated with it immediately
following the adjustment made pursuant to this Section 11(n). If an event
occurs which would require an adjustment under both this Section 11(n) and
Section 11(a)(ii) hereof, the adjustment provided for in this Section 11(n)
shall be in addition to, and shall be made prior to, any adjustment required
pursuant to Section 11(a)(ii) hereof.
Section 12. CERTIFICATE OF ADJUSTED EXERCISE PRICE OR NUMBER OF SHARES.
Whenever an adjustment is made as provided in Sections 11 and 13 hereof, the
Company shall promptly (a) prepare a certificate setting forth such
adjustment and a brief statement of the facts accounting for such adjustment,
(b) file with the Rights Agent and with each transfer agent for the Preferred
Shares a copy of such certificate and (c) mail a brief summary thereof to
each holder of a Rights Certificate in accordance with Section 26 hereof.
Notwithstanding the foregoing sentence, the failure of the Company to make
such certification or give such notice shall not affect the validity of such
adjustment or the force or effect of the requirement for such adjustment.
The Rights Agent shall be fully protected in relying on any such certificate
and on any adjustment contained therein and shall not be deemed to have
knowledge of such adjustment unless and until it shall have received such
certificate.
Section 13. CONSOLIDATION, MERGER OR SALE OR TRANSFER OF ASSETS
OR EARNING POWER.
(a) In the event that, following a Triggering Event, directly or
indirectly:
(i) the Company shall consolidate with, or merge with and
into, any other Person (other than a wholly-owned Subsidiary of the
Company in a transaction the principal purpose of which is to change the
state of incorporation of the Company and which complies with Section
11(m), 11(n) hereof);
(ii) any Person shall consolidate with the Company, or merge
with and into the Company and the Company shall be the continuing or
surviving corporation of such consolidation or merger, all or part of
the Common Shares shall be changed into or exchanged for stock or other
securities of any other person (or of the Company); or
(iii) the Company shall sell or otherwise transfer (or one
or more of its Subsidiaries shall sell or otherwise transfer), in one or
more transactions, assets or earning power
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aggregating 50% or more of the assets or earning power of the Company
and its Subsidiaries (taken as a whole) to any other Person or Persons
(other than the Company or one or more of its wholly-owned Subsidiaries
in one or more transactions, each of which individually (and together)
complies with Section 11(m) hereof),
then, concurrent with and in each such case,
(A) each holder of a Right (except as provided in
Section 7(e) hereof) shall thereafter have the right to receive,
upon the exercise thereof at a price equal to the Total Exercise
Price applicable immediately prior to the occurrence of the Section
13 Event in accordance with the terms of this Agreement, such
number of validly authorized and issued, fully paid, nonassessable
and freely tradeable Common Shares of the Principal Party (as
hereinafter defined), free of any liens, encumbrances, rights of
first refusal or other adverse claims, as shall be equal to the
result obtained by dividing such Total Exercise Price by 50% of the
Current Per Share Market Price of the Common Shares of such
Principal Party on the date of consummation of such Section 13
Event, PROVIDED, HOWEVER, that the Exercise Price and the number of
Common Shares of such Principal Party so receivable upon exercise
of a Right shall be subject to further adjustment as appropriate in
accordance with Section 11(e) hereof;
(B) such Principal Party shall thereafter be liable for,
and shall assume, by virtue of such Section 13 Event, all the
obligations and duties of the Company pursuant to this Agreement;
(C) the term "Company" shall thereafter be deemed to
refer to such Principal Party, it being specifically intended that
the provisions of Section 11 hereof shall apply only to such
Principal Party following the first occurrence of a Section 13
Event;
(D) such Principal Party shall take such steps
(including, but not limited to, the reservation of a sufficient
number of its Common Shares) in connection with the consummation of
any such transaction as may be necessary to ensure that the
provisions hereof shall thereafter be applicable, as nearly as
reasonably may be, in relation to its Common Shares thereafter
deliverable upon the exercise of the Rights; and
(E) upon the subsequent occurrence of any consolidation,
merger, sale or transfer of assets or other extraordinary
transaction in respect of such Principal Party, each holder of a
Right shall thereupon be entitled to receive, upon exercise of a
Right and payment of the Total Exercise Price as provided in this
Section 13(a), such cash, shares, rights, warrants and other
property which such holder would have been entitled to receive had
such holder, at the time of such transaction, owned the Common
Shares of the Principal Party receivable upon the exercise of such
Right pursuant to this Section 13(a), and such Principal Party
shall take such steps (including, but not limited to, reservation
of shares of stock) as may be necessary to permit the subsequent
exercise of the Rights
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in accordance with the terms hereof for such cash, shares, rights,
warrants and other property.
(F) For purposes hereof, the "earning power" of the
Company and its Subsidiaries shall be determined in good faith by
the Company's Board of Directors on the basis of the operating
earnings of each business operated by the Company and its
Subsidiaries during the three fiscal years preceding the date of
such determination (or, in the case of any business not operated by
the Company or any Subsidiary during three full fiscal years
preceding such date, during the period such business was operated
by the Company or any Subsidiary).
(b) For purposes of this Agreement, the term "PRINCIPAL PARTY"
shall mean:
(i) in the case of any transaction described in clause (i) or
(ii) of Section 13(a) hereof: (A) the Person that is the issuer of the
securities into which the Common Shares are converted in such merger or
consolidation, or, if there is more than one such issuer, the issuer the
Common Shares of which have the greatest aggregate market value of
shares outstanding, or (B) if no securities are so issued, (x) the
Person that is the other party to the merger, if such Person survives
said merger, or, if there is more than one such Person, the Person the
Common Shares of which have the greatest aggregate market value of
shares outstanding or (y) if the Person that is the other party to the
merger does not survive the merger, the Person that does survive the
merger (including the Company if it survives) or (z) the Person
resulting from the consolidation; and
(ii) in the case of any transaction described in clause
(iii) of Section 13(a) hereof, the Person that is the party receiving
the greatest portion of the assets or earning power transferred pursuant
to such transaction or transactions, or, if more than one Person that is
a party to such transaction or transactions receives the same portion of
the assets or earning power so transferred and each such portion would,
were it not for the other equal portions, constitute the greatest
portion of the assets or earning power so transferred, or if the Person
receiving the greatest portion of the assets or earning power cannot be
determined, whichever of such Persons is the issuer of Common Shares
having the greatest aggregate market value of shares outstanding;
PROVIDED, HOWEVER, that in any such case described in the foregoing clause
(b)(i) or (b)(ii), if the Common Shares of such Person are not at such time
or have not been continuously over the preceding 12-month period registered
under Section 12 of the Exchange Act, then (1) if such Person is a direct or
indirect Subsidiary of another Person the Common Shares of which are and have
been so registered, the term "Principal Party" shall refer to such other
Person, or (2) if such Person is a Subsidiary, directly or indirectly, of
more than one Person, the Common Shares of which are and have been so
registered, the term "Principal Party" shall refer to whichever of such
Persons is the issuer of Common Shares having the greatest aggregate market
value of shares outstanding, or (3) if such Person is owned, directly or
indirectly, by a joint venture formed by two or more Persons that are not
owned, directly or indirectly by the same Person, the rules set forth in
clauses (1) and (2) above shall apply to each of the owners having an
interest in the venture as if the Person owned by the joint venture was a
Subsidiary of both or
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all of such joint venturers, and the Principal Party in each such case shall
bear the obligations set forth in this Section 13 in the same ration as its
interest in such Person bears to the total of such interests.
(c) The Company shall not consummate any Section 13 Event unless
the Principal Party shall have a sufficient number of authorized Common
Shares that have not been issued or reserved for issuance to permit the
exercise in full of the Rights in accordance with this Section 13 and unless
prior thereto the Company and such issuer shall have executed and delivered
to the Rights Agent a supplemental agreement confirming that such Principal
Party shall, upon consummation of such Section 13 Event, assume this
Agreement in accordance with Sections 13(a) and 13(b) hereof, that all rights
of first refusal or preemptive rights in respect of the issuance of Common
Shares of such Principal Party upon exercise of outstanding Rights have been
waived, that there are no rights, warrants, instruments or securities
outstanding or any agreements or arrangements which, as a result of the
consummation of such transaction, would eliminate or substantially diminish
the benefits intended to be afforded by the Rights and that such transaction
shall not result in a default by such Principal Party under this Agreement,
and further providing that, as soon as practicable after the date of such
Section 13 Event, such Principal Party will:
(i) prepare and file a registration statement under the
Securities Act with respect to the Rights and the securities purchasable
upon exercise of the Rights on an appropriate form, use its best efforts
to cause such registration statement to become effective as soon as
practicable after such filing and use its best efforts to cause such
registration statement to remain effective (with a prospectus at all
times meeting the requirements of the Securities Act) until the
Expiration Date, and similarly comply with applicable state securities
laws;
(ii) use its best efforts to list (or continue the listing
of) the Rights and the securities purchasable upon exercise of the
Rights on a national securities exchange or to meet the eligibility
requirements for quotation on Nasdaq and list (or continue the listing
of) the Rights and the securities purchasable upon exercise of the
Rights on Nasdaq; and
(iii) deliver to holders of the Rights historical
financial statements for such Principal Party which comply in all
respects with the requirements for registration on Form 10 (or any
successor form) under the Exchange Act.
