-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MNFnR878ByVfLSjS8ZUDHRCl0+1a75JfV5IuPfLT2rxt5NwdVLUYSCB4f9Y6YYUq 8tYMOUGaWQZFtutOz9/ZAQ== 0001012870-97-001572.txt : 19970815 0001012870-97-001572.hdr.sgml : 19970815 ACCESSION NUMBER: 0001012870-97-001572 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970814 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: ACCESS HEALTH INC CENTRAL INDEX KEY: 0000882304 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MISC HEALTH & ALLIED SERVICES, NEC [8090] IRS NUMBER: 680163589 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-19758 FILM NUMBER: 97662775 BUSINESS ADDRESS: STREET 1: 11020 WHITE ROCK ROAD CITY: RANCHO CORDOVA STATE: CA ZIP: 95670 BUSINESS PHONE: 9168514000 MAIL ADDRESS: STREET 1: 11020 WHITE ROCK RD CITY: RANCHO CORDOVA STATE: CA ZIP: 95670 FORMER COMPANY: FORMER CONFORMED NAME: ACCESS HEALTH MARKETING INC DATE OF NAME CHANGE: 19930328 10-Q 1 FORM 10-Q 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 June 30, 1997 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 Identification No.) incorporation or organization) 11020 White Rock Road, Rancho Cordova, California 95670 (Address of principal executive offices) (Zip code) (916) 851-4000 (Registrant's telephone number, including area code) Access Health Marketing, Inc. (Former name) 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 July 31, 1997: 18,041,405 shares Access Health, Inc. INDEX Page No. -------- PART I FINANCIAL INFORMATION Item 1. Financial Statements Condensed consolidated balance sheets - September 30, 1996 and June 30, 1997........................................... 4 Condensed consolidated statements of operations - three months and nine months ended June 30, 1996 and 1997................. 5 Condensed consolidated statements of cash flows - nine months ended June 30, 1996 and 1997................................ 6 Notes to condensed consolidated financial statements.......... 7 Item 2. Management's discussion and analysis of financial condition and results of operations....................... 8 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K....................... 15 SIGNATURE........................................................ 16 2 PART 1. FINANCIAL INFORMATION 3 Access Health, Inc. Condensed Consolidated Balance Sheets (In thousands, except per share and share amounts) (Unaudited)
September 30, June 30, 1996 1997 ------------- ------------ Assets: Current assets: Cash and equivalents.................................. $26,533 $ 34,848 Available-for-sale securities......................... 14,126 14,128 Accounts and licenses receivable, net of allowance for doubtful accounts of $884 ($750 at September 30, 1996)......................... 12,944 12,206 Income taxes receivable............................... 1,917 1,917 Prepaid expenses...................................... 2,009 2,315 Other current assets.................................. 1,073 1,032 -------- -------- Total current assets................................ 58,602 66,446 Property and equipment, net........................... 16,512 16,251 Purchased intangibles, net of accumulated amortization of $4,765 ($4,327 at September 30, 1996).................................. 3,478 3,040 Note receivable from AHN.............................. - 5,000 Investment in AHN..................................... 5,000 5,000 Other assets.......................................... 700 442 -------- -------- $84,292 $ 96,179 ======== ======== Liabilities and Stockholders' Equity Current liabilities: Accounts payable...................................... $ 4,314 $ 3,482 Accrued payroll and related expenses.................. 3,413 3,953 Accrued integration and restructuring costs........... - 2,901 Other accrued expenses................................ 4,980 5,161 Notes payable to related parties...................... 1,500 1,243 Current portion of long-term debt..................... 599 641 Deferred revenues..................................... 4,500 5,035 -------- -------- Total current liabilities.......................... 19,306 22,416 Long-term debt.............................................. 1,344 839 Commitments and contingencies Mandatorily redeemable convertible preferred stock, $.001 par value, aggregate liquidation and redemption preference of $10,995 at September 30, 1996; 3,859,196 shares authorized, 3,734,151 shares issued and outstanding as of September 30, 1996 (none at June 30, 1997)............ 10,995 - 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, 17,994,445 shares issued and outstanding (13,684,927 at September 30, 1996).................................. 14 18 Additional paid-in capital............................ 58,182 72,965 Deferred stock compensation........................... (443) - Accumulated deficit................................... (5,106) (59) -------- -------- Total stockholders' equity........................... 52,647 72,924 -------- -------- $84,292 $ 96,179 ======== ========
See accompanying notes. 4 Access Health, Inc. Condensed Consolidated Statements of Operations (In thousands, except per share amounts) (Unaudited)
Three months ended Nine months ended June 30, June 30, ------------------------------------------ ---------------------------------------- 1996 1997 1996 1997 ------------------ --------------------- ------------------ ------------------ Revenues: Personal health management services.. $17,199 $23,909 $42,780 $68,326 Licensing and support services....... 2,776 2,576 8,252 7,901 ------------------ --------------------- ----------------- --------------------- Total revenues................... 19,975 26,485 51,032 76,227 Costs and expenses: Cost of revenues: Personal health management services........................ 9,486 12,795 24,786 35,377 Licensing and support services... 1,484 591 4,089 2,620 Product and other development........ 1,858 1,932 4,205 6,329 Sales and marketing.................. 2,391 2,270 6,625 6,516 General and administrative........... 2,247 2,080 5,864 6,638 Transaction costs.................... - - - 6,345 Integration and restructuring costs.. - - - 6,961 ------------------ --------------------- ------------------ --------------------- Total costs and expenses......... 17,466 19,668 45,569 70,786 ------------------ --------------------- ------------------ --------------------- Income from operations.................. 2,509 6,817 5,463 5,441 Other income............................ 385 520 1,111 1,235 ------------------ --------------------- ------------------ --------------------- Income before income taxes.............. 2,894 7,337 6,574 6,676 Provision for income taxes.............. 2,451 1,761 5,567 1,629 ------------------ --------------------- ------------------ --------------------- Net income.............................. $ 443 $ 5,576 $ 1,007 $5,047 ================== ===================== ================== ===================== Net income per share.................... $0.02 $ 0.29 $0.06 $ 0.27 ================== ===================== ================== ===================== Shares used in per share calculations... 18,949 19,018 18,115 18,973 ================== ===================== ================= =====================
See accompanying notes. 5 Access Health, Inc. Condensed Consolidated Statements of Cash Flows Increase (Decrease) in Cash and Equivalents (In thousands) (Unaudited)
Nine months ended June 30, --------------------------------------- 1996 1997 --------------- ---------------- Cash flows from operating activities: Net income .................................. $ 1,007 $ 5,047 Adjustments to reconcile net income to net cash provided by operations: Allowance for doubtful accounts ............ 178 134 Depreciation and amortization............... 2,766 4,638 Deferred stock compensation................. -- 443 Common stock issued for services rendered................................... -- 2,233 Common stock issued in consideration for discharge of obligation................ 50 -- Deferred income taxes....................... 2,520 -- Changes in: Accounts receivable........................ (3,975) 604 Prepaid expenses and other current assets.................................... (1,078) (265) Accounts payable........................... 1,511 (832) Accrued payroll and related expenses....... 1,207 540 Accrued integration and restructuring costs -- 2,901 Other accrued expenses..................... 3,958 181 Notes payable to related parties........... -- (257) Deferred revenues.......................... 358 535 --------------- ---------------- Net cash provided by operating activities............................... 8,502 15,902 Cash flows from investing activities: Purchase of available-for-sale securities, net............................. (5,196) (2) Purchase of property and equipment........... (8,555) (3,939) Note receivable from AHN..................... (5,000) (5,000) Decrease in other assets..................... 809 258 --------------- ---------------- Net cash used by investing activities............................... (17,942) (8,683) --------------- ---------------- Cash flows from financing activities: Payment of long-term debt.................... (875) (463) Proceeds from note payable................... 680 -- Sale of common stock......................... 30,787 1,559 --------------- ---------------- Net cash provided by financing activities............................... 30,592 1,096 --------------- ---------------- Net increase in cash and equivalents.......... 21,152 8,315 Elimination of IAS and CRS net cash activity for the three months ended December 31, 1995............................ 446 -- Cash and equivalents at beginning of period....................................... 9,815 26,533 --------------- ---------------- Cash and equivalents at end of period......... $ 31,413 $ 34,848 =============== ================
See accompanying notes. 6 Access Health, Inc. Notes to Condensed Consolidated Financial Statements June 30, 1997 (Unaudited) Note 1: Summary of Significant Accounting Policies Interim Financial Statements 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 June 30, 1997, consolidated results of operations for the three and nine month periods ended June 30, 1996 and 1997 and cash flows for the nine month periods ended June 30, 1996 and 1997. Results for the period ended June 30, 1997 are not necessarily indicative of the results to be expected for the entire fiscal year. Revenue Recognition Revenues include personal health 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. Commercial revenues also include licensing and support services related to the Company's ASK-A-NURSE, Cancer HELPLINK, Access Care Management System, and LIFE MATCH products. Program membership fees from Personal Health Advisor and FirstHelp contracts are recognized ratably in accordance with contract terms on the basis of per- member fees. Member communications fees are recognized upon the delivery of services. 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, Cancer HELPLINK and FirstHelp are recognized ratably over the term of the contract. Support revenues are comprised of ASK-A-NURSE and Cancer HELPLINK support revenue, LIFE MATCH software support revenue and direct marketing fees. Revenue from support contracts and software maintenance contracts is deferred when billed and recognized ratably over the contract term. Direct marketing fees are recognized upon the delivery of services. 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. Integration and Restructuring Costs Related to the mergers of Informed Access Systems, Inc. ("Informed Access") and Clinical Reference Systems, Ltd. ("CRS"), these costs were recorded in the first quarter of fiscal 1997 and included approximately $2,950,000 for severance and related expenses, approximately $1,475,000 for elimination of redundant technology, approximately $700,000 for discontinuation of facilities and approximately $800,000 for disposal of assets. The Company expects to incur a one-time charge of between $2.0 million and $3.0 million during the fourth quarter of fiscal 1997 related to the move of corporate headquarters to Broomfield, Colorado from Rancho Cordova, California. Reclassifications Certain reclassifications have been made to amounts reported for the prior periods to conform with the June 30, 1997 presentation. Net Income (Loss) Per Share The Company's net income (loss) per share is based upon the weighted average number of shares of common stock outstanding. Common stock issuable upon the exercise of stock options and warrants has been included in the computation, to the extent dilutive, using the treasury stock method. Common Stock issuable upon the conversion of mandatorily redeemable convertible preferred stock has been included in the computation to the extent dilutive, using the if-converted method. Mandatorily redeemable convertible preferred stock was converted into common stock in November 1996 in connection with the merger of Access Health and Informed Access (Note 3). Note 2: New Accounting Pronouncement In February 1997, the Financial Accounting Standards Board issued Statement No. 128, "Earnings per Share", which is required to be adopted on December 31, 1997. At that time, the Company will be required to change the method currently used to compute earnings per share and to restate all prior periods. Under the new requirements for calculating primary earnings per share, the dilutive effect of stock options will be excluded. The impact is expected to result in an increase in primary earnings per share for the three months ended June 30, 1996 and June 30, 1997 of $0.003 and $0.016 per share, respectively, and for the nine months ended June 30, 1996 and June 30, 1997 of $0.005 and $0.017 per share, respectively. Note 3: 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. In connection with the business combinations, the Company incurred direct transaction costs of approximately $6.3 million which were charged to operations in the three months ended December 31, 1996. The table below sets forth the combined revenues and net income (loss) for the quarters ended December 31, 1995 and 1996 (in thousands):
