AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 8, 1998
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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REGISTRATION STATEMENT ON FORM S-3
UNDER
THE SECURITIES ACT OF 1933
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HEALTHCORE MEDICAL SOLUTIONS, INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 43-1771999
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(State or other jurisdiction of (I.R.S. employer I.D.
Incorporation) number)
HEALTHCORE MEDICAL SOLUTIONS, INC.
11904 BLUE RIDGE BOULEVARD
GRANDVIEW, MISSOURI 64030
(816) 763-4900
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(Address and telephone number of Registrant's principal executive offices)
NEAL J. POLAN
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Chairman and Chief Executive Officer
HEALTHCORE MEDICAL SOLUTIONS, INC.
11904 BLUE RIDGE BOULEVARD
GRANDVIEW, MISSOURI 64030
(816) 763-4900
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(Address and telephone number of agent for service)
Copies to:
SHELDON MISHER, ESQ.
BACHNER, TALLY, POLEVOY & MISHER LLP
380 MADISON AVENUE
NEW YORK, NEW YORK 10017
(212) 687-7000
APPROXIMATE DATE OF PROPOSED COMMENCEMENT OF SALE TO PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [_]
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, please check the following box. |X|
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier
registration statement for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration for the same
offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [_]
If any of the securities being registered on this form are to be offered
pursuant to Rule 429 under the Securities Act, please check the following
box. |X|
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<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
Proposed
Maximum Proposed
Aggregate Maximum Amount of
Title of Each Class of Amount to Price per Aggregate Registration
Securities to be Registered be Registered Security(3) Offering Price Fee(4)
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<S> <C> <C> <C> <C>
Redeemable Class A Warrants(1) ........... 831,250 $ .3125 $ 259,765.63 $ 72.21
Class A Common Stock, $.01 par value(2) .. 1,262,250 $ 1.00 $1,262,250.00 $350.91
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Total Amount of Registration Fee ......... $ 424
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(1) Registered for resale by certain selling securityholders of the Company.
(2) Includes shares of Class A Common Stock which are issued and outstanding,
shares of Class A Common Stock to be issued upon exercise of the Class A
Warrants registered for resale by certain selling securityholders and
shares of Class A Common Stock to be issued upon exercise of other warrants
held by certain selling securityholders.
(3) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457(c) under the Securities Act of 1933, as amended, on the basis
of the price of the Class A Warrants and Class A Common Stock on the Nasdaq
SmallCap Market on December 3, 1998 of $.3125 and $1.00, respectively.
(4) 2,024,000 shares of Class A Common Stock registered in this Offering are
carried forward pursuant to Rule 429(b) and $7,721.00 constituting the
amount of the filing fee associated with such securities was previously
paid in the Company's Registration Statement (File No. 333-28233).
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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PROSPECTUS
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
Subject to Completion, December 8, 1998
HEALTHCORE MEDICAL SOLUTIONS, INC.
831,250 REDEEMABLE CLASS A WARRANTS AND 3,286,250 SHARES OF CLASS A COMMON STOCK
HealthCore Medical Solutions, Inc. is offering 2,024,000 shares of Class A
Common Stock to be issued upon exercise of the redeemable Class A Warrants
issued in our initial public offering in October 1997.
Certain selling securityholders identified in this Prospectus are offering
and selling 831,250 redeemable Class A Warrants and 831,250 shares of Class A
Common Stock to be issued upon exercise of the redeemable Class A Warrants.
These selling securityholders acquired their Class A Warrants in connection with
a private placement completed in February and March 1997. Certain other
securityholders identified in this Prospectus are also offering and selling
431,000 shares of Class A Common Stock. 132,000 of these shares of Class A
Common Stock are currently issued and outstanding and the remaining 299,000
shares of Class A Common Stock offered will be issued upon the exercise of
certain outstanding warrants held by two of the selling securityholders included
this Prospectus who acquired their warrants in September and October 1997.
HealthCore will receive proceeds upon exercise of the Class A Warrants and
upon the exercise of the outstanding warrants if such Class A Warrants and the
outstanding warrants are exercised. HealthCore has agreed to pay a solicitation
fee equal to 5% of the exercise price upon exercise of the Class A Warrants
under certain conditions.
Healthcore's Units, Class A Common Stock and Class A Warrants are listed on
the Nasdaq SmallCap Market and trade under the symbols HMSIU, HMSI and HMSIW,
respectively.