In the event that at any time after the occurrence of a Triggering Event
some or all of the Rights shall not have been exercised at the time of a
transaction described in this Section 13, the Rights which have not
theretofore been exercised shall thereafter be exercisable in the manner
described in Section 13(a) (without taking into account any prior adjustment
required by Section 11(a)(ii)).
(d) In case the "Principal Party" for purposes of Section 13(b)
hereof has provision in any of its authorized securities or in its
certificate of incorporation or by-laws or other instrument governing its
corporate affairs, which provision would have the effect of (i) causing such
Principal Party to issue (other than to holders of Rights pursuant to Section
13 hereof), in connection with, or as a consequence of, the consummation of a
Section 13 Event, Common Shares or Equivalent Shares of such Principal Party
at less than the then Current Per Share Market Price thereof or securities
exercisable for,
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or convertible into, Common Shares or Equivalent Shares of such Principal
Party at less than such then Current Per Share Market Price, or (ii)
providing for any special payment, tax or similar provision in connection
with the issuance of the Common Shares of such Principal Party pursuant to
the provisions of Section 13 hereof, then, in such event, the Company hereby
agrees with each holder of Rights that it shall not consummate any such
transaction unless prior thereto the Company and such Principal Party shall
have executed and delivered to the Rights Agent a supplemental agreement
providing that the provision in question of such Principal Party shall have
been canceled, waived or amended, or that the authorized securities shall be
redeemed, so that the applicable provision will have no effect in connection
with or as a consequence of, the consummation of the proposed transaction.
(e) The Company covenants and agrees that it shall not, at any
time after the Distribution Date, effect or permit to occur any Section 13
Event, if (i) at the time or immediately after such Section 13 Event there
are any rights, warrants or other instruments or securities outstanding or
agreements in effect which would substantially diminish or otherwise
eliminate the benefits intended to be afforded by the Rights, (ii) prior to,
simultaneously with or immediately after such Section 13 Event, the
stockholders of the Person who constitutes, or would constitute, the
"Principal Party" for purposes of Section 13(b) hereof shall have received a
distribution of Rights previously owned by such Person or any of its
Affiliates or Associates or (iii) the form or nature of organization of the
Principal Party would preclude or limit the exercisability of the Rights.
(f) Notwithstanding anything in this Agreement to the contrary,
Section 13 shall not be applicable to a transaction described in clauses (i)
and (ii) of Section 13(a) if: (i) such transaction is consummated with a
Person or Persons who acquired Common Shares pursuant to a Permitted Offer
(or a wholly-owned Subsidiary of any such Person or Persons); (ii) the price
per share of Common Shares offered in such transaction is not less than the
price per share of Common Shares paid to all holders of Common Shares whose
shares were purchased pursuant to such Permitted Offer; and (iii) the form of
consideration being offered to the remaining holders of Common Shares
pursuant to such transaction is the same form as the form of consideration
paid pursuant to such Permitted Offer. Upon consummation of any such
transaction contemplated by this Section 13(f), all Rights hereunder shall
expire.
(g) The provisions of this Section 13 shall similarly apply to
successive mergers or consolidations or sales or other transfers.
Section 14. FRACTIONAL RIGHTS AND FRACTIONAL SHARES.
(a) The Company shall not be required to issue fractions of Rights
or to distribute Rights Certificates which evidence fractional Rights. In
lieu of such fractional Rights, there shall be paid to the registered holders
of the Rights Certificates with regard to which such fractional Rights would
otherwise be issuable, an amount in cash equal to the same fraction of the
current market value of a whole Right. For the purposes of this Section
14(a), the current market value of a whole Right shall be the closing price
of the Rights for the Trading Day immediately prior to the date on which such
fractional Rights would have been otherwise issuable, as determined pursuant
to the second sentence of Section 1(k) hereof.
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(b) The Company shall not be required to issue fractions of
Preferred Shares (other than fractions that are integral multiples of one
one-thousandth of a Preferred Share) upon exercise of the Rights or to
distribute certificates which evidence fractional Preferred Shares (other
than fractions that are integral multiples of one one-thousandth of a
Preferred Share). Interests in fractions of Preferred Shares in integral
multiples of one one-thousandth of a Preferred Share may, at the election of
the Company, be evidenced by depositary receipts, pursuant to an appropriate
agreement between the Company and a depositary selected by it; PROVIDED, that
such agreement shall provide that the holders of such depositary receipts
shall have all the rights, privileges and preferences to which they are
entitled as beneficial owners of the Preferred Shares represented by such
depositary receipts. In lieu of fractional Preferred Shares that are not
integral multiples of one one-thousandth of a Preferred Share, the Company
shall pay to the registered holders of Rights Certificates at the time such
Rights are exercised as herein provided an amount in cash equal to the same
fraction of the current market value of a Preferred Share. For purposes of
this Section 14(b), the current market value of a Preferred Share shall be
one thousand times the closing price of a Common Share (as determined
pursuant to the second sentence of Section 1(k) hereof) for the Trading Day
immediately prior to the date of such exercise.
(c) The Company shall not be required to issue fractions of Common
Shares or to distribute certificates which evidence fractional Common Shares
upon the exercise or exchange of Rights. In lieu of such fractional Common
Shares, the Company shall pay to the registered holders of Rights
Certificates at the time such Rights are exercised as herein provided an
amount in cash equal to the same fraction of the current market value of a
Common Share. For purposes of this Section 14(c), the current market value
of a Common Share shall be the closing price of a Common Share (as determined
pursuant to the second sentence of Section 1(k) hereof) for the Trading Day
immediately prior to the date of such exercise.
(d) The holder of a Right by the acceptance of the Right expressly
waives his or her right to receive any fractional Rights or any fractional
shares (other than fractions that are integral multiples of one
one-thousandth of a Preferred Share) upon exercise of a Right.
Section 15. RIGHTS OF ACTION. All rights of action in respect of this
Agreement, excepting the rights of action given to the Rights Agent under
Section 18 hereof, are vested in the respective registered holders of the
Rights Certificates (and, prior to the Distribution Date, the registered
holders of the Common Shares); and any registered holder of any Rights
Certificate (or, prior to the Distribution Date, of the Common Shares),
without the consent of the Rights Agent or of the holder of any other Rights
Certificate (or, prior to the Distribution Date, of the Common Shares), may,
in his or her own behalf and for his or her own benefit, enforce, and may
institute and maintain any suit, action or proceeding against the Company to
enforce, or otherwise act in respect of, his or her right to exercise the
Rights evidenced by such Rights Certificate in the manner provided in such
Rights Certificate and in this Agreement. Without limiting the foregoing or
any remedies available to the holders of Rights, it is specifically
acknowledged that the holders of Rights would not have an adequate remedy at
law for any breach of this Agreement and will be entitled to specific
performance of the obligations under, and injunctive relief against actual or
threatened violations of, the obligations of any Person subject to this
Agreement.
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Section 16. AGREEMENT OF RIGHTS HOLDERS. Every holder of a Right, by
accepting the same, consents and agrees with the Company and the Rights Agent
and with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be
transferable only in connection with the transfer of the Common Shares;
(b) after the Distribution Date, the Rights Certificates are
transferable only on the registry books of the Rights Agent if surrendered at
the principal office or offices of the Rights Agent designated for such
purposes, duly endorsed or accompanied by a proper instrument of transfer and
with the appropriate forms and certificates fully executed; and
(c) subject to Sections 6(a) and 7(f) hereof, the Company and the
Rights Agent may deem and treat the person in whose name the Rights
Certificate (or, prior to the Distribution Date, the associated Common Shares
certificate) is registered as the absolute owner thereof and of the Rights
evidenced thereby (notwithstanding any notations of ownership or writing on
the Rights Certificates or the associated Common Shares certificate made by
anyone other than the Company or the Rights Agent) for all purposes
whatsoever, and neither the Company nor the Rights Agent shall be affected by
any notice to the contrary.
Section 17. RIGHTS CERTIFICATE HOLDER NOT DEEMED A STOCKHOLDER. No
holder, as such, of any Rights Certificate shall be entitled to vote, receive
dividends or be deemed for any purpose to be the holder of the Preferred
Shares or any other securities of the Company which may at any time be
issuable on the exercise of the Rights represented thereby, nor shall
anything contained herein or in any Rights Certificate be construed to confer
upon the holder of any Rights Certificate, as such, any of the rights of a
stockholder of the Company or any right to vote for the election of directors
or upon any matter submitted to stockholders at any meeting thereof, or to
give or withhold consent to any corporate action, or to receive notice of
meetings or other actions affecting stockholders (except as provided in
Section 25 hereof), or to receive dividends or subscription rights, or
otherwise, until the Right or Rights evidenced by such Rights Certificate
shall have been exercised in accordance with the provisions hereof.
Section 18. CONCERNING THE RIGHTS AGENT.