ACCESS HEALTH INFORMED ACCESS CRS ------------------------ ------------------------ ----------------------- PRE-MERGER POST-MERGER PRE-MERGER POST-MERGER PRE-MERGER POST-MERGER ADJUSTMENT COMBINED ---------- ----------- ---------- ----------- ---------- ----------- ---------- -------- Quarter ended December 31, 1995: Revenues............... $12,005 $ -- $ 1,453 $ -- $ 361 $ -- $ -- $ 13,819 Net income (loss)...... 1,384 -- (913) -- 74 -- (320) 225 Quarter ended December 31, 1996: Revenues............... $12,681 $ 6,123 $ 3,433 $ 1,916 $ 230 $ 258 $ -- $ 24,641 Net income (loss)...... 2,387 (4,914) 44 (3,423) 19 (125) -- (6,012)
The adjustments to the combined results of operations included in the table above reflect the realization of the Informed Access net operating loss carryover to the extent of Access Health deferred income tax liabilities which will reverse in periods subsequent to the merger. Note 4: Note Receivable From AHN During January 1997 the Company purchased an 8% Convertible Subordinated Debenture from America's Health Network, L.P. (AHN). The debenture matures on December 31, 2001 and is unsecured. The debenture is subordinated to all other debt owed by AHN. Interest accrues at 8% annually and is only payable under certain conditions as described in the agreement. The debenture is convertible into partnership interest at the option of the holder. The Company is a limited partner in AHN. AHN is not yet profitable and projections indicate additional losses will need to be funded during current development stages. To date, AHN has not been successful at securing additional funding. The Company's $5.0 million investment in AHN and $5.0 million receivable from AHN are subject to the risk of a write-down or a complete write-off if AHN is unsuccessful at raising additional capital at reasonable terms. Note 5: Notes Payable to Related Parties Notes payable to related parties arising from bonuses are comprised of notes payable to members of management, who are also stockholders of the Company, and are payable in installments in March 1997 and September 1997. Note 6: Long-Term Debt In May 1996, the Company signed a revolving credit agreement (the "Credit Agreement") with a bank under which the Company could borrow up to $3 million. The Credit Agreement expired on May 1, 1997. The Company also has a term facility agreement (the "Term Agreement") whereby through December 1996 the Company could borrow, in one or more borrowings, an amount not to exceed $2 million in the aggregate, subject to certain conditions set forth in the Term Agreement. This commitment is in the form of a $680,000 note payable facility and a $1,320,000 capital lease facility. At June 30, 1997, cumulative borrowings under the note payable facility and capital lease facility aggregated $1,190,547. Borrowings under the Term Agreement are secured by certain of the Company's equipment, with an aggregate carrying value of approximately $1,200,000 at June 30, 1997. 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. Amounts due under the note payable facility of the Term Agreement are $180,000, $197,000 and $214,000 in fiscal 1997, 1998 and 1999, respectively. In connection with the Term Agreement, the Company issued warrants to the lender in October 1995 and May 1996. Under the terms of the warrants, the lender may acquire a number of shares of Series C preferred stock based on specified formulas set forth in the warrant agreements. The warrants are exercisable for ten years after the date of issuance or five years after the date an initial public offering is completed by Informed Access, whichever is longer. The value attributable to these warrants was not material. The warrants were converted into warrants to purchase common stock as a result of the merger with Access Health (Note 3). Note 7: Income Taxes The Company's net operating loss carryforwards of approximately $11 million as of September 30, 1996 expire between 2007 and 2011 for both federal and state purposes. The Company also has approximately $161,000 of Research & Development tax credits available which expire between 2007 and 2011. Certain provisions of the Internal Revenue Code of 1980, as amended, may limit the net operating loss carryforwards and tax credits available for use in any given year if certain events occur. Note 8: Commitments Operating Leases The Company leases its offices under the terms of operating leases. Annual minimum rental payments for fiscal 1997, 1998, 1999, 2000, 2001 and thereafter are $2,552,000, $2,347,000, $1,735,000, $1,448,000, $1,394,000 and $118,000, respectively. Rental expenses are recorded on a straight-line basis over the respective lease terms. Note 9: Mandatorily Redeemable Convertible Preferred Stock Informed Access was authorized to issue shares of mandatorily redeemable preferred stock from time to time in one or more series of designations, rights, preferences and limitations established by its board of directors. Each share of mandatorily redeemable preferred stock was converted into one share of common stock of Access Health upon completion of the merger. In July 1996, Informed Access issued a warrant to a customer to purchase 64,548 shares of Series C mandatorily redeemable preferred stock at $15.49 per share. The warrants became exercisable in November 1996. The warrants were converted into warrants to purchase common stock of Access Health as a result of the merger. Note 10: Stockholders' Equity Common Stock During May and July 1996 certain options were granted with exercise prices below the applicable fair market value (as determined by an independent appraisal) on the date of grant, resulting in deferred stock compensation of approximately $476,000. The deferred stock compensation was to be amortized into expense ratably over the four year vesting term of the related options; however, because such options became 100% vested as a result of the merger in November 1996, the unamortized balance of deferred stock compensation was recorded as an expense in the quarter ended December 31, 1996. Employee Stock Options Informed Access option holders became Access Health option holders upon completion of the merger in November 1996 (See Note 3). As of December 31, 1996, 36,093 shares of common stock have been purchased through the exercise of options by former Informed Access option holders and options to purchase 560,500 shares of common stock remain outstanding and are all exercisable. 7 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Management's Discussion and Analysis of Financial Condition and Results of Operations may contain certain forward-looking statements which involve risks and uncertainties. The Company's actual results could differ materially from the results anticipated in these forward-looking statements as a result of certain factors set forth hereunder and in the Company's Annual Report as filed on Form 10-K. General. The Company completed mergers with Informed Access Systems, Inc. - ------- ("Informed Access") and Clinical Reference Systems, LTD ("CRS") during November 1996. Both transactions were accounted for as pooling-of-interests and, accordingly, Management's Discussion of Financial Condition and Results of Operations refers to the historical financial statements of the Company that have been restated to include the consolidated financial statements of Access Health, Informed Access and CRS, and the combined results of operations and financial position of all three companies for the periods presented. During July 1997 the Company announced plans to move corporate headquarters to Broomfield, Colorado from Rancho Cordova, California. Results of Operations - --------------------- Revenues. Revenues consist of revenues from personal health management - -------- services, which consist of program membership, member communications and teleservicing fees from the Company's Personal Health Advisor, First Help and ASK-A-NURSE contracts with managed care organizations, physician organizations, self insured employers and hospitals, and licensing and support services related to the Company's ASK-A-NURSE, Cancer HelpLink, FirstHelp, Access Care Management System, LIFE MATCH products and patient education modules. Revenues increased 32.6% from $20.0 million during the three months ended June 30, 1996 to $26.5 million during the three months ended June 30, 1997 and increased 49.4% from $51.0 million during the nine months ended June 30, 1996 to $ 76.2 million for the nine months ended June 30, 1997. Revenues from personal health management services increased from $17.2 million during the third quarter of fiscal 1996 to $23.9 million during the third quarter of fiscal 1997 and from $42.8 million during the first nine months of fiscal 1996 to $68.3 million during the first nine months of fiscal 1997 because the number of members enrolled under the Company's Personal Health Advisor (PHA) contracts increased during these periods. As of June 30, 1997, approximately 20.0 million members were enrolled in PHA compared to approximately 11.8 million members enrolled as of June 30, 1996. Revenue from PHA contracts is recognized ratably in accordance with contract terms on the basis of per-member fees. Revenues from licensing and support services decreased from $2.8 million during the third quarter of fiscal 1996 to $2.6 million during the third quarter of fiscal 1997 and from $8.3 million for the first nine months of fiscal 1996 to $7.9 million during the first nine months of fiscal 1997 due to the discontinuation of several ASK-A-NURSE contracts. Cost of revenues. The cost of personal health management services revenues - ---------------- includes the costs of operating the Company's services centers, on-going client consultation and charges for providing PHA member communications services. The gross margins for personal health management services were 44.8% during the third quarter of fiscal 1996 and 46.5% during the third quarter of fiscal 1997 and 42.1% during the first nine months of fiscal 1996 compared to 48.2% during the first nine months of fiscal 1997. Gross margin for personal health management services improved during the three and nine months periods ended June 30, 1997 compared to the prior year due to economies of scale resulting from growth in PHA enrollment. The Company believes it is operating near targeted gross margin levels for personal health management services*. 