INVESTING IN THESE SECURITIES INVOLVES A HIGH DEGREE OF RISK
SEE "RISK FACTORS" BEGINNING ON PAGE 5.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR
ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED
OF THESE SECURITIES OR HAS PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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THE DATE OF THIS PROSPECTUS IS DECEMBER __, 1998.
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AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission"), Washington, D.C. a Registration Statement on Form S-3 under the
Securities Act of 1933, as amended ("Securities Act") covering the securities
offered by this Prospectus. This Prospectus does not contain all of the
information set forth in the Registration Statement and the exhibits thereto.
Statements contained in this Prospectus as to the contents of any contract or
other document referred to are not necessarily complete and in each instance
such statement is qualified by reference to each such contract or document filed
(or incorporated by reference) as an exhibit to the Registration Statement. The
Company is subject to the informational requirements of the Securities Exchange
Act of 1934, as amended ("Exchange Act"), and in accordance therewith files
reports and other information with the Commission. Reports and other information
filed by the Company with the Commission can be inspected without charge and
copied at the public reference facilities maintained by the Commission at the
following addresses: New York Regional Office, Seven World Trade Center, New
York, New York 10048; and Chicago Regional Office, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661-2511. Copies of such material can be
obtained upon written request from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed
rates. Information on the operation of the Public Reference Room may be obtained
by calling the Commission at 1-800-SEC-0330. The Commission maintains a Web site
at http://www.sec.gov that contains reports, proxy statements and other
information regarding issuers that file electronically with the Commission.
Reports and other information concerning the Company may also be inspected at
the offices of the National Association of Securities Dealers, Inc., 1735 K
Street, N.W., Washington, D.C. 20006.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission (File No. 000-22947)
pursuant to the Exchange Act are incorporated herein by reference:
1. The Company's Annual Report on Form 10-KSB for the fiscal year
ended September 30, 1997, including any documents or portions thereof
incorporated by reference therein;
2. The Company's Quarterly Reports on Form 10-QSB for the quarters
ended December 31, 1997, March 31, 1998 and June 30, 1998;
3. The Company's Registration Statement on Form 8-A declared effective
on October 14, 1997, as amended, registering the Units, Class A Common
Stock and Class A Warrants under the Exchange Act; and
4. All other documents filed by the Company pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of
this Prospectus and prior to the termination of the Offering.
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Any statement contained in any document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as modified or
superseded, to constitute a part of this Prospectus. The Company will provide
without charge to each person to whom this Prospectus is delivered, upon written
or oral request of any such person, a copy of any or all of the documents
incorporated herein by reference (other than exhibits to such documents which
are not specifically incorporated by reference into such documents). Requests
for such documents should be directed to the Company, 11904 Blue Ridge
Boulevard, Grandview, Missouri 64030, Attention: Chief Financial Officer,
telephone (816) 763-4900.
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PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this Prospectus.
It is not complete and may not contain all of the information that you should
consider before investing in the Company's securities. You should read the
entire Prospectus carefully, including the "Risk Factors" section and the
financial statements and the notes to those statements.
THE COMPANY
HealthCore Medical Solutions, Inc. provides access to healthcare services
at discount prices. For an annual fee of approximately $55 to $100, individuals
can join our card membership program and use their HealthCare Solutions Card to
receive discounts of up to 5% to 60% off the retail price of ancillary
healthcare services and products including eye care, dental, hearing, pharmacy,
physical and occupational therapy and chiropractic. In addition to the
HealthCare Solutions Card which offers subscribers access to ancillary medical
services at discount, the Company began marketing two new products: the Savings
Solutions Card, which was customized for an organization to offer ancillary
medical services as well as non-medical consumer products to certain subscribers
in the New York metropolitan area and the Medical Solutions Card, which offers
discounts to enrollees for hospital and physician services. The Company
anticipates marketing the Savings Solutions Card in certain regions in the
United States.
We contract with approximately 40 different healthcare provider networks
which currently consists of approximately 500,000 participating providers. Our
target market includes uninsured individuals who, whether because of medical
history, age or occupation, either do not have insurance or have limited
insurance coverage but who seek to access health care products and services at
discounted costs. Acceptance into our membership program is unrestricted, and
our HealthCare Solutions Card may be used by any member of the cardholder's
household. We primarily use brokers, insurance agents and consumer marketing
organization to sell to either individuals or to group enrollees such as
employers, HMOs and other organizations who purchase the HealthCare Solutions
Card for their employees or members. We derive our revenues primarily from the
receipt of annual or monthly enrollment fees.