(a) The Company agrees to pay to the Rights Agent reasonable
compensation for all services rendered by it hereunder and, from time to
time, on demand of the Rights Agent, its reasonable expenses and counsel fees
and other disbursements incurred in the administration and execution of this
Agreement and the exercise and performance of its duties hereunder. The
Company also agrees to indemnify the Rights Agent for, and to hold it
harmless against, any loss, liability or expense, incurred without gross
negligence, bad faith or willful misconduct on the part of the Rights Agent,
for anything done or omitted by the Rights Agent in connection with the
acceptance and administration of this Agreement, including the costs and
expenses of defending against any claim of liability in the premises. In no
event will the Rights Agent be liable for special, indirect, incidental or
consequential loss or damage of any kind whatsoever, even if the Rights Agent
has been advised of the possibility of such loss or damage.
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(b) The Rights Agent shall be protected and shall incur no
liability for, or in respect of any action taken, suffered or omitted by it
in connection with, its administration of this Agreement in reliance upon any
Rights Certificate or certificate for the Preferred Shares or Common Shares
or for other securities of the Company, instrument of assignment or transfer,
power of attorney, endorsement, affidavit, letter, notice, direction,
consent, certificate, statement or other paper or document reasonably
believed by it to be genuine and to be signed, executed and, where necessary,
verified or acknowledged, by the proper Person or Persons, or otherwise upon
the advice of counsel as set forth in Section 20 hereof.
Section 19. MERGER OR CONSOLIDATION OR CHANGE OF NAME OF RIGHTS AGENT.
(a) Any corporation into which the Rights Agent or any successor
Rights Agent may be merged or with which it may be consolidated, or any
corporation resulting from any merger or consolidation to which the Rights
Agent or any successor Rights Agent shall be a party, or any corporation
succeeding to the corporate trust business of the Rights Agent or any
successor Rights Agent, shall be the successor to the Rights Agent under this
Agreement without the execution or filing of any paper or any further act on
the part of any of the parties hereto; PROVIDED, HOWEVER, that such
corporation would be eligible for appointment as a successor Rights Agent
under the provisions of Section 21 hereof. In case at the time such
successor Rights Agent shall succeed to the agency created by this Agreement,
any of the Rights Certificates shall have been countersigned but not
delivered, any such successor Rights Agent may adopt the countersignature of
the predecessor Rights Agent and deliver such Rights Certificates so
countersigned; and in case at that time any of the Rights Certificates shall
not have been countersigned, any successor Rights Agent may countersign such
Rights Certificates either in the name of the predecessor Rights Agent or in
the name of the successor Rights Agent; and in all such cases such Rights
Certificates shall have the full force provided in the Rights Certificates
and in this Agreement.
(b) In case at any time the name of the Rights Agent shall be
changed and at such time any of the Rights Certificates shall have been
countersigned but not delivered, the Rights Agent may adopt the
countersignature under its prior name and deliver Rights Certificates so
countersigned; and in case at that time any of the Rights Certificates shall
not have been countersigned, the Rights Agent may countersign such Rights
Certificates either in its prior name or in its changed name; and in all such
cases such Rights Certificates shall have the full force provided in the
Rights Certificates and in this Agreement.
Section 20. DUTIES OF RIGHTS AGENT. The Rights Agent undertakes the
duties and obligations imposed by this Agreement upon the following terms and
conditions, by all of which the Company and the holders of Rights
Certificates, by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel (who may be
legal counsel for the Company), and the opinion of such counsel shall be full
and complete authorization and protection to the Rights Agent as to any
action taken or omitted by it in good faith and in accordance with such
opinion.
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(b) Whenever in the performance of its duties under this Agreement
the Rights Agent shall deem it necessary or desirable that any fact or matter
(including, without limitation, the identity of any Acquiring Person and the
determination of Current Per Share Market Price) be proved or established by
the Company prior to taking or suffering any action hereunder, such fact or
matter (unless other evidence in respect thereof be herein specifically
prescribed) may be deemed to be conclusively proved and established by a
certificate signed by any one of the Chairman of the Board, the Chief
Executive Officer, the President, any Vice President, the Chief Financial
Officer, the Secretary or any Assistant Secretary of the Company and
delivered to the Rights Agent; and such certificate shall be full
authorization to the Rights Agent for any action taken or suffered in good
faith by it under the provisions of this Agreement in reliance upon such
certificate.
(c) The Rights Agent shall be liable hereunder to the Company and
any other Person only for its own gross negligence, bad faith or willful
misconduct.
(d) The Rights Agent shall not be liable for or by reason of any
of the statements of fact or recitals contained in this Agreement or in the
Rights Certificates (except its countersignature thereof) or be required to
verify the same, but all such statements and recitals are and shall be deemed
to have been made by the Company only.
(e) The Rights Agent shall not be under any responsibility in
respect of the validity of this Agreement or the execution and delivery
hereof (except the due execution hereof by the Rights Agent) or in respect of
the validity or execution of any Rights Certificate (except its
countersignature thereof); nor shall it be responsible for any breach by the
Company of any covenant or condition contained in this Agreement or in any
Rights Certificate; nor shall it be responsible for any change in the
exercisability of the Rights or any adjustment in the terms of the Rights
(including the manner, method or amount thereof) provided for in Sections 3,
11, 13, 23 or 24, or the ascertaining of the existence of facts that would
require any such change or adjustment (except with respect to the exercise of
Rights evidenced by Rights Certificates after receipt by the Rights Agent of
a certificate furnished pursuant to Section 12 describing such change or
adjustment); nor shall it by any act hereunder be deemed to make any
representation or warranty as to the authorization or reservation of any
Preferred Shares to be issued pursuant to this Agreement or any Rights
Certificate or as to whether any Preferred Shares will, when issued, be
validly authorized and issued, fully paid and nonassessable.
(f) The Company agrees that it will perform, execute, acknowledge
and deliver or cause to be performed, executed, acknowledged and delivered
all such further and other acts, instruments and assurances as may
reasonably be required by the Rights Agent for the carrying out or performing
by the Rights Agent of the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from any
one of the Chairman of the Board, the Chief Executive Officer, the President,
any Vice President, the Chief Financial Officer, the Secretary or any
Assistant Secretary of the Company, and to apply to such officers for advice
or instructions in connection with its duties, and it shall not be liable for
any action taken or suffered by it in good faith in accordance with
instructions of any such officer or for any delay in acting while waiting for
those instructions. Any
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application by the Rights Agent for written instructions from the Company
may, at the option of the Rights Agent, set forth in writing any action
proposed to be taken or omitted by the Rights Agent under this Rights
Agreement and the date on and/or after which such action shall be taken or
such omission shall be effective. The Rights Agent shall not be liable for
any action taken by, or omission of, the Rights Agent in accordance with a
proposal included in any such application on or after the date specified in
such application (which date shall not be less than five (5) Business Days
after the date any officer of the Company actually receives such application,
unless any such officer shall have consented in writing to an earlier date)
unless, prior to taking any such action (or the effective date in the case of
an omission), the Rights Agent shall have received written instructions in
response to such application specifying the action to be taken or omitted.
(h) The Rights Agent and any stockholder, director, officer or
employee of the Rights Agent may buy, sell or deal in any of the Rights or
other securities of the Company or become pecuniarily interested in any
transaction in which the Company may be interested, or contract with or lend
money to the Company or otherwise act as fully and freely as though it were
not the Rights Agent under this Agreement. Nothing herein shall preclude the
Rights Agent from acting in any other capacity for the Company or for any
other legal entity.
(i) The Rights Agent may execute and exercise any of the rights or
powers hereby vested in it or perform any duty hereunder either itself or by
or through its attorneys or agents, and the Rights Agent shall not be
answerable or accountable for any act, default, neglect or misconduct of any
such attorneys or agents or for any loss to the Company resulting from any
such act, default, neglect or misconduct, provided reasonable care was
exercised in the selection and continued employment thereof.
(j) No provision of this Agreement shall require the Rights Agent
to expend or risk its own funds or otherwise incur any financial liability in
the performance of any of its duties hereunder or in the exercise of its
rights if there shall be reasonable grounds for believing that repayment of
such funds or adequate indemnification against such risk or liability is not
reasonably assured to it.
(k) If, with respect to any Rights Certificate surrendered to the
Rights Agent for exercise or transfer, the certificate attached to the form
of assignment or form of election to purchase, as the case may be, has either
not been completed or indicates an affirmative response to clause 1 and/or 2
thereof, the Rights Agent shall not take any further action with respect to
such requested exercise or transfer without first consulting with the Company.