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 8 FirstHelp, ASK-A-NURSE, Cancer HELPLINK, Access Care Management System ("ACMS"), LIFE MATCH and CRS patient education modules licensees. The gross margin percentages for licensing and support services increased from 46.5% during the third quarter of fiscal 1996 to 77.1% during the third quarter of fiscal 1997 and from 50.4% for the first nine months of fiscal 1996 to 66.8% for the first nine months of fiscal 1997. Licensing and support services gross margin increases are due to changes in product licensing mix and increased efficiency resulting from organizational adjustments. While gross margins can fluctuate, the Company believes it is operating near targeted gross margin levels for licensing and support services*. Product and other development expenses. Product development expenses totaled - -------------------------------------- $1.9 million, or 9.3% of revenues, during the third quarter of fiscal 1996 and $1.9, or 7.3% of revenues, during the third quarter of fiscal 1997 and were $4.2 million, or 8.2% of revenues, for the first nine months of fiscal 1996 compared to $6.3 million, or 8.3% of revenues, during the first nine months of fiscal 1997. These expenses relate to the Company's continuing efforts to develop new products to meet the needs of consumers beyond triage and health information for general populations. The Company expects that product and other development expenses will increase during fiscal 1997 and could continue to increase as a percentage of revenues*. Sales and marketing expenses. Sales and marketing expenses were $2.4 million, - ---------------------------- or 12.0% of revenues, and $2.3 million, or 8.6% of revenues, during the third quarter of fiscal 1996 and 1997, respectively, and were $6.6 million, or 13.0% of revenues, and $6.5 million, or 8.5% of revenues, during the first nine months of fiscal 1996 and 1997, respectively. Third quarter sales and marketing expenses decreased from fiscal 1996 to fiscal 1997 as a result of the integration of the sales teams of Access Health and Informed Access and because certain marketing expenses in fiscal 1996 were not repeated in fiscal 1997. Sales and marketing expenses may increase in fiscal 1997 as the Company continues to pursue its strategy of building brand awareness for its personal health management*. General and administrative expenses. General and administrative expenses were - ----------------------------------- $2.2 million, or 11.2% of revenues, and $2.1 million, or 7.9% of revenues, during the third quarter of fiscal 1996 and 1997, respectively, and totaled $5.9 million, or 11.5% of revenues and $6.6 million, or 8.7% of revenues, during the first nine months of fiscal 1996 and 1997, respectively. The increase from the first nine months of fiscal 1996 to the first nine months of fiscal 1997 reflects additional infrastructure investment made by two growing companies which was mitigated by efficiencies achieved as a result of the merger with Informed Access as evidenced in the decline from the third quarter of fiscal 1996 to the third quarter of fiscal 1997. Transaction costs. Transaction costs were charges recorded in the first quarter - ----------------- of fiscal 1997 associated directly with the merger of the Company with Informed Access and CRS and included professional fees of approximately $5.2 million. Integration and restructuring costs. Related to the mergers with Informed - ----------------------------------- Access and CRS, these costs were recorded during the first quarter of fiscal 1997 and included approximately $3.0 million for severance and related expenses, approximately $1.5 million for elimination of redundant technology and approximately $1.5 million for discontinuation of facilities and disposal of assets. The Company expects to incur a one-time charge of between $2.0 million and $3.0 million during the fourth quarter of fiscal 1997 related to the move of corporate headquarters to Broomfield, Colorado from Rancho Cordova, California*. Income from operations. Operating income increased from $2.5 million during the - ---------------------- third quarter of fiscal 1996 to $6.8 million during the third quarter of fiscal 1997 due to factors and trends described in preceding paragraphs. Operating income decreased from $5.5 million during the first nine months of fiscal 1996 to $5.4 million during the first nine months of fiscal 1997 as a result of the merger-related charges recorded during the first quarter of fiscal 1997 and described in the preceding two paragraphs. 9 Other income. The Company generates interest and other income from cash - ------------ balances and available-for-sale securities which is partially offset by interest expense on long-term debt. Other income increased from $385,000 to $520,000 in the third quarter of fiscal 1996 and 1997, respectively, and from $1.1 million to $1.2 million during the first nine months of fiscal 1996 and 1997, respectively, primarily as a result of increases in invested cash and available- for-sale securities balances. Effects of inflation and changing prices. Inflation and changing prices have - ---------------------------------------- not had a material effect on the Company's operations and, at current levels, are not expected to in future years*. Liquidity and Capital Resources - ------------------------------- As of June 30, 1997, the Company held cash and equivalents and available-for- sale securities totaling $49.0 million which increased from a balance of $40.7 million as of September 30, 1996. Cash provided by operations during the first nine months of fiscal 1997 was $16.0 million compared with $8.5 million for the first nine months of fiscal 1996. During January 1997, the Company purchased a $5.0 million debenture issued by America's Health Network, L. P. ("AHN"), a 24-hour, 7 day a week cable television channel devoted to consumer health care information. The Company is a limited partner in AHN. AHN is not yet profitable and projections indicate additional losses will need to be funded during current development stages. To date, AHN has not been successful at securing additional funding. The Company's $5 million investment in AHN and $5.0 million receivable from AHN are subject to the risk of a write-down or a complete write-off if AHN is unsuccessful at raising additional capital at reasonable terms. During the first nine months of fiscal 1997 the Company purchased $3.9 million of property and equipment. The Company expects to purchase additional capital equipment during the remaining quarter of fiscal 1997 to expand its call centers and systems capacity. The Company believes its current capital resources are adequate to fund cash needs for anticipated operating levels for at least the next twelve months*. The Company also may use capital resources in connection with business expansion that may include the acquisition of complementary product lines or businesses during fiscal 1997 or beyond*. * This statement is a forward-looking statement reflecting current expectations. There can be no assurance that the Company's actual future performance will meet the Company's current expectations. Investors are strongly encouraged to review the section entitled "Risk Factors That May Affect Future Operating Performance." Risk Factors That May Affect Future Operating Performance - --------------------------------------------------------- Ability to Secure Additional Contracts and Expand and Retain Existing Contracts. The Company's ability to increase revenues and profitability is largely dependent on the Company's ability to secure additional contracts and to retain and expand existing contracts. In addition, the Company's revenues are affected by the timing of member enrollment under new contracts. The Company could be adversely affected by the termination or non-renewal of any of the Company's contracts, or by renegotiation of the terms of contracts, particularly if the affected contracts cover a large number of members or represent a significant portion of the Company's health systems services revenue. In the past, the Company has renegotiated contracts prior to expiration resulting in reductions in the number of members and/or revenue per member rates. Any factors adversely affecting the market for the Company's products, including factors outside of the Company's control, such as adverse publicity or government regulatory action, would have a material adverse effect on the Company. Dependence on Principal Customers. The Company's PHA contracts cover members ranging from approximately 3,000 members to 2.2 million members per contract and include one contract for 2.2 million members, one contract for 1.9 million members, two contracts for 1.7 million members, two contracts for 1.5 million members and one contract for 1.3 million members. In the three months ended June 30, 1997, the Company's three largest customers accounted for approximately 8.1%, 7.8%, and 7.4% of the Company's total revenues and the Company's top five customers, in the aggregate, accounted for approximately 34.7% of the Company's total revenues. After an initial term of approximately one to four years, contracts generally can be terminated upon 60 to 180 days notice to the Company. Two of the three largest contracts are up for renewal in fiscal 1998. The Company's contracts could also be subject to early termination by its customers if the Company were not in compliance with any applicable government regulation. The termination, non-renewal or renegotiation of any of such agreements could have a material adverse effect on the Company's operating results. See "Government Regulation." Uncertainty of Future Operating Results. During fiscal 1994 the Company incurred significant expenses related to the start-up of its PHA and including the hiring and training of personnel and the expansion of infrastructure and sales and marketing programs. Because revenues from PHA and FirstHelp products were not sufficient to cover these start-up expenses, operating losses were sustained in fiscal 1994 and 1995. The Company returned to profitability in 1996 as additional members were enrolled in PHA and FirstHelp. There can be no assurance that the Company's revenues and profitability will continue to increase during fiscal 1997 and beyond. The Company may incur significantly increased sales, marketing and promotional expenses in the future, and may devote additional resources to the further development of PHA or other new products. To the extent that the Company incurs increased expenses, the Company's operating results will be adversely affected unless revenues and operating margins increase sufficiently to offset such expenditures. See "Management's Discussion and Analysis of Financial Condition and Results of Operations." Competition. The market for the Company's products and services is highly and increasingly competitive. There are a number of competitors that offer products or services that compete with some or all of those offered by the Company. Existing and potential clients may also evaluate the Company's products or services against 10 internally developed programs. Increased competition could result in pricing pressure and margin erosion. In its existing business and as the Company offers new products or services, or enters new markets, it may face increased competition from competitors, some of which may have substantially greater financial, marketing and technical resources than the Company. There can be no assurance that the Company will continue to compete successfully. While the Company cannot predict the effect of future competition, increased competition would adversely impact the Company's revenues and rate of growth and operating results, particularly if the Company encountered price competition. Changing Health Care Market and New Product Development. The health care industry has undergone significant changes in recent years, and changes are expected to continue. Containing health care costs has become a national priority. As a result, the health care industry has become increasingly dominated by managed health care plans, causing cost containment pressure to rise. To address these changes, the Company shifted its business focus in 1993 to payors from providers and developed its personal health management services. There is no assurance that the Company's existing products and services will achieve continued success or that its new products and services will succeed. There also can be no assurance that continued industry change will not adversely affect the Company's ability to compete. Continued change may cause the Company to incur significant product development and marketing expenses. The Company's future success will depend on the Company's ability to adapt to the changing needs of the health care industry. Call Center Operations. The Company maintains member service and data centers ("call centers") in Rancho Cordova, California; Chicago, Illinois; Broomfield, Colorado; and Phoenix, Arizona. The Company's operations depend on the adequate functioning of the computer and telephone systems in its call centers. Although the Company has taken precautions to provide for power, computer, and telephone systems redundancy, there can be no assurance that a fire or other disaster affecting the centers or an equipment failure would not disable the Company's systems for a significant period of time. Any significant damage to the Company's facilities or an equipment failure could have a material adverse effect on the Company's results of operations. Management of Growth. The Company has experienced rapid growth in recent years. Continued rapid growth may place a significant strain on the Company's management, telecommunications systems, operational infrastructure, working capital and financial and management control systems. In order for the Company to manage its client base successfully, management will be required to anticipate the changing demands of their growing operations and to adopt systems and procedures accordingly. Failure to effectively implement or maintain such systems and controls could adversely affect the Company's business, results of operation and financial condition. Further, there can be no assurance that the Company's current information systems, telecommunications systems and operational infrastructure will be adequate for its future needs, or