We established our operations in October 1995 as MegaVision L.C., a
Missouri limited liability company ("MegaVision"). In February 1997, MegaVision
merged into HealthCore Medical Solutions, Inc. All references to the our
operations include MegaVision and its operations. Our executive offices are
located at 11904 Blue Ridge Boulevard, Grandview, Missouri 64030, and our
telephone number is (816) 763-4900.
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RISK FACTORS
Investing in our securities is very risky. You should be able to bear a
complete loss of your investment. Before making an investment, you should
carefully read this entire Prospectus and consider the following factors:
HISTORY OF OPERATING LOSSES; ANTICIPATED FUTURE LOSSES. Since our formation
in June 1995, we have experienced significant operating losses. We also expect
to incur losses in the future. At September 30, 1998, our accumulated deficit
was approximately $6.5 million. Our losses stem principally from expenses
associated with development and marketing. We can not assure you that we ever
will develop significant commercial sales or become profitable.
DEVELOPMENT STAGE COMPANY; NO HISTORY OF OPERATIONS. Although we were
organized in June 1995, we have only recently contracted with a network of
healthcare providers and have made only minimal sales of the HealthCare
Solutions Card. The success of our business depends upon several factors,
including the quality and quantity of providers in the networks, the acceptance
of the HealthCare Solutions Card by individuals, employers, HMOs, business and
other associations, providers of medical benefits and card members, the
incentive we offer to independent sales representatives to sell our products and
our ability to manage our business. You should be aware of the difficulties we
face as a new enterprise, as well as the high rate of failure of new
enterprises. Based on the short history of our operations, we can not assure
that we will ever become a profitable business. While we have initiated sales
and marketing activities and have generated minimal sales, we have yet to
generate significant revenues and may experience many of the problems, delays,
expenses and difficulties commonly encountered by early stage companies, many of
which are beyond our control. These problems include delays or expenses related
to product development and marketing, uncertain market acceptance, lack of
sufficient capital, competition, customer service and regulatory compliance, as
well as additional costs and expenses that may exceed current estimates. We may
not be able to develop a strong cardholder base, to enter into and maintain
agreements with a sufficient number of providers that are accessible and
acceptable to potential members, to generate any revenues or to ever develop
profitable operations. In addition, we have yet to expand our network to a size
that is required to become profitable and cannot predict all of the technical
difficulties, including issues relating to management information systems and
customer service, that may arise.
NEED FOR SIGNIFICANT ADDITIONAL FUNDS. The proceeds from our initial public
offering completed in October 1997 will only be sufficient to fund our
operations, at our current utilization rate, until approximately January 2000.
Thereafter, we will likely need significant additional funds to continue our
operations. Moreover, our future cash requirements may vary significantly from
what we expect them to be based on factors such as product development and
marketing programs, changes in the forms and direction of our business
activities, the timing of receipt of revenues, if any, as well as other factors.
We have no commitments for any future funding and we may not be able to obtain
additional financing in the future from either debt or equity financings, bank
loans, collaborative arrangements or other sources on terms acceptable to us, or
at all. If we are unable to obtain the necessary financing, we will have to
significantly curtail our activities or cease operations.
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UNPROVEN COMMERCIAL ACCEPTANCE; NEED FOR MARKET ACCEPTANCE. Our success
depends on commercial acceptance of the HealthCare Solutions Card, as well as
any other potential products we may offer in the future. Our commercial success
will be determined in large part by the acceptance of the HealthCare Solutions
Card by individuals, employers, HMOs, business and other associations, providers
of medical benefits and members, as well as our ability to market effectively
and to build alliances with network providers. To date, we have made only
minimal sales of the HealthCare Solutions Card. We can not assure that we will
be able to successfully demonstrate that the benefits associated with the
HealthCare Solutions Card justify the costs of purchasing the card or that the
benefits we offer outweigh benefits offered by either competing medical benefits
programs or traditional insurance programs. If we are unable to achieve
commercial acceptance of the HealthCare Solutions Card, we may be forced to
cease operations.
