INVESTOR AGREEMENT
This agreement is made and entered into this 19th day of March, 1997 by and
between Xxxxxxx Financial Associates, L.L.C. ("Investor"), a Delaware
corporation, and American HealthChoice, Inc. ("Company"), a New York
corporation.
WITNESSETH
WHEREAS, Company is engaged in the practice of operating medical clinics in
Texas, Georgia and Louisiana;
WHEREAS, Investor desires to invest in Company and take certain
responsibilities relative to control of the Company's Board of Directors;
NOW, THEREFORE, FOR AND IN CONSIDERATION of the mutual covenants, promises
and conditions contained herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Investor and Company
hereby agree as follows:
BEST EFFORTS
Both parties agree to use best efforts to effectuate the intent and terms
of this agreement. Investor recognizes that Company is foregoing other
opportunities to fund the Company's needs. Further, both parties recognized time
is of the essence.
REPRESENTATIONS BY COMPANY
Board Members: The Company agrees to change its Board of Directors (Board)
to allow for seven (7) members. Upon the completion of the five hundred and
fifty thousand ($550,000) Bridge Loan, as defined below, to the Company, the
Company will agree to change the number of board members to seven (7). Further,
the Company will deliver the resignations of one (1) board member. Investor will
then have the right to appoint four members to the Company Board.
If a Raise of Capital (minimum of two million ($2,000,000), separate from
bridge loan), as described herein under Representations By Investor, is not
substantially complete within one hundred (100) days of the bridge loan, also
described herein under Representations By Investor, the Investor will provide
the Company with resignations of the four (4) board members appointed by the
Investors.
Bridge Loan: The current Board will approve a bridge loan in the amount of
five hundred and fifty thousand dollars ($550,000.00) by Investor, at ten (10%)
percent annually, as senior debt subject to existing debt already perfected as
of the date of this agreement. Additional consideration for said loan is in the
form of one million (1,000,000) warrants at two and three-
eight ($2 3/8) dollars per share of Company common shares to be issued from
"authorized but not issued" Company common stock.
Consultant: Xxxxx Xxxx, C.P.A., X.X., an affiliate of Investor, will be
retained by the board as a consultant for an initial period of one (1) year,
subject to the same terms as imposed upon the new board members. Compensation
will be at forty-eight thousand ($48,000.00) annually plus reasonable
reimbursement expenses, with the first amount being deducted as a non-refundable
retainer of ten thousand ($10,000.00) to be paid upon the closing of the bridge
loan, with the balance being accrued until the funding of the Raise of Capital
as represented by Investor below.
Founder Options: Doctors X.X. Xxxxxx, X. Xxxxx and X. Xxxxxx, or other
founders will make available two million ($2,000,000) shares of their common
stock to Investor to be optioned at two dollars and seventy-five cents ($2.75)
per share executable for the next eighteen months. Said shares will be held in
escrow by an escrow agent mutually agreed upon by both parties. The "Put" is as
follows:
(a) after thirty (30) days, if the stock trades at five ($5.00) dollars
for five consecutive trading days, a Put call can be exercised for
three hundred thousand (300,000) shares.
(b) after ninety (90) days, if the stock trades at five and a half ($5.50)
dollars for five consecutive trading days, a Put call can be exercised
for three hundred thousand (300,000) shares.
(c) after one hundred twenty (120) days, if the stock trades at six
($6.00) dollars for five consecutive trading days, a Put call can be
exercised for three hundred thousand (300,000) shares.
(d) after one hundred eighty (180) days, if the stock trades at six and a
half ($6.50) dollars for five consecutive trading days, a Put call can
be exercised for three hundred thousand (300,000) shares.
(e) after two hundred and forty (240) days, if the stock trades at seven
($7.00) dollars for five consecutive trading days, a Put call can be
exercised for three hundred thousand (300,000) shares.
(f) after three hundred (300) days, if the stock trades at seven ($7.00)
dollars for five consecutive trading days, a Put call can be exercised
for five hundred thousand (500,000) shares.