that Access Health will be successful in implementing new systems. Failure to upgrade its information systems, telecommunications systems and operational infrastructure or unexpected difficulties encountered with these systems during expansion could adversely affect the Company's business, financial condition and results of operations. Acquisition-Related Risks. The Company has grown in part through mergers and acquisitions. The process of integrating an acquired company's business into the Company's operations may result in unforeseen operating difficulties and expenditures and may absorb significant management attention that would otherwise be available for the ongoing development of the Company's business. Moreover, there can be no assurance that the anticipated benefits of an acquisition will be realized. The Company intends to evaluate acquisitions of complementary product lines and businesses as part of its business strategy. Future acquisitions by the Company may result in potentially dilutive issuances of equity securities, the use of the Company's cash resources, the incurrence of debt and increased goodwill, 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 the assimilation of the operations and the products of the acquired companies, 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 and the potential loss of key employees of the acquired company. The inability of the Company's management to respond to changing business conditions 11 effectively, including the changes associated with its acquired businesses and product lines, could have a material adverse effect on the Company's results of operations. Uncertainties Relating to Integration of Operations. The Company consummated the acquisitions of Informed Access Systems, Inc. and Clinical Reference Systems, Ltd. in November 1996 with the expectation that the mergers will result in beneficial synergies for the combined companies. Achieving the anticipated benefits of the mergers will depend in part upon whether the integration of the two companies' businesses with the Company is achieved in an efficient, effective and timely manner, and there can be no assurance that this will occur. The successful combination of the two companies with Access Health will require, among other things, the timely integration of the companies' respective product and service offerings, coordination of their respective sales and marketing and research and development efforts and integration of the companies' respective telecommunications systems with Access Health. The difficulties of such integration may be increased by the necessity of coordinating geographically separated organizations. There can be no assurance that integration will be accomplished smoothly, on time or successfully. Integrating the operations of the two companies with Access Health could have a material adverse effect on Access Health's business and future operating results. For example, the process could: (i) interrupt Access Health's business resulting in lower revenues or slower revenue growth and/or increased operating expenses or inability to obtain synergies; (ii) divert management attention; (iii) place further pressure on Access Health's officers; and (iv) result in additional administrative expense. Failure to effectively accomplish the integration of the two companies' operations with Access Health could have a material adverse effect on Access Health's business, results of operations and financial condition. Key Employees and Management of Change. The Company's success depends on a limited number of key management employees, none of whom is subject to post- employment non-competition restrictions other than certain officers. The loss of the services of one or more of these employees could have a material adverse effect on the Company. The Company believes that its continued success also will depend in large part on its ability to attract and retain highly-skilled management, marketing, sales and nursing personnel. Competition for such personnel is intense, and there can be no assurance that the Company will be successful in attracting and retaining such personnel as necessary. Furthermore, the Company's ability to manage change and growth successfully will require the Company to continue to improve its management expertise as well as its financial systems and controls. Volatility of Stock Price. The Company believes that factors such as announcements of developments related to the Company's business, including the signing or loss of a major contract, changes in market analyst estimates and recommendations for the Company's Common Stock, changes in government regulation and general conditions in the health care industry and the economy could cause the price of the Company's Common Stock to fluctuate, perhaps substantially. In addition, in recent years stock prices have experienced significant price fluctuations. Government Regulation. The health care industry is subject to extensive and evolving government regulation at both the Federal and state levels relating to many aspects of the Company's and its clients' businesses in use of the Company's programs, including the provision of health care services, teleservicing, health care referral programs, and health maintenance organizations and other similar plans. These statutes and regulations in many cases predate the development of telephone-based health care information and 12 other interstate transmission and communication of medical information and services. The literal language of certain of these statutes and regulations governing the provision of health care services, including the practice of nursing and the practice of medicine, could be construed by regulatory authorities to apply to certain of the Company's activities, including without limitation teleservicing activities which use California, Illinois, Arizona and Colorado registered nurses to provide out-of-state personal health management services such as nursing assessments and information regarding appropriate sources of care and treatment time frames. These statutes and regulations could also apply to certain activities of the Company's health service customers when operating the Company's programs. The Company has not been made, nor is it aware that any of its clients with respect to operation of the Company's programs, or its nurse employees or any other organization providing out-of-state teleservicing have ever been made, the subject of such requirements by a regulatory authority. In addition, the literal language of the statutes and regulations governing health maintenance organizations and other plans that provide or arrange for the provision of health care services for a prepaid or periodic charge could be construed by regulatory authorities to apply to certain activities of the Company that are provided on a per-member, per-month basis. The Company has not been made, nor is it aware that any other company providing out-of-state teleservicing has ever been made, the subject of such requirements by a regulatory authority. However, if regulators seek to enforce any of the foregoing statutory and regulatory requirements, the Company, its employees and/or its clients could be required to obtain additional licenses or registrations, to modify or curtail the operation of the Company's programs, to modify the method of payment for the Company's programs, or to pay fines or incur other penalties. The payment of remuneration to induce the referral of health care business has been a subject of increasing governmental and regulatory focus in recent years. Section 1128B(b) of the Social Security Act (sometimes referred to as the "Federal anti-kickback statute") provides criminal penalties for individuals or entities that knowingly and willfully offer, pay, solicit or receive remuneration in order to induce referrals for items or services for which payment may be made under the Medicare and Medicaid programs and certain other government-funded programs. The Social Security Act provides authority to the Office of the Inspector General through civil proceedings to exclude an individual or entity from participation in the Medicare and state health programs if it is determined any such party has violated Section 1128B(b) of the Social Security Act. Regulations have been promulgated specifying certain payment practices which will not be subject to criminal prosecution or civil exclusion. These regulations, commonly referred to as the "safe harbor" regulations, do not expand the scope of the Federal anti-kickback statute, and the fact that a business arrangement does not fit within a safe harbor does not mean the business arrangement violates the Federal anti-kickback statute. The Company's programs do not meet the requirements of the safe harbor for referral services. A number of states in which the Company operates have anti-kickback statutes similar to the Federal statute as well as statutory and regulatory requirements governing referral agencies and regulating franchising and business opportunity ventures. In addition, the Federal government and a number of states have enacted statutes which contain outright prohibitions on referrals for specified services which are made by referring providers who have an ownership interest in, or compensation arrangement with, the entity to which the referral is made. If the Company or the use of its products and services were to be found in violation of such statutes, the Company or its clients could be required to modify or curtail the operation of the Company's programs, or to pay fines or incur other penalties, and the Company's clients could be excluded from participation in the Medicare and Medicaid programs and could be precluded from charging fees and obtaining reimbursement for specified services. There can be no assurance that the Company or the use of its products and services will not be subject to review or challenge by government regulators under any of the foregoing statutes and regulations that apply to health care services and products. In addition, additional laws and regulations could be enacted in the future that would regulate the Company or the use of its products and services. Any government investigative or enforcement actions with respect to the Company or the use of its products or services could generate adverse publicity irrespective of the final outcome, and could have a material adverse effect on the Company. 13 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 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 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 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. Intellectual Property. The Company regards its software, clinical nursing assessment protocols and marketing and program operation materials as proprietary and attempts to protect its intellectual property with patents, copyrights, trademarks, trade secret laws and restrictions on disclosure, copying and transferring title. Despite these precautions, it may be possible for unauthorized third parties to copy aspects of the Company's products or to obtain and use information that the Company regards as proprietary. Not all of the Company's technology is patented and existing copyright laws afford only limited practical protection. In addition, the laws of some foreign countries do not protect the Company's proprietary rights to the same extent as do the laws of the United States, which could be a factor if the Company expands into markets outside the United States. 14 PART II - OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K a) Exhibits:
EXHIBIT DESCRIPTION - ------- ----------- 2.1 (B) Conformed Agreement and Plan of Reorganization by and among the Registrant, Access Acquisition Corp. and Informed Access Systems, Inc. dated as of September 3, 1996 3.1 (C) Amended and Restated Certificate of Incorporation 3.2 (C) Amended and Restated Bylaws 3.3 (D) 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 (C) Specimen Stock Certificate 4.2 (A) Registration Rights Agreement dated June 26, 1990 between Registrant and certain parties named therein 4.3 (C) Shareholder's Representation Statement and Registration Rights Agreement dated as of November 25, 1996 between Registrant and various investors 4.4 (C) Registration Rights Agreement dated November 18, 1996 4.5 (D) Form of Preferred Shares Rights Agreement, dated as of March 12, 1997 between the Company and The First National Bank of Boston, including exhibits 10.26 (E) AHN Partners, L.P. 8% Convertible Subordinated Debenture due 2001 10.27 (E) Form of Change of Control/Severance Agreement for all Named Executive Officers 10.28 Amendment to Employment Agreement dated April 30, 1997 between Registrant and Kenneth B. Plumlee 10.29 Amendment to Stock Option Agreements dated April 30, 1997 between Registrant and Kenneth B. Plumlee 10.30 Separation Agreement and Mutual Release dated April 30, 1997 between Registrant and Thomas E. Gardner 27 Financial Data Schedule.