LIMITED MARKETING CAPABILITIES; INTERDEPENDENCE ON THIRD PARTIES FOR
MARKETING ACTIVITIES. To a large extent, our operating results will depend upon
our ability to successfully market the HealthCare Solutions Card and other
potential products we offer to members. We will continue to expand in these
areas and concentrate the limited resources we have at present on defined
segments of our target markets. We anticipate that our success will depend, to a
significant degree, upon independent brokers, insurance companies, selected
marketing organizations and our direct sales efforts to market our products.
Although third parties will receive a commission for their services, the success
of any alliance will depend in part upon the third parties' own competitive,
marketing and strategic considerations, including the relative advantages of
alternative competing products. Although we have entered into numerous
agreements with independent brokers and insurance agents, we can not assure that
third parties will successfully market our products. To the extent that we
utilize third parties as a primary distribution source, our ability to control
sales and marketing will be limited. We can not assure that we will be able to
hire experienced marketing personnel or to establish any additional arrangements
with brokers, nor can we be certain that any current or future marketing efforts
will be successful or result in any significant sales of our products.
DEPENDENCE UPON PROVIDERS; POSSIBLE TERMINATION OF PROVIDER AGREEMENTS. The
success of our operations will depend, in part, upon our ability to enter into
and maintain service agreements with providers of health care products and
services which provide for discounts and other pricing terms favorable to our
card members. To date, we have entered into non-exclusive service agreements
with several provider networks. The agreements generally expire after
approximately one to three years, but are subject to earlier termination upon
the occurrence of certain events, including, notice by the other party. We can
not assure that the providers affiliated with such networks will actually
provide services to the members, that our agreements will be renewed or that our
agreements will not be terminated prior to the end of their respective terms.
The cancellation of a contract by any provider network may negatively affect our
business. Further, we can not assure that we will successfully secure agreements
with additional providers or provider networks, nor can we be certain that
providers who have agreed to join the network will provide services or cost
savings that appeal to members. Our inability to retain our current service
providers or to obtain alternate or additional service providers will likely
detract from the real or perceived value of the HealthCare Solutions Card and
may cause us to curtail or alter our activities or cease operations.
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RISKS RELATED TO ENTRY INTO PHYSICIAN AND HOSPITAL NETWORK BUSINESS. We are
seeking opportunities for developing or acquiring a physician and hospital
network business and have entered into a non-binding letter of intent to
establish a joint venture with a preferred provider organization that maintains
a nationwide network of approximately 250,000 physicians and hospitals. We can
not assure that this letter of intent will lead to the execution of any
agreements, nor can we be certain that any such physician and hospital network
will ever be established. The development of a physician and hospital network
business is subject to numerous risks, including risks similar to those
described in this Prospectus, significant barriers to entry, intense competition
with well-capitalized insurance companies and the possible incurrence of
significant additional sales and marketing costs to develop a distribution
system different from the one we are currently have in place.
POSSIBLE EXPOSURE TO LIABILITY. Physicians and other medical entities have
become increasingly vulnerable to lawsuits alleging medical malpractice. While
we do not intend to practice medicine or control any affiliated provider's
practice of medicine, we can not assure that we will not become a party to
malpractice litigation in the future. We may also be exposed to claims for
personal injuries as a result of the incorrect preparation or packaging of
prescriptions or from the pilferage of or tampering with the prescription drugs
supplied by pharmacy benefits providers. We will attempt to take precautions to
protect us from such claims, including seeking indemnification from such
providers, but we can not assure that such precautions will be implemented or
will prove adequate. Because we are not permitted to and do not render medical
services, we cannot obtain malpractice insurance nor do we maintain errors and
omissions insurance. We do, however, maintain general liability insurance in the
amount of $2,000,000 which provides general coverage for property damage,
business liability and medical payments. We can not assure that we will not be
sued for malpractice as the result of the activities undertaken by our providers
or that any such suit will not result in a recovery against us in excess of any
applicable general liability insurance coverage, which in turn will negatively
affect our financial health.
HEALTH CARE REFORM. In recent years there have been numerous proposals to
change the health care system in the United States. We are unable to predict the
effect of potential reforms in the health care industry on our business, either
by legislative mandate or through self policing mechanisms, particularly those
affecting physicians, health care payors and affiliated health systems. A change
in the health care system could negatively affect our business.