Founder Lock-up: Doctors X.X. Xxxxxx, X. Xxxxx, X. Xxxxxx and the majority
of shares belonging to Doctors Webb, Bryant, and Xxxxx, will lock-up with
Investor the remaining portion of any shares that become freely tradable within
eighteen (18) months of this agreement. All shares shall become freely tradable
eighteen (18) months from the date of this agreement.
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All shares subject to the Investor, and/or his assignee, lock-up can be rolled
out after six (6) months from the date of this agreement at a rate of
one-eighteenth (1/18) per month subject to Security Exchange Commission Rules.
Warrants and Options previously granted are not subject to this lock-up
agreement. Company will use its best efforts to get other shareholders to lock
up under similar terms.
Employment Agreement: Xx. Xxxxxx will remain as CEO for three (3) years.
Compensation to be at a base rate of two hundred and fifty thousand ($250,000)
annually with milestone bonuses based on Company profitability. The employment
agreement will be substantially similar to Xx. Xxxxxx'x existing agreement.
Xx. Xxxxxx'x Bridge Loan: Xx. Xxxxxx agrees to sell shares of his stock in
an amount equal to five hundred thousand ($500,000) dollars and loan the
proceeds to Company. As repayment, Xx. Xxxxxx will receive a debenture of equal
value, convertible to common stock at a fifteen (15%) discount fixed on date of
execution, at ten percent (10%) interest, convertible in ninety (90) days. This
is in addition to the salary as enumerated above. To effectuate the proceeds,
Xx. Xxxxxx will agree to lock up in a trust with Investor the amount of shares
necessary and Investor will fund the proceeds within seven (7) days of trust
agreement.
Repayment of Bridge Loan: Company agrees to repay any loans made under this
agreement or these loans made by Galaxy Investment and/or its assignees from the
sale of the Raise of Capital contemplated herein.
Consulting Agreements: Other than the consulting agreement for Xx. Xxxx
Xxxxxxx and Xxxxx Xxxxxx, the Company agrees all other consulting agreements are
void.
REPRESENTATIONS BY INVESTORS
Raise of Capital: Investor represents that it will use its best efforts to
raise a minimum of two million ($2,000,000.00) net to the Company. Company
agrees to repay Galaxy and Investor the five hundred and fifty thousand
($550,000) dollar bridge loan from said Raise of Capital. The Raise of Capital
must be substantially complete within one hundred (100) days of this agreement.
Shares for raising the minimum net capital shall be from no more than one
million four hundred thousand (1,430,000) of "authorized but unissued" Company
stock.
Board Control: The new board members appointed by Investor will not agree
to any stock split, reverse merger, equity conversions, or take any action that
is dilutive to shareholders, except for the transactions that are expressly
agreed to in this agreement or without written approval from Xxxxxx, which
approval will not be unreasonably withheld.
Bridge Loans: Investor agrees to loan Company a minimum of five hundred and
fifty thousand ($550,000.00) secured by a note and security agreement perfected
against tangible and intangible assets of the Company. Investor acknowledges
that the intention of the parties is that the bridge loan be repaid by a
convertible debenture at a ten (10%) percent discount.
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Hold Harmless: Investor agrees to hold harmless any prior acts by the
Company's officers and directors, except those actions directly related to
criminal conduct.
Approvals: Investor agrees that DVI and Grovest Management ("Other
Affiliates") have agreed to the terms of this agreement and that by entering
into this agreement the Other Affiliates will not claim any default under their
respective agreements due to this agreement.
Disclosure: Investor acknowledges that is has performed due diligence,
reviewed the Company's Form 10-KSB 1996, and Form 10-QSB for the first quarter
of 1997, and has received a copy of the Risk Factors prepared by the Company.
Investor represents that it has had an opportunity to request additional
information and receive such information to the satisfaction of Investor.
Investment Experience: Investor acknowledges that it is an investor in
securities of developing companies and can bear the economic risk of its
investment. Investor represents that it is an accredited investor as that term
is defined under Regulation D promulgated under the Security Act of 1933.
IN WITNESS WHEREOF, Investor and Company have caused this agreement to be
duly executed and delivered this the 18th day of March 1997.
"INVESTOR" "COMPANY"
Xxxxxxx Financial Associates, L.L.C. American HealthChoice, Inc.
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Xx. Xxxxxx Xxxxxxx Xx. X.X. Xxxxxx
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