(A) Incorporated by reference to Registrant's Form S-1 Registration No. 33-44604. (B) Incorporated by reference to Registrant's Registration Statement on Form S-4 (No. 333-13931). (C) Incorporated by reference to Registrant's Form 10-K for the year ended September 30, 1996. (D) Incorporated by reference to Registrant's Registration Statement on Form 8-A filed on March 13, 1997 (No. 000-19758). (E) Incorporated by reference to Registrant's Form 10-Q for the quarter ended March 31, 1997. b) Reports on Form 8-K. No reports on Form 8-K were filed during the current quarter. 15 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: August 13, 1997 /s/ Timothy H. Connor -------------------- Timothy H. Connor Senior Vice President and Chief Financial Officer (principal financial officer of Registrant) 16 EXHIBIT INDEX
EXHIBIT DESCRIPTION - ------- ----------- 2.1 (B) Conformed Agreement and Plan of Reorganization by and among the Registrant, Access Acquisition Corp. and Informed Access Systems, Inc. dated as of September 3, 1996 3.1 (C) Amended and Restated Certificate of Incorporation 3.2 (C) Amended and Restated Bylaws 3.3 (D) 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 (C) Specimen Stock Certificate 4.2 (A) Registration Rights Agreement dated June 26, 1990 between Registrant and certain parties named therein 4.3 (C) Shareholder's Representation Statement and Registration Rights Agreement dated as of November 25, 1996 between Registrant and various investors 4.4 (C) Registration Rights Agreement dated November 18, 1996 4.5 (D) Form of Preferred Shares Rights Agreement, dated as of March 12, 1997 between the Company and The First National Bank of Boston, including exhibits 10.26 (E) AHN Partners, L.P. 8% Convertible Subordinated Debenture due 2001 10.27 (E) Form of Change of Control/Severance Agreement for all Named Executive Officers 10.28 Amendment to Employment Agreement dated April 30, 1997 between Registrant and Kenneth B. Plumlee 10.29 Amendment to Stock Option Agreements dated April 30, 1997 between Registrant and Kenneth B. Plumlee 10.30 Separation Agreement and Mutual Release dated April 30, 1997 between Registrant and Thomas E. Gardner 27 Financial Data Schedule
(A) Incorporated by reference to Registrant's Form S-1 Registration No. 33-44604. (B) Incorporated by reference to Registrant's Registration Statement on Form S-4 (No. 333-13931). (C) Incorporated by reference to Registrant's Form 10-K for the year ended September 30, 1996. (D) Incorporated by reference to Registrant's Registration Statement on Form 8-A filed on March 13, 1997 (No. 000-19758). (E) Incorporated by reference to REgistrant's Form 10-Q for the quarter ended March 31, 1997. EX-10.28 2 EMPLOYMENT AGREEMENT OF KENNETH B. PLUMLEE EXHIBIT 10.28 AMENDMENT TO EMPLOYMENT AGREEMENT This Amendment to Employment Agreement ("Amendment") is entered into effective as of April 30, 1997, by and between Access Health, Inc. (the "Company"), and Kenneth B. Plumlee ("Employee"). RECITALS -------- WHEREAS, Employee is currently employed by the Company as Chairman of its Board of Directors pursuant to an Employment Agreement (the "Employment Agreement") effective as of December 1, 1996, and the Parties desire to amend the Employment Agreement as hereinafter stated. NOW, THEREFORE, in consideration of the mutual promises made herein and in the Employment Agreement, the Company and Employee (collectively referred to as the "Parties") hereby agree as follows: 1. Termination of Services. Employee and the Board of Directors of the ----------------------- Company mutually agreed Employee shall be relieved of any further responsibility to provide the services specified in Paragraph 3 of the Employment Agreement and to serve as its Chairman as of April 5, 1997. There is no further obligation on the part of the Company or its Board of Directors to have Employee act as the Chairman of the Board of Directors, and there is no further obligation on the part of Employee to serve as the Chairman of the Board of Directors subsequent to the March 1997 Stockholders Meeting. Whether or not Employee continues to act as the Chairman of the Board of Directors of the Company will have no effect on his rights or obligations, nor on the Company's rights or obligations, under the Employment Agreement or under this Amendment. 2. Payment. Employee and the Chief Executive Officer of the Company have ------- mutually agreed to revise employee's services under Paragraph 3 of the Employment Agreement as specified above so that the only services expected of Employee hereafter will be as a member of the Company's Board of Directors for so long as he shall continue to serve thereon. The Company will promptly pay to Employee the sum of two hundred twnety seven thousand eight hundred sixty five Dollars ($227,865) in lieu of all salary and benefits, including insurance and car allowance, which would have been received by Employee from the Company for the period May 1, 1997 through the remainder of the Employment Period as defined in the Employment Agreement. 3. 1995 Option. The Parties acknowledge and confirm to each other that ----------- 12,000 of the 60,000 shares in the Option granted on May 23, 1995 to purchase 60,000 shares of the Company's common stock (the "1995 Option") are vested and exercisable by Employee, 12,000 shares will become vested and exercisable on May 23, 1997, another 12,000 shares will become vested and exercisable on May 23, 1998, another 12,000 shares will become vested and exercisable on May 23, 1999, and the final 12,000 shares will become vested and exercisable on May 23, 2000. The Parties agree the 1995 Option is amended hereby to provide that the 12,000 shares which were to become vested and exercisable on May 23, 1998, and the 12,000 shares which were to become vested and exercisable on May 23, 1999 and the 12,000 shares which were to become vested and exercisable on May 23, 2000 shall now be vested and exercisable. As a result of this Amendment, 48,000 of the 60,000 shares in the 1995 Option are now vested and exercisable, and the final 12,000 shares will become exercisable on May 23, 1997. In addition, the Parties agree the 1995 Option is further amended hereby to provide that Employee shall have the right to exercise the 1995 Option and to purchase any of the 36,000 shares accelerated hereby, pursuant to the terms of that Option at any time from now through the 12-month period following the latter of (i) September 30, 1998 or (ii) the date Employee no longer serves on the Company's Board of Directors. 4. Life Insurance. The Company shall transfer to Employee ownership of -------------- the key man term insurance on his life, provided any additional cost in so doing is borne by Employee. 5. Non-Competition. Employee agrees in consideration of this Agreement --------------- that Section 8 of the Employment Agreement shall be amended to read "until September 30, 1998," and, accordingly, the provisions of such Section shall be applicable to Employee until such date whether or not Employee continues to serve as a director of the Company. 6. No Other Changes. Except as expressly amended hereby, the Employment ---------------- Agreement shall remain in full force and effect. 7. No Representations. Each party represents that it or he has had the ------------------ opportunity to consult with an attorney, and has carefully read and understands the scope and effect of the provisions of this Amendment. Neither party has relied upon any representations or statements made by the other party hereto not specifically set forth in this Amendment. 8. Entire Agreement. The Employment Agreement, as amended hereby, ---------------- represents the entire agreement and understanding between the Company and Employee concerning Employee's separation from the Company and supersedes and replaces any and all prior agreements and understandings concerning Employee's relationship with the Company and his compensation by the Company. 9. No Oral Modification. The Employment Agreement and this Amendment may -------------------- only be amended in writing signed by Employee and an officer of the Company. 10. Governing Law. This Amendment shall be governed by the laws of the ------------- State of California, without reference to its choice of law principles. -2- 11. Counterparts. This Amendment may be executed in counterparts, and ------------ each counterpart shall have the same force and effect as an original and shall constitute an effective, binding agreement on the part of each of the undersigned. IN WITNESS WHEREOF, the Parties have executed this Amendment to Employment Agreement as of the date set forth above. ACCESS HEALTH, INC. by /s/ Julie A. Brooks ____________________________________________ Julie A. Brooks Senior Vice-President and General Counsel /s/ Kenneth B. PlumLee ______________________________________________ KENNETH B. PLUMLEE -3- EX-10.29 3 STOCK OPTION AGREEMENT OF KENNETH B. PLUMLEE EXHIBIT 10.29 AMENDMENT TO STOCK OPTION AGREEMENTS This Amendment to Stock Option Agreements is entered into effective as of April 30, 1997, by and between Access Health, Inc. (the "Company"), and Kenneth B. Plumlee ("Optionee"). RECITALS -------- WHEREAS, Optionee has heretofore been granted four different options by the Company to purchase specified numbers of shares of its common stock (the "Options"), said Options being evinced by four different Stock Option Agreements, and the Parties desire to amend certain of the Stock Option Agreements as hereinafter stated. WHEREAS, Optionee has refrained from exercising any of the Options in such a manner as would have provided to him certain tax benefits to the detriment of the Company. NOW, THEREFORE, in consideration of the foregoing and the mutual promises made herein, the Company and Optionee (collectively referred to as the "Parties") hereby agree as follows: 1. Options Held. The Parties confirm that Optionee holds the following four ------------ Options: An Option granted on January 29, 1993, to purchase 37,321 shares of the Company's common stock at an exercise price of $4.167 per share (the "1993 Option"); An Option granted on March 22, 1994, to purchase 37,321 shares of the Company's common stock at an exercise price of $8.833 per share (the "1994 Option"); An Option granted on May 23, 1995, to purchase 60,000 shares of the Company's common stock at an exercise price of $10.420 per share (the "1995 Option"); and An Option granted on March 27, 1996, to purchase 112,500 shares of the Company's common stock at an exercise price of $39.313 per share (the "1996 Option"), which option Employee has exchanged effective on the date hereof for a new option to purchase 112,500 shares of the Company's common stock at an exercise price of $14.395 per share (the closing price on May 1, 1997) which option shall become exercisable as to 10,227 shares at the end of each month beginning on May 31 with a final vesting of 10,230 shares on the earlier of March 31, 1998, or the date of the 1998 annual meeting of stockholders (the "1997 Option"). 