GOVERNMENT REGULATION. Numerous federal, state and local regulations affect
the health care industry, including the prohibition of business corporations
from providing medical care, fraud and abuse provisions of the Medicare and
Medicaid statutes, the prohibition against referral fees and fee splitting and
statutes regulating insurance companies and other organizations that are
associated with health care services. Some of the states in which we intend to
operate currently enforce or may in the future implement registration and
licensing regulations which may affect our business. In addition, the health
care entities with whom we may enter into contracts are subject to a variety of
regulations such as those relating to fee splitting, referral fees, patient
freedom of choice, provider rights to participate and anti-discrimination. These
regulations may result in the delay or denial of any such organization's
participation in our network, which in turn, may affect our operations. The
practice of receiving utilization for our pharmacy benefits program may, in a
number of states, be interpreted to contravene the literal provisions of the
statutes and regulations of such states. At
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present, we have not obtained any rulings from any governmental authorities, nor
have we received an opinion of counsel relating to government regulation of our
business. However, we believe that we are in compliance with the laws and
regulations that are currently enforced and that apply to our business and
conduct our business in a manner consistent with current industry practices.
Legislation in these areas continues to evolve and we can not assure that
changes in enforcement and compliance practices will not change in the future,
nor can we be certain that existing legislation will not expand. If such change
or expansion affects our business, we may be required to register in additional
states, post substantial fidelity or surety bonds and/or meet other financial
requirements. Alternatively, we may be required to modify our products and
services, modify our contractual arrangements with providers or even cease
conducting business in certain states. If any of the above situations were to
occur, or it was determined that we violated any applicable laws or regulations,
such an occurrence or determination would negatively affect our business.
COMPETITION. We believe that a critical element of our business is to
compete for a portion of the benefit dollars allocated by various organizations
for employee benefit programs. We compete for a portion of those dollars with
various other cost-containment marketing organizations, pharmacy indemnity
programs, retail pharmacies, mail order prescription companies, preferred
provider organizations, HMOs, health care membership programs and other
ancillary health care insurance programs. Many of these competitors have longer
operating histories than we do and have significantly greater financial,
marketing and administrative resources. We can not assure that we will ever
develop products that achieve greater market acceptance than products and
services offered by our competitors, nor can we be certain that our competitors
will not develop products that would render our products less competitive or
obsolete.
PROPRIETARY RIGHTS; MANAGEMENT INFORMATION SYSTEMS. Our network
administration system greatly affects our ability to provide customer service
and to process important data. We rely on trade secrets and proprietary software
to establish and protect the proprietary rights affecting our network
administration system. However, trade secrets and proprietary software are
difficult to protect and we can not assure that others will not independently
develop substantially equivalent proprietary technology or otherwise gain access
to our trade secrets or disclose such technology, nor can we be certain that we
will succeed in meaningfully protecting our rights to non-patented trade
secrets. While we have applied for federal registrations of several service
marks and proprietary software from the United States Patent and Trademark
Office, we can not assure that such rights will be granted or, if granted, that
they will provide meaningful protection. Although we intend to take steps that
we consider appropriate to protect our intellectual property rights, we believe
that the success of our business will depend primarily upon our ability to
effectively market our current products, to introduce new products and services
or to enhance existing products, rather than on our ability to obtain legal
protection over our existing intellectual property.
RELIANCE UPON DATA PROCESSING; YEAR 2000 COMPLIANCE. Certain aspects of our
business, including our customer service capabilities, our ability to timely pay
brokers their commissions and pay network providers their fees, are dependent
upon the ability to store, retrieve, process and manage data and to maintain and
upgrade the data processing systems we currently rely on. Although we believe
that we have established appropriate safeguard mechanisms, interruption of data
processing capabilities for any extended period of time, loss of stored data,
programming errors
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or other computer problems may affect our ability to attract and retain brokers
and networks, which in turn may negatively affect our business. We can not
assure that we will not experience problems, delays or unanticipated costs in
the use of our current systems.
We have commenced review of our computer systems to identify the systems
that could be affected by the "Year 2000" issue and are currently developing an
implementation plan to resolve the issue. The Year 2000 issue is the result of
computer programs being written using two digits rather than four to define the
applicable year. Any of our programs that have time-sensitive software may
recognize a date using "00" as the year 1900 rather than the year 2000. The Year
2000 issue could result in a major system failure or miscalculations, affect our
ability to pay commissions and fees to our brokers and networks, as well as our
ability to review network providers in a timely manner and could disrupt our
business operations. We are utilizing internal personnel, contract programmers
and vendors to review our information and operational systems for purposes of
identifying Year 2000 non-compliance problems. We have identified two specific
areas of risks relating to the Year 2000 problem: internal business systems and
software and external noncompliance by third parties including suppliers of
participating providers data, suppliers requiring information about our
eligiblity, financial vendors and our subscribers. Although we believe that our
computer systems are Year 2000 compliant, we can not assure that our systems
will operate as anticipated. In addition, unanticipated issues and problems may
arise with our computer systems which could affect our operating results. The
inability of third parties, including suppliers of participating provider data,
providers and financial vendors to achieve Year 2000 compliance could also
affect our ability to conduct business and could negatively affect our business.