Section 21. CHANGE OF RIGHTS AGENT. The Rights Agent or any successor
Rights Agent may resign and be discharged from its duties under this
Agreement upon thirty (30) days' notice in writing mailed to the Company and
to each transfer agent of the Preferred Shares and the Common Shares by
registered or certified mail, and to the holders of the Rights Certificates
by first-class mail. The Company may remove the Rights Agent or any
successor Rights Agent upon thirty (30) days' notice in writing, mailed to
the Rights Agent or successor Rights Agent, as the case may be, and to each
transfer agent of the Preferred Shares and the Common Shares by registered or
certified mail, and to the holders of the Rights Certificates by first-class
mail. If the Rights Agent shall resign or be removed or shall otherwise
become incapable of acting, the Company shall appoint a successor to the
Rights Agent. If the Company
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shall fail to make such appointment within a period of thirty (30) days after
giving notice of such removal or after it has been notified in writing of
such resignation or incapacity by the resigning or incapacitated Rights Agent
or by the holder of a Rights Certificate (who shall, with such notice, submit
his or her Rights Certificate for inspection by the Company), then the
registered holder of any Rights Certificate may apply to any court of
competent jurisdiction for the appointment of a new Rights Agent. Any
successor Rights Agent, whether appointed by the Company or by such a court,
shall be a corporation organized and doing business under the laws of the
United States or of any state of the United States, in good standing, which
is authorized under such laws to exercise corporate trust or stockholder
services powers and is subject to supervision or examination by federal or
state authority and which has at the time of its appointment as Rights Agent
a combined capital and surplus of at least $50 million. After appointment,
the successor Rights Agent shall be vested with the same powers, rights,
duties and responsibilities as if it had been originally named as Rights
Agent without further act or deed; but the predecessor Rights Agent shall
deliver and transfer to the successor Rights Agent any property at the time
held by it hereunder, and execute and deliver any further assurance,
conveyance, act or deed necessary for the purpose. Not later than the
effective date of any such appointment, the Company shall file notice thereof
in writing with the predecessor Rights Agent and each transfer agent of the
Preferred Shares and the Common Shares, and mail a notice thereof in writing
to the registered holders of the Rights Certificates. Failure to give any
notice provided for in this Section 21, however, or any defect therein, shall
not affect the legality or validity of the resignation or removal of the
Rights Agent or the appointment of the successor Rights Agent, as the case
may be.
Section 22. ISSUANCE OF NEW RIGHTS CERTIFICATES. Notwithstanding any
of the provisions of this Agreement or of the Rights to the contrary, the
Company may, at its option, issue new Rights Certificates evidencing Rights
in such form as may be approved by its Board of Directors to reflect any
adjustment or change in the Exercise Price and the number or kind or class of
shares or other securities or property purchasable under the Rights
Certificates made in accordance with the provisions of this Agreement. In
addition, in connection with the issuance or sale of Common Shares following
the Distribution Date and prior to the redemption or expiration of the
Rights, the Company (a) shall, with respect to Common Shares so issued or
sold pursuant to the exercise of stock options or under any employee plan or
arrangement or upon the exercise, conversion or exchange of other securities
of the Company outstanding at the date hereof or upon the exercise,
conversion or exchange of securities hereinafter issued by the Company and
(b) may, in any other case, if deemed necessary or appropriate by the Board
of Directors of the Company, issue Rights Certificates representing the
appropriate number of Rights in connection with such issuance or sale;
PROVIDED, HOWEVER, that (i) no such Rights Certificate shall be issued and
this sentence shall be null and void AB INITIO if, and to the extent that,
such issuance or this sentence would create a significant risk of or result
in material adverse tax consequences to the Company or the Person to whom
such Rights Certificate would be issued or would create a significant risk of
or result in such options' or employee plans' or arrangements' failing to
qualify for otherwise available special tax treatment and (ii) no such Rights
Certificate shall be issued if, and to the extent that, appropriate
adjustment shall otherwise have been made in lieu of the issuance thereof.
Section 23. REDEMPTION.
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(a) The Company may, at its option and with the approval of the
Board of Directors, at any time prior to the Close of Business on the earlier
of (i) the tenth day following the Shares Acquisition Date (or such later
date as may be determined by action of a majority of Continuing Directors
then in office and publicly announced by the Company) and (ii) the Final
Expiration Date, redeem all but not less than all the then outstanding Rights
at a redemption price of $0.001 per Right, appropriately adjusted to reflect
any stock split, stock dividend or similar transaction occurring after the
date hereof (such redemption price being herein referred to as the
"REDEMPTION PRICE") and the Company may, at its option, pay the Redemption
Price either in Common Shares (based on the Current Per Share Market Price
thereof at the time of redemption) or cash. Such redemption of the Rights by
the Company may be made effective at such time, on such basis and with such
conditions as the Board of Directors in its sole discretion may establish;
PROVIDED, HOWEVER, if the Board of Directors of the Company authorizes
redemption of the Rights on or after the time a Person becomes an Acquiring
Person, then there must be Continuing Directors then in office and such
authorization shall require the concurrence of a majority of such Continuing
Directors. The date on which the Board of Directors elects to make the
redemption effective shall be referred to as the "REDEMPTION DATE."
(b) Immediately upon the action of the Board of Directors of the
Company ordering the redemption of the Rights, evidence of which shall have
been filed with the Rights Agent, and without any further action and without
any notice, the right to exercise the Rights will terminate and the only
right thereafter of the holders of Rights shall be to receive the Redemption
Price. The Company shall promptly give public notice of any such redemption;
PROVIDED, HOWEVER, that the failure to give or any defect in, any such notice
shall not affect the validity of such redemption. Within ten (10) days after
the action of the Board of Directors ordering the redemption of the Rights,
the Company shall give notice of such redemption to the Rights Agent and the
holders of the then outstanding Rights by mailing such notice to all such
holders at their last addresses as they appear upon the registry books of the
Rights Agent or, prior to the Distribution Date, on the registry books of the
transfer agent for the Common Shares. Any notice which is mailed in the
manner herein provided shall be deemed given, whether or not the holder
receives the notice. Each such notice of redemption will state the method by
which the payment of the Redemption Price will be made. Neither the Company
nor any of its Affiliates or Associates may redeem, acquire or purchase for
value any Rights at any time in any manner other than that specifically set
forth in this Section 23 or in Section 24 hereof, and other than in
connection with the purchase of Common Shares prior to the Distribution Date.
Section 24. EXCHANGE.
(a) Subject to applicable laws, rules and regulations, and subject
to subsection 24(c) below, the Company may, at its option, by majority vote
of the Board of Directors and a majority vote of the Continuing Directors, at
any time after the occurrence of a Triggering Event, exchange all or part of
the then outstanding and exercisable Rights (which shall not include Rights
that have become void pursuant to the provisions of Section 7(e) hereof) for
Common Shares at an exchange ratio of one Common Share per Right,
appropriately adjusted to reflect any stock split, stock dividend or similar
transaction occurring after the date hereof (such exchange ratio being
hereinafter referred to as the "EXCHANGE RATIO"). Notwithstanding the
foregoing, the Board of Directors shall not be empowered to effect such
exchange at any time after any Person (other than the Company, any Subsidiary
of the
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Company, any employee benefit plan of the Company or any such Subsidiary, or
any entity holding Common Shares for or pursuant to the terms of any such
plan), together with all Affiliates and Associates of such Person, becomes
the Beneficial Owner of 50% or more of the Common Shares then outstanding.
(b) Immediately upon the action of the Board of Directors ordering
the exchange of any Rights pursuant to subsection 24(a) of this Section 24
and without any further action and without any notice, the right to exercise
such Rights shall terminate and the only right thereafter of a holder of such
Rights shall be to receive that number of Common Shares equal to the number
of such Rights held by such holder multiplied by the Exchange Ratio. The
Company shall give public notice of any such exchange; PROVIDED, HOWEVER,
that the failure to give, or any defect in, such notice shall not affect the
validity of such exchange. The Company shall mail a notice of any such
exchange to all of the holders of such Rights at their last addresses as they
appear upon the registry books of the Rights Agent. Any notice which is
mailed in the manner herein provided shall be deemed given, whether or not
the holder receives the notice. Each such notice of exchange will state the
method by which the exchange of the Common Shares for Rights will be effected
and, in the event of any partial exchange, the number of Rights which will be
exchanged. Any partial exchange shall be effected pro rata based on the
number of Rights (other than Rights which have become void pursuant to the
provisions of Section 7(e) hereof) held by each holder of Rights.
(c) In the event that there shall not be sufficient Common Shares
issued but not outstanding or authorized but unissued to permit any exchange
of Rights as contemplated in accordance with Section 24(a), the Company shall
either take such action as may be necessary to authorize additional Common
Shares for issuance upon exchange of the Rights or alternatively, at the
option of a majority of the Board of Directors, with respect to each Right
(i) pay cash in an amount equal to the Current Value (as hereinafter
defined), in lieu of issuing Common Shares in exchange therefor, or (ii)
issue debt or equity securities or a combination thereof, having a value
equal to the Current Value, in lieu of issuing Common Shares in exchange for
each such Right, where the value of such securities shall be determined by a
nationally recognized investment banking firm selected by majority vote of
the Board of Directors, or (iii) deliver any combination of cash, property,
Common Shares and/or other securities having a value equal to the Current
Value in exchange for each Right. For purposes of this Section 24(c) only,
the Current Value shall mean the product of the Current Per Share Market
Price of Common Shares on the date of the occurrence of the event described
above in subparagraph (a), multiplied by the number of Common Shares for
which the Right otherwise would be exchangeable if there were sufficient
shares available. To the extent that the Company determines that some action
need be taken pursuant to clauses (i), (ii) or (iii) of this Section 24(c),
the Board of Directors may temporarily suspend the exercisability of the
Rights for a period of up to sixty (60) days following the date on which the
event described in Section 24(a) shall have occurred, in order to seek any
authorization of additional Common Shares and/or to decide the appropriate
form of distribution to be made pursuant to the above provision and to
determine the value thereof. In the event of any such suspension, the
Company shall issue a public announcement stating that the exercisability of
the Rights has been temporarily suspended.