2. Current Status. The Parties acknowledge and confirm to each other that -------------- all of the Options listed in Paragraph 1 above remain outstanding as of this date, and that upon Optionee's exercise of any of the Options, the Options will be treated as "non-qualified" Options under applicable tax laws and regulations. 3. 1993 and 1994 Options. The Parties acknowledge and confirm to each other --------------------- that the 1993 Option and the 1994 Option are fully vested and all the shares thereunder are subject to being purchased by Optionee at this time. 4. 1995 Option. The Parties acknowledge and confirm to each other that ----------- 48,000 of the 60,000 shares in the 1995 Option are now vested and exercisable, and the final 12,000 shares will become exercisable on May 23, 1997. 5. Further Vesting. Those portions of any of the Options not yet vested and --------------- exercisable shall continue to vest and become exercisable for so long as, and only for so long as, Optionee continues to serve as a director of the Company as provided in Paragraph 4(c) of that certain Employment Agreement between Optionee and the Company dated December 1, 1996, except as the Options may be accelerated hereafter as provided in Paragraph 4(d) of that Employment Agreement. 6. Exercise Periods. The Parties hereby agree that Paragraph 4(e) of that ---------------- certain Employment Agreement between Optionee and the Company dated December 1, 1996 relating to the extension of exercise periods is hereby deleted ab initio and shall be null and void and of no force or effect as though it had never been written. Instead, the parties agree that the following shall be the exercise periods for the Options. (a) 1993 and 1994 Options. Subject to Paragraph 7 below, Optionee shall --------------------- have the right to exercise the 1993 and 1994 Options and to purchase any of the shares covered thereby pursuant to the terms of those Options at any time from now through the 90-day period following the date Optionee no longer serves on the Company's Board of Directors. (b) 1995 Option (1). Subject to Paragraph 7 below, Optionee shall have --------------- the right to exercise the 1995 Option and to purchase any of the 12,000 shares covered thereby, which were already vested as of the date hereof, pursuant to the terms of that Option at any time from now through the 90-day period following the date Optionee no longer serves on the Company's Board of Directors. (c) 1995 Option (2). Subject to Paragraph 7 below, Optionee shall have --------------- the right to exercise the 1995 Option and to purchase any of the 36,000 shares covered thereby, the vesting of which were accelerated pursuant to an Amendment dated April 30, 1997 to that certain Employment Agreement between Optionee and the Company dated December 1, 1996, pursuant to the terms of that Option at any time from now through the 12-month period following the latter of (i) September 30, 1998 or (ii) the date Optionee no longer serves on the Company's Board of Directors. (d) 1995 Option (3). Subject to Paragraph 7 below, Optionee shall have --------------- the right to exercise the 1995 Option and to purchase any of the 12,000 shares covered thereby, which will become vested on May 23, 1997, pursuant to the terms of that Option at any time from the date they become vested through the 90-day period following the date Optionee no longer serves on the Company's Board of Directors. (e) 1997 Option. Subject to Paragraph 7 below, Optionee shall have the ----------- right to exercise the 1997 Option and to purchase any of the shares covered thereby pursuant to the terms of that Option at any time from the dates those shares become vested through the 12-month period following the latter of (i) September 30, 1998 or (ii) the date Optionee no longer serves on the Company's Board of Directors. 7. Term/Expiration Date. The Parties acknowledge and confirm to each other -------------------- that each of the Stock Option Agreements specifies a "Term/Expiration Date" seven years following the date of grant of the Option specified in the particular Stock Option Agreement, after which Term/Expiration Date, Optionee will have no further right to exercise the Option covered by that Stock Option Agreement. 8. No Other Changes. Except as expressly amended hereby, the Agreement ---------------- shall remain in full force and effect. 9. No Representations. Each of the Parties represents that it or he has had ------------------ the opportunity to consult with an attorney, and has carefully read and understands the scope and effect of the provisions of this Amendment. Neither Party has relied upon any representations or statements made by the other Party hereto not specifically set forth in this Amendment. -2- 10. No Oral Modification. The Stock Option Agreements and this Amendment may -------------------- only be amended in writing signed by Optionee and an officer of the Company. 11. Governing Law. This Amendment shall be governed by the laws of the State ------------- of California, without reference to its choice of law principles. 12. Counterparts. This Amendment may be executed in counterparts, and each ------------ counterpart shall have the same force and effect as an original and shall constitute an effective, binding agreement on the part of each of the undersigned. IN WITNESS WHEREOF, the Parties have executed this Amendment to Stock Option Agreements as of the date set forth above. ACCESS HEALTH, INC. by /s/ Julie A. Brooks ____________________________________________ Julie A. Brooks Senior Vice-President and General Counsel /s/ Kenneth B. Plumlee ______________________________________________ KENNETH B. PLUMLEE -3- EX-10.30 4 SEPARATION AGREEMENT OF THOMAS E. GARDNER EXHIBIT 10.30 SEPARATION AGREEMENT AND MUTUAL RELEASE This Separation Agreement and Mutual Release ("Agreement") is entered into as of April 30, 1997 (the "Effective Date") by and between Access Health, Inc., a Delaware corporation (the "Company"), and Thomas E. Gardner ("Executive"). RECITALS -------- 1. Executive is currently employed by the Company as its President and Chief Executive Officer and Chief Operating Officer and also serves as a member of the Board of Directors; 2. Executive has decided to resign from all executive positions and as a director of the Company and the Company agrees to accept such resignation. The Company and Executive have further mutually agreed to terminate their employment relationship and to release each other from any claims arising from or related to the employment relationship; 3. Executive and the Company entered into an Employment Agreement dated December 1, 1996 (the "Prior Agreement"). The parties agree that, for purposes of the Prior Agreement, the termination of Executive's employment shall be treated as a termination by the Company without Cause (as defined in the Prior Agreement). In connection with the termination of their employment relationship, and to assure an orderly transition, the parties desire to enter into this Agreement with respect to Executive's separation from the Company. The Agreement will terminate and supersede the Prior Agreement in all respects except as otherwise specifically provided or incorporated by reference herein; to the extent a particular provision of the Prior Agreement is incorporated into this Agreement, any defined terms referenced in such provision shall also be incorporated herein. NOW THEREFORE, in consideration of the mutual promises made herein, the Company and Executive (collectively referred to as the "Parties") hereby agree as follows: 1. Resignation. Executive hereby resigns from all executive positions ----------- with the Company including as President and Chief Executive Officer and Chief Operating Officer of the Company and also as a director on the Effective Date. The Executive's employment with the Company shall otherwise be treated as continuing through April 30, 1997. 2. Consideration. In consideration of Executive's past services to the ------------- Company, and in consideration for Executive's promises and covenants herein, and in light of the terms of the Prior Agreement, the Company shall pay Executive, subject to Section 3 herein, as follows: (a) Salary. The Company will pay Executive on the Effective Date all ------ salary earned through the Effective Date plus salary through April 30, 1997, less applicable withholding. (b) Bonus. Executive shall receive on the Effective Date a bonus ----- equal to the pro rata annual incentive award through April 30, 1997, for fiscal year 1997 based on the on-plan target bonus, which the Parties agree shall be $105,000. (c) Separation Payment. Executive shall also receive on the Effective ------------------ Date a payment equal to 125% of the sum of (i) his annualized base salary of $300,000 and (ii) Executive's on-plan target bonus award for fiscal year 1997 of $180,000, which payment the Parties agree shall be in the aggregate $600,000. (d) Business Expenses. The Company shall reimburse Executive for all ----------------- business expenses incurred in connection with carrying out the business of the Company promptly upon receiving backup documentation in reasonable detail documenting such expenses. (e) Benefits. Executive shall be entitled to accrued vacation in the -------- amount of twenty (20) days which the Company shall pay to Executive on the Effective Date in the form of a lump sum payment of $23,170. Executive shall also be entitled to continued coverage, through April 30, 1999 (the "Continued Coverage Period"), under each Employee Welfare Benefit Plan (as defined in the Prior Agreement) of the Company in which he was participating as of March 31, 1997, at no increased cost to Executive, provided that the Company's obligations under this Section 2(e) shall be reduced to the extent Executive receives similar coverage and benefits under the plans of a subsequent employer. Executive shall promptly provide the Company with notice and information reasonably requested by the Company concerning such plans. If Executive or any member of his family is precluded from continuing full participation in any benefit under any Employee Welfare Benefit Plan as provided in this Section 2(e), then (as provided in Section 9(h) of the Prior Agreement) the Company shall provide the after-tax economic equivalent of any benefit forgone. The economic equivalent of any benefit foregone shall be deemed to be no less than the total cost to the Executive of obtaining such benefit on an individual basis. Payment of such after-tax economic equivalent shall be made quarterly in advance, without discount. After the Continued Coverage Period, the Company shall make reasonable good faith efforts to secure from its insurance carrier for Executive and his family continued health insurance coverage until April 30, 2001 to the same extent and at rates similar to those offered to the Company's employees provided (i) Executive shall bear the entire cost of such coverage, (ii) the Company shall not be obligated to add Executive or otherwise include him as part of any of the Company's health plans with such carrier, and (iii) the Company will not be otherwise obligated to provide or assist Executive obtain health care benefits if the Company's carrier declines coverage of Executive. (f) Lease