MONEY BACK GUARANTEE. We offer a full money back guarantee to members who,
if during the first 90 days or after one year (depending upon the product), are
not completely satisfied with the HealthCare Solutions Card. We recognize
revenues from the sale of the HealthCare Solutions Card on a monthly basis
ratably over the life of the membership. Therefore, if refunds exceed the
reserves we have established, such refunds may negatively affect our operating
results, cash flows and our overall financial condition.
DEPENDENCE ON KEY PERSONNEL; NEED FOR ADDITIONAL PERSONNEL; CONFLICTS OF
INTEREST. We depend upon Neal J. Polan, our Chairman and Chief Executive Officer
with whom we have an employment agreement, as well as principal members of our
management team. Mr. Polan devotes approximately 50% of his business time to our
business activities. Mr. Polan devotes approximately 50% of his business and
investments outside of the Company, some of which are or may be in the health
care services field. In the course of his activities, Mr. Polan may occasionally
be presented with various business opportunities in the health care services
industry. Mr. Polan may present certain of these opportunities to our business,
although Mr. Polan has no agreement to do so and we can not be certain that any
such opportunities will ever be presented to us. In addition, we have entered
into a one-year consulting agreement with Practice Management, Inc., whereby
Practice Management, Inc. will market our business to labor groups, managed care
entities, preferred provider organizations and third party administrators for an
annual fee of $50,000. Mr. Polan has entered into a separate agreement with
Practice Management, Inc. whereby Practice Management, Inc. has agreed in
exchange for a one-time payment of $50,000 to present to Mr. Polan, in
preference
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to others certain business opportunities; provided, that the agreement between
Practice Management, Inc. and Mr. Polan provides that Practice Management, Inc.
shall be obligated to first present to us, prior to Mr. Polan, any business
opportunities that may be appropriate for our business. These arrangements and
agreements may give rise to certain conflicts of interest.
We currently have only 14 full-time employees. The success of our business
will depend partially upon our ability to attract and retain additional skilled
personnel to manage our operations. The inability to do so, or the loss of
services of certain of our executive officers and directors or other executive
officers or key employees that we may hire in the future, may negatively affect
the business.
CONTROL BY MANAGEMENT AND PRINCIPAL STOCKHOLDERS; POTENTIAL ANTI-TAKEOVER
EFFECT OF SHARES HAVING DISPROPORTIONATE VOTING RIGHTS. Neal J. Polan, our
Chairman of the Board and Chief Executive Officer currently owns all of our
Class B Common Stock. Mr. Polan also holds the power to vote by proxy an
aggregate of 144,000 shares of Class A Common Stock. As such, Mr. Polan has the
power vote shares of Common Stock representing approximately 29.9% of the total
voting power held by our stockholders, and therefore has significant control
over the outcome of substantially all matters submitted to a vote of the
stockholders. Furthermore, the disproportionate vote afforded the Class B Common
Stock could impede or prevent a change of control of our company. As such,
potential acquirors seeking to acquire control of us through the purchase of
Class A Common Stock may be discouraged from doing so, which in turn, could have
a depressive effect on the price of our securities.
POTENTIAL ADVERSE EFFECTS OF PREFERRED STOCK; POSSIBLE ANTI-TAKEOVER
PROVISIONS. Our Certificate of Incorporation authorizes us to issue shares of
"blank check" preferred stock, which will have such designations, rights and
preferences our Board of Directors may determine from time to time. Accordingly,
our Board of Directors are empowered, without stockholder approval (but subject
to applicable government regulatory restrictions), to issue preferred stock with
dividend, liquidation, conversion, voting or other rights which could negatively
affect the voting power or other rights of the holders of the Common Stock. If
such preferred stock were to be issued, it could be used, under certain
circumstances, to discourage, delay or prevent a change in control of our
company. Although we have no present intention to issue any shares of preferred
stock, we can not be certain that we will not do so in the future. There is also
a Delaware statute regulating business combinations that could discourage,
hinder or preclude an unsolicited acquisition of our company and make it less
likely that stockholders receive a premium for their shares as a result of such
attempt. This Delaware statute may negatively affect the market price of our
securities.