(d) The Company shall not be required to issue fractions of
Common Shares or to distribute certificates which evidence fractional Common
Shares. In lieu of such fractional Common Shares, there shall be paid to the
registered holders of the Rights Certificates with regard to which such
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fractional Common Shares would otherwise be issuable, an amount in cash equal
to the same fraction of the current market value of a whole Common Share (as
determined pursuant to the second sentence of Section 11(k) hereof).
(e) The Company may, at its option, by majority vote of the Board
of Directors, at any time before any Person has become an Acquiring Person,
exchange all or part of the then outstanding Rights for rights of
substantially equivalent value, as determined reasonably and with good faith
by the Board of Directors, based upon the advice of one or more nationally
recognized investment banking firms.
(f) Immediately upon the action of the Board of Directors ordering
the exchange of any Rights pursuant to subsection 24(e) of this Section 24
and without any further action and without any notice, the right to exercise
such Rights shall terminate and the only right thereafter of a holder of such
Rights shall be to receive that number of rights in exchange therefor as has
been determined by the Board of Directors in accordance with subsection 24(e)
above. The Company shall give public notice of any such exchange; PROVIDED,
HOWEVER, that the failure to give, or any defect in, such notice shall not
affect the validity of such exchange. The Company shall mail a notice of any
such exchange to all of the holders of such Rights at their last addresses as
they appear upon the registry books of the transfer agent for the Common
Shares of the Company. Any notice which is mailed in the manner herein
provided shall be deemed given, whether or not the holder receives the
notice. Each such notice of exchange will state the method by which the
exchange of the Rights will be effected.
Section 25. NOTICE OF CERTAIN EVENTS.
(a) In case the Company shall propose to effect or permit to occur
any Triggering Event or Section 13 Event, the Company shall give notice
thereof to each holder of Rights in accordance with Section 26 hereof at
least twenty (20) days prior to occurrence of such Triggering Event or such
Section 13 Event.
(b) In case any Triggering Event or Section 13 Event shall occur,
then, in any such case, the Company shall as soon as practicable thereafter
give to each holder of a Rights Certificate, in accordance with Section 26
hereof, a notice of the occurrence of such event, which shall specify the
event and the consequences of the event to holders of Rights under Sections
11(a)(ii) and 13 hereof.
Section 26. NOTICES. Notices or demands authorized by this Agreement
to be given or made by the Rights Agent or by the holder of any Rights
Certificate to or on the Company shall be sufficiently given or made if sent
by first-class mail, postage prepaid, addressed (until another address is
filed in writing with the Rights Agent) as follows:
Access Health, Inc.
310 Interlocken Parkway, Suite A
Broomfield, Colorado 80021
Attention: Joseph P. Tallman
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with a copy to:
Wilson Sonsini Goodrich & Rosati
Professional Corporation
650 Page Mill Road
Palo Alto, California 94304-1050
Attention: Barry E. Taylor
Subject to the provisions of Section 21 hereof, any notice or demand
authorized by this Agreement to be given or made by the Company or by the
holder of any Rights Certificate to or on the Rights Agent shall be
sufficiently given or made if sent by first-class mail, postage prepaid,
addressed (until another address is filed in writing with the Company) as
follows:
First Chicago Trust Company of New York
525 Washington Boulevard
Suite 4690
Jersey City, New Jersey 07301
Attention: Kevin Laurita
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Rights Certificate shall be
sufficiently given or made if sent by first-class mail, postage prepaid,
addressed to such holder at the address of such holder as shown on the
registry books of the Company.
Section 27. SUPPLEMENTS AND AMENDMENTS. Prior to the occurrence of a
Distribution Date, the Company may supplement or amend this Agreement in any
respect without the approval of any holders of Rights and the Rights Agent
shall, if the Company so directs, execute such supplement or amendment. From
and after the occurrence of a Distribution Date, the Company and the Rights
Agent may from time to time supplement or amend this Agreement without the
approval of any holders of Rights in order to (i) cure any ambiguity, (ii)
correct or supplement any provision contained herein which may be defective
or inconsistent with any other provisions herein, (iii) shorten or lengthen
any time period hereunder (which shortening or lengthening shall be
effective only if there are Continuing Directors and shall require the
concurrence of a majority of such Continuing Directors) or (iv) to change or
supplement the provisions hereunder in any manner that the Company may deem
necessary or desirable and that shall not adversely affect the interests of
the holders of Rights (other than an Acquiring Person or an Affiliate or
Associate of an Acquiring Person); PROVIDED, this Agreement may not be
supplemented or amended to lengthen, pursuant to clause (iii) of this
sentence, (A) a time period relating to when the Rights may be redeemed at
such time as the Rights are not then redeemable or (B) any other time period
unless such lengthening is for the purpose of protecting, enhancing or
clarifying the rights of, and/or the benefits to, the holders of Rights
(other than an Acquiring Person or an Affiliate or Associate of an Acquiring
Person). Upon the delivery of a certificate from an appropriate officer of
the Company that states that the proposed supplement or amendment is in
compliance with the terms of this Section 27, the Rights Agent shall execute
such supplement or amendment. Prior to the Distribution Date, the interests
of the holders of Rights shall be deemed coincident with the interests of the
holders of Common Shares.
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<PAGE>
Section 28. SUCCESSORS. All the covenants and provisions of this
Agreement by or for the benefit of the Company or the Rights Agent shall bind
and inure to the benefit of their respective successors and assigns hereunder.
Section 29. DETERMINATIONS AND ACTIONS BY THE BOARD OF DIRECTORS, ETC.
For all purposes of this Agreement, any calculation of the number of Common
Shares outstanding at any particular time, including for purposes of
determining the particular percentage of such outstanding Common Shares of
which any Person is the Beneficial Owner, shall be made in accordance with
the last sentence of Rule 13d-3(d)(1)(i) of the Rules and Regulations under
the Exchange Act. The Board of Directors of the Company (or, where
specifically provided for herein, the Continuing Directors) shall have the
exclusive power and authority to administer this Agreement and to exercise
all rights and powers specifically granted to the Board, or the Company (or,
where specifically provided for herein, the Continuing Directors), or as may
be necessary or advisable in the administration of this Agreement, including,
without limitation, the right and power to (i) interpret the provisions of
this Agreement and (ii) make all determinations deemed necessary or advisable
for the administration of this Agreement (including a determination to redeem
or not redeem the Rights or to amend the Agreement). All such actions,
calculations, interpretations and determinations (including, for purposes of
clause (y) below, all omissions with respect to the foregoing) which are done
or made by the Board (or, where specifically provided for herein, by the
Continuing Directors) in good faith, shall (x) be final, conclusive and
binding on the Company, the Rights Agent, the holders of the Rights
Certificates and all other parties and (y) not subject the Board or the
Continuing Directors to any liability to the holders of the Rights.
Section 30. BENEFITS OF THIS AGREEMENT. Nothing in this Agreement
shall be construed to give to any Person other than the Company, the Rights
Agent and the registered holders of the Rights Certificates (and, prior to
the Distribution Date, the Common Shares) any legal or equitable right,
remedy or claim under this Agreement; but this Agreement shall be for the
sole and exclusive benefit of the Company, the Rights Agent and the
registered holders of the Rights Certificates (and, prior to the Distribution
Date, the Common Shares).
Section 31. SEVERABILITY. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain
in full force and effect and shall in no way be affected, impaired or
invalidated; PROVIDED, HOWEVER, that notwithstanding anything in this
Agreement to the contrary, if any such term, provision, covenant or
restriction is held by such court or authority to be invalid, void or
unenforceable and the Board of Directors of the Company determines in its
good faith judgment that severing the invalid language from this Agreement
would adversely affect the purpose or effect of this Agreement, the right of
redemption set forth in Section 23 hereof shall be reinstated and shall not
expire until the Close of Business on the tenth day following the date of
such determination by the Board of Directors.
Section 32. GOVERNING LAW. This Agreement and each Right and each
Rights Certificate issued hereunder shall be deemed to be a contract made
under the laws of the State of Delaware and for all purposes shall be
governed by and construed in accordance with the laws of such State
applicable to contracts to be made and performed entirely within such State.
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Section 33. COUNTERPARTS. This Agreement may be executed in any number
of counterparts and each of such counterparts shall for all purposes be
deemed to be an original, and all such counterparts shall together constitute
but one and the same instrument.
Section 34. DESCRIPTIVE HEADINGS. Descriptive headings of the several
Sections of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions
hereof.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
"COMPANY" Access Health, Inc.