Payments. The Company shall continue to make prompt payments -------------- through August 31, 1997 of all lease payments on the property at 3400 Adams Road, Sacramento, California, where Executive resides, and Executive may reside there until August 31, 1997; provided, upon the date Executive relocates from Sacramento, California Executive shall assign all rights to the lease of such house to the Company. (g) Stock Option Grants. No stock options shall be granted to ------------------- Executive for fiscal year 1997 performance. (h) Restricted Stock. The 2,000 shares of restricted stock granted to ---------------- Executive as of May 30, 1996, shall become fully vested, fully transferable, and fully nonforfeitable as of the Effective Date. -2- (i) Stock Options. Section 6(b), Exhibit B and Exhibit C of the Prior ------------- --------- --------- Agreement shall survive any termination of the Prior Agreement, and shall remain in full force and effect, with the following modifications. As to the option granted on November 18, 1996 to acquire 250,000 shares of Common Stock, Executive shall have until April 30, 1999 (the "Option Termination Date") to exercise 100,000 shares, and on the Option Termination Date such option shall terminate as to 150,000 shares as well as to any unexercised vested shares subject to such option. As to the option granted on May 30, 1996 to acquire 230,000 shares of Common Stock, Executive shall have until the Option Termination Date to exercise 92,000 shares, and on the Option Termination Date such option shall terminate as to 138,000 shares as well as to any unexercised vested shares subject to such option. (j) Indemnification. The Indemnification Agreement between the --------------- Parties, dated as of December 1, 1996 and appended as Exhibit A to this --------- Agreement, shall remain in full force and effect. (k) Tax Gross-Up. The Company shall promptly provide any payment ------------ required under Section 8(b)(iii) of the Prior Agreement with respect to expenses incurred prior to the Effective Date. (l) Out Placement. The Company shall reimburse Executive for ------------- reasonable out-of-pocket expenses incurred as out-placement expenses incurred prior to April 30, 1998 (including, without limitation, secretarial assistance, phone and fax charges, unreimbursed travel expenses, and transition counseling, but specifically excluding office space expense) for up to $10,000 promptly upon presentation of reasonably acceptable documentation. (m) No Mitigation; Limited Offset. As provided in Section 9(i) of the ----------------------------- Prior Agreement, Executive shall be under no obligation to seek other employment and there shall be no offset against amounts due Executive under this Agreement on account of (i) any remuneration or other benefit attributable to any subsequent employment that he may obtain except as specifically provided in this Section 2 or (ii) any claims the Company, or its affiliates, may have against Executive. (n) Nature of Payments. Any amounts due under this Section 2 are in ------------------ the nature of severance payments considered to be reasonable by the Company and are not in the nature of a penalty. 3. Forfeiture of Benefits upon Breach. In the event that Executive ---------------------------------- breaches Section 4 of this Agreement (i) all obligations of the Company to make any payments or provide any benefits under Sections 2(b), 2(c), 2(e), 2(f) and 2(l) shall immediately terminate and Executive shall promptly repay, net of all taxes paid or payable, any amounts he may have received under these Sections and (ii) any portion of any stock option that became exercisable solely pursuant to Section 2(i) hereof shall be forfeited, and in the event that Executive shall already have exercised any portion of any such stock option that became exercisable solely pursuant to Section 2(i) hereof, he shall return the Common Stock of the Company that he acquired on exercise of such stock option, provided that in lieu of delivering Common Stock pursuant to subsection (ii) hereof, Executive may deliver cash equal to the current market value (based on the closing price on the last trading day preceding the date of return) of any such Common Stock not returned, less sufficient Common Stock of the Company and/or cash to make him whole (on an after-tax basis) for the cost of acquiring such Common Stock and for any taxes paid or payable in connection with (A) acquiring such Common Stock and (B) any subsequent sale or other -3- disposition of any portion of such Common Stock occurring before the return of such Common Stock and/or cash pursuant to this Section 3. 4. Noncompetition. For a period of twelve (12) months following the -------------- Effective Date, Executive shall be subject to the terms of Section 11(a) of the Prior Agreement which is expressly incorporated by reference into this Agreement. 5. Non-Solicitation. For a period of twelve (12) months following the ---------------- Effective Date, Executive shall not intentionally or knowingly allow others under his direction to solicit or encourage, directly or indirectly, any then current Company employee to terminate his or her employment with the Company for the purpose of working as an officer, director, employee, consultant or in any other capacity for either Executive or any of his employers. For purposes of the above, an employer of Executive's will be deemed to include (i) any parent, subsidiary or other affiliate of such an employer or (ii) any person or company for which Executive provides consulting services or for which he acts in the capacity of director or for which he acts in any other capacity. 6. Confidentiality. Executive acknowledges that during the course of his --------------- employment he has had access to a wide range of sensitive, non-public information concerning the Company, its future business and product plans, its marketing strategies and its sales organization. Executive acknowledges that the Proprietary Information and Business Agreement dated December 19, 1996 (the "Confidentiality Agreement") that he signed in connection with his employment and that is appended to this Agreement as Exhibit B, shall accordingly remain --------- in full force and effect, except that Executive may retain, after review by the Company, personal Rolodexes, personal files and the like following the termination of his employment to the extent that the Company does not reasonably and promptly object, provided such materials shall continue to be subject to the Confidentiality Agreement. To the extent Executive provides the Company services, if any, after the Effective Date, Executive shall remain subject to the Confidentiality Agreement. 7. Payment of Salary. Executive acknowledges and represents that, upon ----------------- full performance of its obligations under this Agreement, the Company will have paid or made all salary, bonuses, equity grants and any and all other compensation or benefits due to Executive as of the Effective Date. 8. Release of Claims. The Parties acknowledge and agree that this ----------------- Agreement represents settlement in full of all obligations and claims arising out of or relating to Executive's employment by the Company and the termination of such employment as provided in this Agreement. Executive and the Company, on behalf of themselves, and their respective heirs, executors, officers, directors, employees, investors, shareholders, administrators, predecessor and successor corporations, and assigns, hereby fully and forever release each other and their respective heirs, executors, officers, directors, employees, investors, shareholders, administrators, predecessor and successor corporations, and assigns, of and from any claim, duty, obligation or cause of action relating to any matters of any kind, whether presently known or unknown, suspected or unsuspected, that any of them may possess arising from any omissions, acts or facts that have occurred up until and including the Effective Date including, without limitation, -4- (a) any and all claims relating to or arising from Executive's employment by (or services for) the Company, his employment relationship with the Company and the termination of that relationship; (b) any and all claims for wrongful discharge of employment; breach of contract, both express and implied; breach of a covenant of good faith and fair dealing, both express and implied; negligent or intentional infliction of emotional distress; negligent or intentional misrepresentation; negligent or intentional interference with contract or prospective economic advantage; and defamation; (c) any and all claims for violation of any federal, state or municipal statute, including, but not limited to, Title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1991, the Age Discrimination in Employment Act of 1967, the Americans with Disabilities Act of 1990, and the California Fair Employment and Housing Act; (d) any and all claims arising out of any other laws and regulations relating to employment or employment discrimination; (e) any claims arising out of or related to the Prior Agreement (to the extent that the Prior Agreement is superseded by this Agreement), including without limitation, any rights relating to notice of termination as provided pursuant to Section 9(g) of the Prior Agreement; (f) any and all claims for attorneys' fees and costs; (g) all claims arising out of or relating to Executive's conduct as an employee, officer, director, agent or representative of the Company; and (h) all claims arising out of or relating to duties owed by Executive to the Company or to any of its directors, officers, employees, agents, affiliates, stockholders, lenders, investors, predecessor or successor corporations, assigns, attorneys, accountants or other representatives. The Company and Executive agree that the release set forth in this section shall be and remain in effect in all respects as a complete general release as to the matters released. This release does not extend to any obligations arising under, incurred under, or preserved by this Agreement. 9. Acknowledgment of Waiver of Claims under ADEA. Executive acknowledges --------------------------------------------- that he is waiving and releasing any rights he may have under the Age Discrimination in Employment Act of 1967 ("ADEA") and that this waiver and release is knowing and voluntary. Executive and the Company agree that this waiver and release does not apply to any rights or claims that may arise under ADEA after the Effective Date. Executive acknowledges that the consideration given for this waiver and release is in addition to anything of value to which Executive was already entitled. Executive further acknowledges that he has been advised by this writing that (a) he should consult with an attorney prior to ----- executing this Agreement; (b) he has at least twenty-one (21) days within which to consider this Agreement; (c) he has at least seven (7) days following the execution of this Agreement by the Parties to revoke the Agreement; and (d) this Agreement shall not be effective until the revocation period has expired. -5- 10. Civil Code Section 1542. The Parties represent that they are not ----------------------- aware of any claim by either of them other than the claims that are released by this Agreement. Executive and the Company acknowledge that they have been advised by legal counsel and are familiar with the provisions of California Civil Code Section 1542, which provides as follows: A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR. Executive and the Company, being aware of said Code section, agree to expressly waive any rights they may have thereunder, as well as under any other statute or common law principles of similar effect. 11. Communications. Communications by the Company and its officers, -------------- directors, employees, stockholders, and successors concerning Executive's termination of employment with the Company will be based upon the statement agreed upon by the Parties which is attached hereto as Exhibit C. All --------- communications by the Company and its officers, directors, employees, stockholders, and successors concerning Executive in response to reference checks will be based upon the response agreed upon by the Parties which is attached hereto as Exhibit D. --------- 12. Fees and Expenses. Each of the Parties hereto shall bear their own ----------------- fees and expenses, including attorneys fees, incurred in connection with the negotiation of this Agreement or otherwise arising out of, or by reason of, this Agreement. 13. Taxes. All payments to be made by the Company to Executive under this ----- Agreement will be subject to reduction to the extent necessary in order to comply with applicable Federal, state and local tax withholding requirements. 14. Confidentiality. The Parties hereto each agree to use their best --------------- efforts to maintain in confidence the existence of this Agreement, the contents and terms of this Agreement, and the consideration for this Agreement, except where disclosure of the terms of this Agreement is otherwise required by law and except for disclosure in confidence to financial, tax, and legal advisors and disclosure by Executive in confidence to prospective employers. 15. Disparagement. Each Party agrees to refrain from any disparagement, ------------- criticism, defamation, and slander of the other Party, and from tortious interference with the contracts and relationships of the other Party. 16. No Representations. Each Party represents that it or he has had the ------------------ opportunity to consult with an attorney, and has carefully read and understands the scope and effect of the provisions of this Agreement. Neither Party has relied upon any representations or statements made by the other Party hereto which are not specifically set forth in this Agreement. -6- 17. Entire Agreement. This Agreement and those portions of the Prior ---------------- Agreement preserved by this Agreement represent the entire agreement and understanding between the Company and Executive concerning Executive's separation from the Company, and supersede and replace any and all prior agreements and understandings concerning Executive's relationship with the Company and his compensation by the Company, including without limitation, the Prior Agreement, except as otherwise provided in this Agreement. 18. Assignability; Binding Nature. This Agreement shall be binding upon ----------------------------- and inure to the benefit of the Parties and their respective successors and assigns. No rights or obligations of the Company under this Agreement may be assigned or transferred by the Company except that such rights or obligations may be assigned or transferred pursuant to a merger or consolidation in which the Company is not the continuing entity, or the sale or liquidation of all or substantially all of the assets of the Company, provided that the assignee or transferee is the successor to all or substantially all of the assets of the Company and such assignee or transferee expressly assumes all the liabilities, obligations and duties of the Company, as contained in this Agreement. In connection with any transfer or assignment of its rights, duties, or obligations under this Agreement, the Company shall take whatever action it legally can to cause such assignee or transferee to expressly assume the labilities, obligations and duties of the Company hereunder. The Company shall, in any event, remain as unconditional guarantor of prompt payment and prompt satisfaction of all such liabilities, obligations and duties. No rights, obligations or duties of the Executive under this Agreement may be assigned or transferred, other than his rights to compensation and benefits, which may be transferred only by will or operation of law, except as provided in Section 23 below. 19. Representations. The Company represents and warrants that it is fully --------------- authorized and empowered by action of the Board to enter into this Agreement and that the performance of its obligations under this Agreement will not violate any law, regulation or order of any agreement between it and any other person. The Executive represents and warrants that he is not subject to any agreement or obligation that conflicts with or would be breached by the provisions of this Agreement. 20. Amendment or Waiver. No provision in this Agreement may be amended ------------------- unless such amendment is set forth in a writing signed by the Parties. No waiver by either Party of any breach of any condition or provision contained in this Agreement shall be deemed a waiver of a similar or dissimilar condition or provision at the same or any prior or subsequent time. To be effective, any waiver must be set forth in writing and signed by the waiving Party. 21. Severability. In the event that any provision or portion of this ------------ Agreement shall be determined to be invalid or unenforceable for any reason, in whole or in part, the remainder of this Agreement shall be unaffected thereby and shall remain in full force and effect to the fullest extent permitted by law so as to achieve the purposes of this Agreement. 22. Survivorship. Except as otherwise expressly set forth in this ------------ Agreement, the respective rights and obligations of the Parties hereunder shall survive the termination of Executive's employment. This Agreement itself (as distinguished from the Executive's employment) may not be terminated by either Party. -7- 23. Beneficiaries/References. The Executive shall be entitled, to the ------------------------ extent permitted under any applicable law, to select and change a beneficiary or beneficiaries to receive any compensation or benefit hereunder following the Executives's death, by giving written notice to the Company. In the event of the Executive's death or a judicial determination of his incompetence, references in this Agreement to the Executive shall be deemed, where appropriate, to refer to his beneficiary, estate or other legal representative. 24. Resolution of Disputes. Any claim arising out of or relating to this ---------------------- Agreement (or any amendment thereof), any provision of the Prior Agreement incorporated into this Agreement or out of Executive's employment by, or services for, the Company shall, at the election of either Party, be resolved by confidential arbitration, to be held in Sacramento County, California, in accordance with the Commercial Arbitration Rules of the American Arbitration Association. The arbitrator(s) shall explain the reasons and basis of his (their) award in detail and in writing, and judgment upon the award may be entered in any court having jurisdiction thereof. Each Party shall bear their own respective costs and expenses relating to resolving any such claim. Pending the final and conclusive resolution of any such claim, the Company shall continue prompt payment of all amounts due the Executive under this Agreement (or any amendment thereof) and prompt provision of all benefits to which the Executive or his successors and assigns are entitled. 25. Notices. Any notice, consent, demand, request, or other communication ------- given to a Party in connection with this Agreement shall be in writing and shall be deemed to have been given (a) when delivered personally to the Party specified or (b), provided that reasonable steps are take to assure that the communication is actually received by the Party specified, five business days after being sent by certified or registered mail, postage prepaid, return receipt requested, duly addressed to the Party concerned at the address indicated below or to such changed address as such Party may subsequently give notice of: If to the Company: Access Health, Inc. 11020 White Rock Road Rancho Cordova, California 95670 Attention: General Counsel With a copy sent by the same means to: Wilson Sonsini Goodrich & Rosati, P.C. 650 Page Mill Road Palo Alto, California 94304-1050 Attention: Barry E. Taylor, Esq. -8- If to the Executive: Thomas E. Gardner 3400 Adams Road Sacramento, California 95864 With a copy sent by the same means to: Law Offices of Joseph E. Bachelder 780 Third Avenue New York, New York 10017 26. Headings. The headings of the Sections contained in this Agreement -------- are for convenience only and shall not be deemed to control or affect the meaning or construction of any provision of this Agreement. 27. Governing Law. This Agreement shall be governed by the laws of the ------------- State of California, without reference to its choice of law principles. 28. Counterparts. This Agreement may be executed in counterparts, and ------------ each counterpart shall have the same force and effect as an original and shall constitute an effective, binding agreement on the part of each of the undersigned. 29. Voluntary Execution of Agreement. This Agreement is executed -------------------------------- voluntarily and without any duress or undue influence on the part or behalf of the Parties hereto, with the full intent of releasing all claims. The Parties acknowledge that: (a) They have read this Agreement; (b) They have been represented in the preparation, negotiation, and execution of this Agreement by legal counsel of their own choice or that they have voluntarily declined to seek such counsel; (c) They understand the terms and consequences of this Agreement and of the releases it contains; (d) They are fully aware of the legal and binding effect of this Agreement. [The remainder of this page left intentionally blank] -9- IN WITNESS WHEREOF, the Parties have executed this Agreement on the respective dates set forth below. ACCESS HEALTH, INC. Dated: April __, 1997 By: /s/JULIE A. BROOKS ------------------ Dated: April __, 1997 /s/THOMAS E. GARDNER -------------------- Thomas E. Gardner -10- EX-27 5 FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from FY 1997 Q3 unaudited financial statements and is qualified in its entirety by reference to such financial statements. 9-MOS SEP-30-1997 OCT-01-1996 JUN-30-1997 34,848 14,128 13,090 884 0 66,446 27,533 11,282 96,179 22,416 0 0 0 18 72,906 96,179 76,227 76,227 37,997 37,997 32,789 0 (1,235) 6,676 1,629 5,047 0 0 0 5,047 0.27 0.27
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