By: /s/ Julie A. Brooks
-----------------------------------
Name: Julie A. Brooks
Title: Senior Vice President &
General Counsel
"RIGHTS AGENT" First Chicago Trust Company of New York
By: /s/ [illegible]
-----------------------------------
Name: [illegible]
---------------------------------
Title: ASSISTANT VICE PRESIDENT
--------------------------------
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EXHIBIT A
CERTIFICATE OF DESIGNATION OF RIGHTS, PREFERENCES
AND PRIVILEGES OF
SERIES A PARTICIPATING PREFERRED STOCK
OF ACCESS HEALTH, INC.
The undersigned, Thomas E. Gardner and Julie A. Brooks, do hereby
certify:
1. That they are the duly elected and acting Chief Executive Officer
and Secretary, respectively, of Access Health, Inc., a Delaware corporation
(the "CORPORATION").
2. That pursuant to the authority conferred upon the Board of
Directors by the Restated Certificate of Incorporation of the said
Corporation, the said Board of Directors, acting through a special committee
formed for such purpose, on March 12, 1997, adopted the following resolution
creating a series of 100,000 shares of Preferred Stock designated as Series A
Participating Preferred Stock:
"RESOLVED, that pursuant to the authority vested in the Board of
Directors of the corporation by the Restated Certificate of Incorporation,
the Board of Directors does hereby provide for the issue of a series of
Preferred Stock of the Corporation and does hereby fix and herein state and
express the designations, powers, preferences and relative and other special
rights and the qualifications, limitations and restrictions of such series of
Preferred Stock as follows:
Section 1 DESIGNATION AND AMOUNT. The shares of such series shall be
designated as "SERIES A PARTICIPATING PREFERRED STOCK." The Series A
Participating Preferred Stock shall have a par value of $0.001 per share, and
the number of shares constituting such series shall be 100,000.
Section 2 PROPORTIONAL ADJUSTMENT. In the event the Corporation shall
at any time after the issuance of any share or shares of Series A
Participating Preferred Stock (i) declare any dividend on Common Stock of the
Corporation ("COMMON STOCK") payable in shares of Common Stock, (ii)
subdivide the outstanding Common Stock or (iii) combine the outstanding
Common Stock into a smaller number of shares, then in each such case the
Corporation shall simultaneously effect a proportional adjustment to the
number of outstanding shares of Series A Participating Preferred Stock.
Section 3 DIVIDENDS AND DISTRIBUTIONS.
(a) Subject to the prior and superior right of the holders of any
shares of any series of Preferred Stock ranking prior and superior to the
shares of Series A Participating Preferred Stock with respect to dividends,
the holders of shares of Series A Participating Preferred Stock shall be
entitled to receive when, as and if declared by the Board of Directors out of
funds legally available for that purpose, quarterly dividends payable in cash
on the last day of January, April, July and October in each year (each such
date being referred to herein as a "QUARTERLY DIVIDEND PAYMENT DATE"),
commencing on the first Quarterly Dividend Payment Date after the first
issuance of a share or fraction of a share of Series A
<PAGE>
Participating Preferred Stock, in an amount per share (rounded to the nearest
cent) equal to 1,000 times the aggregate per share amount of all cash
dividends, and 1,000 times the aggregate per share amount (payable in kind)
of all non-cash dividends or other distributions other (except as provided in
Section 2 hereof) than a dividend payable in shares of Common Stock or a
subdivision of the outstanding shares of Common Stock (by reclassification or
otherwise), declared on the Common Stock since the immediately preceding
Quarterly Dividend Payment Date, or, with respect to the first Quarterly
Dividend Payment Date, since the first issuance of any share or fraction of a
share of Series A Participating Preferred Stock.
(b) The Corporation shall declare a dividend or distribution on
the Series A Participating Preferred Stock as provided in paragraph (a) above
immediately after it declares a dividend or distribution on the Common Stock
(other than a dividend payable in shares of Common Stock).
(c) Dividends shall begin to accrue on outstanding shares of
Series A Participating Preferred Stock from the Quarterly Dividend Payment
Date next preceding the date of issue of such shares of Series A
Participating Preferred Stock, unless the date of issue of such shares is
prior to the record date for the first Quarterly Dividend Payment Date, in
which case dividends on such shares shall begin to accrue from the date of
issue of such shares, or unless the date of issue is a Quarterly Dividend
Payment Date or is a date after the record date for the determination of
holders of shares of Series A Participating Preferred Stock entitled to
receive a quarterly dividend and before such Quarterly Dividend Payment Date,
in either of which events such dividends shall begin to accrue from such
Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear
interest. Dividends paid on the shares of Series A Participating Preferred
Stock in an amount less than the total amount of such dividends at the time
accrued and payable on such shares shall be allocated pro rata on a
share-by-share basis among all such shares at the time outstanding. The
Board of Directors may fix a record date for the determination of holders of
shares of Series A Participating Preferred Stock entitled to receive payment
of a dividend or distribution declared thereon, which record date shall be no
more than 30 days prior to the date fixed for the payment thereof.
Section 4 VOTING RIGHTS. The holders of shares of Series A
Participating Preferred Stock shall have the following voting rights:
(a) Each share of Series A Participating Preferred Stock shall
entitle the holder thereof to 1,000 votes on all matters submitted to a vote
of the stockholders of the Corporation.
(b) Except as otherwise provided herein or by law, the holders of
shares of Series A Participating Preferred Stock and the holders of shares of
Common Stock shall vote together as one class on all matters submitted to a
vote of stockholders of the Corporation.
(c) Except as required by law, holders of Series A Participating
Preferred Stock shall have no special voting rights and their consent shall
not be required (except to the extent they are entitled to vote with holders
of Common Stock as set forth herein) for taking any corporate action.
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Section 5 CERTAIN RESTRICTIONS.
(a) The Corporation shall not declare any dividend on, make any
distribution on, or redeem or purchase or otherwise acquire for consideration
any shares of Common Stock after the first issuance of a share or fraction of
a share of Series A Participating Preferred Stock unless concurrently
therewith it shall declare a dividend on the Series A Participating Preferred
Stock as required by Section 3 hereof.
(b) Whenever quarterly dividends or other dividends or
distributions payable on the Series A Participating Preferred Stock as
provided in Section 2 are in arrears, thereafter and until all accrued and
unpaid dividends and distributions, whether or not declared, on shares of
Series A Participating Preferred Stock outstanding shall have been paid in
full, the Corporation shall not:
(i) declare or pay dividends on, make any other
distributions on, or redeem or purchase or otherwise acquire for
consideration any shares of stock ranking junior (either as to dividends or
upon liquidation, dissolution or winding up) to the Series A Participating
Preferred Stock;
(ii) declare or pay dividends on, make any other
distributions on any shares of stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with Series A
Participating Preferred Stock, except dividends paid ratably on the Series A
Participating Preferred Stock and all such parity stock on which dividends
are payable or in arrears in proportion to the total amounts to which the
holders of all such shares are then entitled;
(iii) redeem or purchase or otherwise acquire for
consideration shares of any stock ranking on a parity (either as to dividends
or upon liquidation, dissolution or winding up) with the Series A
Participating Preferred Stock, provided that the Corporation may at any time
redeem, purchase or otherwise acquire shares of any such parity stock in
exchange for shares of any stock of the Corporation ranking junior (either as
to dividends or upon dissolution, liquidation or winding up) to the Series A
Participating Preferred Stock;
(iv) purchase or otherwise acquire for consideration any
shares of Series A Participating Preferred Stock, or any shares of stock
ranking on a parity with the Series A Participating Preferred Stock, except
in accordance with a purchase offer made in writing or by publication (as
determined by the Board of Directors) to all holders of such shares upon such
terms as the Board of Directors, after consideration of the respective annual
dividend rates and other relative rights and preferences of the respective
series and classes, shall determine in good faith will result in fair and
equitable treatment among the respective series or classes.
(c) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any shares of
stock of the Corporation unless the Corporation could, under paragraph (a) of
this Section 5, purchase or otherwise acquire such shares at such time and in
such manner.
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<PAGE>
Section 6 REACQUIRED SHARES. Any shares of Series A Participating
Preferred Stock purchased or otherwise acquired by the Corporation in any
manner whatsoever shall be retired and canceled promptly after the
acquisition thereof. All such shares shall upon their cancellation become
authorized but unissued shares of Preferred Stock and may be reissued as part
of a new series of Preferred Stock to be created by resolution or resolutions
of the Board of Directors, subject to the conditions and restrictions on
issuance set forth herein and, in the Restated Certificate of Incorporation,
as then amended.
Section 7 LIQUIDATION, DISSOLUTION OR WINDING UP. Upon any
liquidation, dissolution or winding up of the Corporation, the holders of
shares of Series A Participating Preferred Stock shall be entitled to receive
an aggregate amount per share equal to 1,000 times the aggregate amount to be
distributed per share to holders of shares of Common Stock plus an amount
equal to any accrued and unpaid dividends on such shares of Series A
Participating Preferred Stock.
Section 8 CONSOLIDATION, MERGER, ETC. In case the Corporation shall
enter into any consolidation, merger, combination or other transaction in
which the shares of Common Stock are exchanged for or changed into other
stock or securities, cash and/or any other property, then in any such case
the shares of Series A Participating Preferred Stock shall at the same time
be similarly exchanged or changed in an amount per share equal to 1,000 times
the aggregate amount of stock, securities, cash and/or any other property
(payable in kind), as the case may be, into which or for which each share of
Common Stock is changed or exchanged.
Section 9 NO REDEMPTION. The shares of Series A Participating
Preferred Stock shall not be redeemable.
Section 10 RANKING. The Series A Participating Preferred Stock shall
rank junior to all other series of the Corporation's Preferred Stock as to
the payment of dividends and the distribution of assets, unless the terms of
any such series shall provide otherwise.
Section 11 AMENDMENT. The Restated Certificate of Incorporation of
the Corporation shall not be further amended in any manner which would
materially alter or change the powers, preference or special rights of the
Series A Participating Preferred Stock so as to affect them adversely without
the affirmative vote of the holders of a majority of the outstanding shares
of Series A Participating Preferred Stock, voting separately as a class.
Section 12 FRACTIONAL SHARES. Series A Participating Preferred Stock
may be issued in fractions of a share which shall entitle the holder, in
proportion to such holder's fractional shares, to exercise voting rights,
receive dividends, participate in distributions and to have the benefit of
all other rights of holders of Series A Participating Preferred Stock.
RESOLVED FURTHER, that the President or any Vice President and the
Secretary or any Assistant Secretary of this corporation be, and they hereby
are, authorized and directed to prepare and file a Certificate of Designation
of Rights, Preferences and Privileges in accordance with the foregoing
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<PAGE>
resolution and the provisions of Delaware law and to take such actions as
they may deem necessary or appropriate to carry out the intent of the
foregoing resolution."
We further declare under penalty of perjury that the matters set forth
in the foregoing Certificate of Designation are true and correct of our own
knowledge.
Executed at Rancho Cordova, California on March 12, 1997
------------------------------------------
Thomas E. Gardner, Chief Executive Officer
------------------------------------------
Julie A. Brooks, Secretary
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EXHIBIT B
FORM OF RIGHTS CERTIFICATE
Certificate No. R- _________ Rights
NOT EXERCISABLE AFTER THE EARLIER OF (i) MARCH 12, 2007, (ii) THE
DATE TERMINATED BY THE COMPANY OR (iii) THE DATE THE COMPANY
EXCHANGES THE RIGHTS PURSUANT TO THE RIGHTS AGREEMENT. THE RIGHTS
ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE COMPANY, AT $0.001
PER RIGHT ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. UNDER
CERTAIN CIRCUMSTANCES, RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING
PERSON OR AN AFFILIATE OR ASSOCIATE OF AN ACQUIRING PERSON (AS SUCH
TERMS ARE DEFINED IN THE RIGHTS AGREEMENT) AND ANY SUBSEQUENT
HOLDER OF SUCH RIGHTS MAY BECOME NULL AND VOID. [THE RIGHTS
REPRESENTED BY THIS RIGHTS CERTIFICATE ARE OR WERE BENEFICIALLY
OWNED BY A PERSON WHO WAS OR BECAME AN ACQUIRING PERSON OR AN
AFFILIATE OR ASSOCIATE OF AN ACQUIRING PERSON (AS SUCH TERMS ARE
DEFINED IN THE RIGHTS AGREEMENT). ACCORDINGLY, THIS RIGHTS
CERTIFICATE AND THE RIGHTS REPRESENTED HEREBY MAY BECOME NULL AND
VOID IN THE CIRCUMSTANCES SPECIFIED IN SECTION 7(e) OF SUCH RIGHTS
AGREEMENT.]
RIGHTS CERTIFICATE
ACCESS HEALTH, INC.
This certifies that ______________________________, or registered
assigns, is the registered owner of the number of Rights set forth above,
each of which entitles the owner thereof, subject to the terms, provisions
and conditions of the Rights Agreement dated as of March 12, 1997, (the
"RIGHTS AGREEMENT"), between Access Health, Inc., a Delaware corporation (the
"COMPANY"), and First Chicago Trust Company of New York ( the "RIGHTS
AGENT"), to purchase from the Company at any time after the Distribution Date
(as such term is defined in the Rights Agreement) and prior to 5:00 P.M., New
York time, on ________________, at the office of the Rights Agent designated
for such purpose, or at the office of its successor as Rights Agent, one
one-thousandth (1/1,000) of a fully paid non-assessable
- ------------------
* The portion of the legend in bracket shall be inserted only if
applicable and shall replace the preceding sentence.
<PAGE>
share of Series A Participating Preferred Stock, $0.001 par value, (the
"PREFERRED SHARES"), of the Company, at a Exercise Price of $150 per
one-thousandth of a Preferred Share (the "EXERCISE PRICE"), upon presentation
and surrender of this Rights Certificate with the Form of Election to
Purchase and related Certificate duly executed. The number of Rights
evidenced by this Rights Certificate (and the number of one-thousandths of a
Preferred Share which may be purchased upon exercise hereof) set forth above
are the number and Exercise Price as of _____________, based on the Preferred
Shares as constituted at such date. As provided in the Rights Agreement, the
Exercise Price and the number and kind of Preferred Shares or other
securities which may be purchased upon the exercise of the Rights evidenced
by this Rights Certificate are subject to modification and adjustment upon
the happening of certain events.
This Rights Certificate is subject to all of the terms, provisions
and conditions of the Rights Agreement, which terms, provisions and
conditions are hereby incorporated herein by reference and made a part hereof
and to which Rights Agreement reference is hereby made for a full description
of the rights, limitations of rights, obligations, duties and immunities
hereunder of the Rights Agent, the Company and the holders of the Rights
Certificates, which limitations of rights include the temporary suspension of
the exercisability of such Rights under the specific circumstances set forth
in the Rights Agreement. Copies of the Rights Agreement are on file at the
principal executive offices of the Company and the above-mentioned office of
the Rights Agent.
Subject to the provisions of the Rights Agreement, the Rights
evidenced by this Rights Certificate (i) may be redeemed by the Company, at
its option, at a redemption price of $0.001 per Right or (ii) may be
exchanged by the Company in whole or in part for Common Shares, substantially
equivalent rights or other consideration as determined by the Company.
This Rights Certificate, with or without other Rights Certificates,
upon surrender at the office of the Rights Agent designated for such purpose,
may be exchanged for another Rights Certificate or Rights Certificates of
like tenor and date evidencing Rights entitling the holder to purchase a like
aggregate amount of securities as the Rights evidenced by the Rights
Certificate or Rights Certificates surrendered shall have entitled such
holder to purchase. If this Rights Certificate shall be exercised in part,
the holder shall be entitled to receive upon surrender hereof another Rights
Certificate or Rights Certificates for the number of whole Rights not
exercised.
No fractional portion of less than one one-thousandth of a
Preferred Share will be issued upon the exercise of any Right or Rights
evidenced hereby but in lieu thereof a cash payment will be made, as provided
in the Rights Agreement.
No holder of this Rights Certificate, as such, shall be entitled to
vote or receive dividends or be deemed for any purpose the holder of the
Preferred Shares or of any other securities of the Company which may at any
time be issuable on the exercise hereof, nor shall anything contained in the
Rights Agreement or herein be construed to confer upon the holder hereof, as
such, any of the rights of a stockholder of the Company or any right to vote
for the election of directors or upon any matter submitted to stockholders at
any meeting thereof, or to give or withhold consent to any corporate action,
or to receive notice of meetings or other actions affecting stockholders
(except as provided in the Rights
-2-
<PAGE>
Agreement), or to receive dividends or subscription rights, or otherwise,
until the Right or Rights evidenced by this Rights Certificate shall have
been exercised as provided in the Rights Agreement.
This Rights Certificate shall not be valid or obligatory for any purpose
until it shall have been countersigned by the Rights Agent.
WITNESS the facsimile signature of the proper officers of the Company
and its corporate seal. Dated as of _______________, 19____.
ATTEST: ACCESS HEALTH, INC.
By:
- -------------------------- ----------------------------------
Julie A. Brooks, Secretary Joseph P. Tallman, Chief Executive
Officer and President
Countersigned:
First Chicago Trust Company of New York
as Rights Agent
By:
----------------------------
Its:
---------------------------
-3-
<PAGE>
FORM OF REVERSE SIDE OF RIGHTS CERTIFICATE
FORM OF ASSIGNMENT
(To be executed by the registered holder if such
holder desires to transfer the Rights Certificate)
FOR VALUE RECEIVED ________________________ hereby sells, assigns
and transfers unto _________________________________________________________
(Please print name and address of transferee)
____________________________________________________________________________
this Rights Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint __________________________
Attorney, to transfer the within Rights Certificate on the books of the
within-named Company, with full power of substitution.
Dated: _______________, 19____
___________________________________
Signature
Signature Guaranteed:
Signatures must be guaranteed by an eligible guarantor institution
(a bank, stockbroker, savings and loan association or credit union with
membership in an approved signature guarantee medallion program) pursuant to
Rule 17Ad-15 of the Securities Exchange Act of 1934.
<PAGE>
CERTIFICATE
The undersigned hereby certifies by checking the appropriate boxes that:
(1) this Rights Certificate [ ] is [ ] is not being sold, assigned
and transferred by or on behalf of a Person who is or was an Acquiring
Person, or an Affiliate or Associate of any such Person (as such terms are
defined in the Rights Agreement);
(2) after due inquiry and to the best knowledge of the
undersigned, it [ ] did [ ] did not acquire the Rights evidenced by this
Rights Certificate from any Person who is, was or subsequently became an
Acquiring Person or an Affiliate or Associate of any such Person.
Dated: _______________, 19____
____________________________________
Signature
Signature Guaranteed:
Signatures must be guaranteed by an eligible guarantor institution
(a bank, stockbroker, savings and loan association or credit union with
membership in an approved signature guarantee medallion program) pursuant to
Rule 17Ad-15 of the Securities Exchange Act of 1934.
<PAGE>
FORM OF REVERSE SIDE OF RIGHTS CERTIFICATE -- CONTINUED
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to
exercise the Rights Certificate)
To: ___________________________
The undersigned hereby irrevocably elects to exercise
_________________________ Rights represented by this Rights Certificate to
purchase the number of one-thousandths of a Preferred Share issuable upon the
exercise of such Rights and requests that certificates for such number of
one-thousandths of a Preferred Share issued in the name of:
Please insert social security
or other identifying number
______________________________________________________________________________
(Please print name and address)
______________________________________________________________________________
If such number of Rights shall not be all the Rights evidenced by this Rights
Certificate, a new Rights Certificate for the balance remaining of such
Rights shall be registered in the name of and delivered to:
Please insert social security
or other identifying number
______________________________________________________________________________
(Please print name and address)
______________________________________________________________________________
Dated: ___________________ , 19____
_______________________________________
Signature
Signature Guaranteed:
Signatures must be guaranteed by an eligible guarantor institution
(a bank, stockbroker, savings and loan association or credit union with
membership in an approved signature guarantee medallion program) pursuant to
Rule 17Ad-15 of the Securities Exchange Act of 1934.
<PAGE>
CERTIFICATE
The undersigned hereby certifies by checking the appropriate boxes that:
(1) the Rights evidenced by this Rights Certificate [ ] are [ ]are not
being exercised by or on behalf of a Person who is or was an Acquiring Person
or an Affiliate or Associate of any such Person (as such terms are defined in
the Rights Agreement);
(2) after due inquiry and to the best knowledge of the undersigned, it
[ ] did [ ] did not acquire the Rights evidenced by this Rights Certificate
from any Person who is, was or subsequently became an Acquiring Person or an
Affiliate or Associate of any such Person.
Dated: ___________________ , 19____
_______________________________________
Signature
Signature Guaranteed:
Signatures must be guaranteed by an eligible guarantor institution
(a bank, stockbroker, savings and loan association or credit union with
membership in an approved signature guarantee medallion program) pursuant to
Rule 17Ad-15 of the Securities Exchange Act of 1934.
<PAGE>
FORM OF REVERSE SIDE OF RIGHTS CERTIFICATE -- CONTINUED
NOTICE
The signature in the foregoing Forms of Assignment and Election
must conform to the name as written upon the face of this Rights Certificate
in every particular, without alteration or enlargement or any change
whatsoever.
-2-
<PAGE>
EXHIBIT C
STOCKHOLDER RIGHTS PLAN
ACCESS HEALTH, INC.
SUMMARY OF RIGHTS
DISTRIBUTION AND The Board of Directors has declared a dividend of one
TRANSFER OF RIGHTS; Right for each share of Access Health Common Stock
RIGHTS CERTIFICATE: outstanding. Prior to the Distribution Date referred
to below, the Rights will be evidenced by and trade
with the certificates for the Common Stock. After
the Distribution Date, Access Health, Inc. (the
"COMPANY") will mail Rights certificates to the
Company's stockholders and the Rights will become
transferable apart from the Common Stock.
DISTRIBUTION DATE: Rights will separate from the Common Stock and become
exercisable following (a) the tenth day (or such
later date as may be determined by a majority of the
Directors not affiliated with the acquiring person or
group (the "CONTINUING DIRECTORS")) after a person or
group acquires beneficial ownership of 20% or more of
the Company's Common Stock or (b) the tenth business
day (or such later date as may be determined by a
majority of the Continuing Directors) after a person
or group announces a tender or exchange offer, the
consummation of which would result in ownership by a
person or group of 20% or more of the Company's
Common Stock.
PREFERRED STOCK After the Distribution Date, each Right will entitle
PURCHASABLE UPON the holder to purchase for $150, a fraction of a
EXERCISE OF RIGHTS: share of the Company's Preferred Stock with economic
terms similar to that of one share of the Company's
Common Stock.
FLIP-IN: If an acquiror (an "ACQUIRING PERSON") obtains 20% or
more of the Company's Common Stock (other than
pursuant to a tender offer deemed adequate and in the
best interests of the Company and its stockholders by
the Continuing Directors (a "PERMITTED OFFER")), then
each Right (other than Rights owned by an Acquiring
Person or its affiliates) will entitle the holder
thereof to purchase, for the Exercise Price, a number
of shares of the Company's Common Stock having a then
current market value of twice the Exercise Price.
FLIP-OVER: If, after an Acquiring Person obtains 20% or more of
the Company's Common Stock, (a) the Company merges
into another entity, (b) an acquiring entity merges
into the Company or (c) the Company sells more than
50% of the Company's assets or earning power, then
each Right (other than Rights owned by an Acquiring
Person or its affiliates) will entitle the holder
thereof to purchase,
<PAGE>
for the Exercise Price, a number of shares of Common
Stock of the Person engaging in the transaction
having a then current market value of twice the
Exercise Price (unless the transaction satisfies
certain conditions and is consummated with a Person
who acquired shares pursuant to a Permitted Offer, in
which case the Rights will expire).
EXCHANGE PROVISION: At any time after the date an Acquiring Person
obtains 20% or more of the Company's Common Stock
and prior to the acquisition by the Acquiring Person
of 50% of the outstanding Common Stock, a majority of
the Board of Directors and a majority of the
Continuing Directors of the Company may exchange the
Rights (other than Rights owned by the Acquiring
Person or its affiliates), in whole or in part, for
shares of Common Stock of the Company at an exchange
ratio of one share of Common Stock per Right (subject
to adjustment).
REDEMPTION OF Rights will be redeemable at the Company's option for
THE RIGHTS: $0.001 per Right at any time on or prior to the tenth
day (or such later date as may be determined by a
majority of the Continuing Directors) after public
announcement that a Person has acquired beneficial
ownership of 20% or more of the Company's Common
Stock (the "SHARES ACQUISITION DATE").
EXPIRATION OF The Rights expire on the earliest of (a) March 12,
THE RIGHTS: 2007, (b) exchange or redemption of the Rights as
described above, or (c) consummation of a merger or
consolidation resulting in expiration of the Rights
as described above.
AMENDMENT OF The terms of the Rights and the Rights Agreement may
TERMS OF RIGHTS: be amended in any respect without the consent of the
Rights holders on or prior to Distribution Date;
thereafter, the terms of the Rights and the Rights
Agreement may be amended without the consent of the
Rights holders in order to cure any ambiguities or to
make changes which do not adversely affect the
interests of Rights holders (other than the Acquiring
Person).
VOTING RIGHTS: Rights will not have any voting rights.
ANTI-DILUTION Rights will have the benefit of certain customary
PROVISIONS: anti-dilution provisions.
TAXES: The Rights distribution should not be taxable for
federal income tax purposes. However, following an
event which renders the Rights exercisable or upon
redemption of the Rights, stockholders may recognize
taxable income.
-2-
<PAGE>
The foregoing is a summary of certain principal terms of the Stockholder
Rights Plan only and is qualified in its entirety by reference to the
detailed terms of the Rights Agreement dated as of March 12, 1997, between
the Company and the Rights Agent.
-3-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from FY1998 Q2
unaudited financial statements and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 43,820
<SECURITIES> 31,936
<RECEIVABLES> 14,289
<ALLOWANCES> 874
<INVENTORY> 0
<CURRENT-ASSETS> 103,725
<PP&E> 32,121
<DEPRECIATION> 16,075
<TOTAL-ASSETS> 123,882
<CURRENT-LIABILITIES> 25,925
<BONDS> 0
0
0
<COMMON> 19
<OTHER-SE> 97,626
<TOTAL-LIABILITY-AND-EQUITY> 123,882
<SALES> 31,216
<TOTAL-REVENUES> 31,216
<CGS> 16,165
<TOTAL-COSTS> 22,825
<OTHER-EXPENSES> 6,660
<LOSS-PROVISION> 22
<INTEREST-EXPENSE> (919)
<INCOME-PRETAX> 9,310
<INCOME-TAX> 3,538
<INCOME-CONTINUING> 5,772
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,772
<EPS-PRIMARY> 0.31
<EPS-DILUTED> 0.29
</TABLE>