CHARGES AND POTENTIAL CHARGES TO EARNINGS. As a condition to our initial
public offering completed in October 1997, the holders of our Class A and Class
B Common Stock prior to our initial public offering agreed to place, on a pro
rata basis, 900,000 shares, or three-quarters of their outstanding shares of
Common Stock before the initial public offering into escrow. These escrow shares
will be released only if we attain certain earnings or market price thresholds.
The Securities and Exchange Commission has taken the position that in the event
any shares are released from escrow to holders who are officers, directors,
employees or consultants, a compensation expense will
-10-
<PAGE>
be recorded for financial reporting purposes. Accordingly, if the escrow shares
are released, we will recognize for the period in which the earnings thresholds
are probable of being met or such stock levels achieved, a substantial non-cash
charge to earnings equal to the fair market value of such shares on the date of
their release. This kind of charge to earnings may significantly increase our
loss or reduce or eliminate earnings, if any, at such time. The recognition of
such compensation expense may also have a depressive effect on the market price
of our securities.
In addition, the achievement of defined earnings or market price thresholds
affect whether certain warrants issued to Neal J. Polan may be exercised. When
Mr. Polan is able to exercise these warrants, we will recognize during the
period in which the earnings thresholds are probable of being met or such stock
levels achieved, an additional non-cash charge to earnings equal to the fair
market value of the portion of the warrants subject to such earnings or market
price thresholds. This kind of charge to earnings may affect our market price
and significantly increase our loss or reduce or eliminate earnings, if any, at
such time.
POSSIBLE VOLATILITY OF MARKET PRICE. The market prices of our Units (each
Unit consisting of one share of Class A Common Stock and one Class A Warrant),
Class A Common Stock and Class A Warrants could fluctuate significantly in
response to variations in our development efforts, intellectual property
position, government regulation, general trends in the industry and as a result
of other factors, including extreme price and volume fluctuations which have
been experienced by the securities markets from time to time.
SHARES ELIGIBLE FOR FUTURE SALE; EFFECT OF OUTSTANDING OPTIONS AND
WARRANTS; EXERCISE OF REGISTRATION RIGHTS. Future sales of our securities by
existing securityholders through the exercise of outstanding registration rights
or through the issuance of shares of Class A Common Stock upon exercise of
options, warrants or otherwise may decrease the price of our securities. Of the
6,172,250 shares of Class A Common Stock to be outstanding after the Offering
(giving effect to the exercise of the Class A Warrants and the other outstanding
Warrants), approximately 5,311,250 shares of Class A Common Stock, including the
shares of Class A Common Stock offered in this Prospectus, will be freely
tradeable without restriction under the Securities Act, except if any shares are
purchased by "affiliates" as defined in Rule 144 under the Securities Act. The
remaining 862,000 shares of Class A Common Stock outstanding after the Offering
are "restricted securities" as that term is defined in Rule 144 under the
Securities Act, and under certain circumstances may be sold without registration
under Rule 144 or otherwise.
We have outstanding 3,473,000 Warrants to purchase a total of 3,473,000
shares of Class A Common Stock (including the Class A Warrants and other
outstanding Warrants to purchase shares of Class A Common Stock being registered
for resale in this Offering) and the Unit Purchase Option to purchase a total of
352,000 shares of Class A Common Stock, assuming exercise of the underlying
Class A Warrants. We have also reserved for issuance 200,000 shares of Class A
Common Stock under our 1997 Stock Option Plan. To date, options to purchase
159,500 shares (net of forfeitures) have been granted under our 1997 Stock
Option Plan. 216,000 shares of Class A
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<PAGE>
Common Stock will also be issued upon conversion of the 216,000 shares Class B
Common Stock which we have outstanding. The existence of these securities could
decrease the price of the Company's outstanding securities. If any of these
securities are exercised, the value of the Class A Common Stock held by public
investors will be diluted if the value of such stock immediately prior to the
exercise of such securities exceeds their exercise price, with the extent of
such dilution depending upon such excess. These securities afford the holders
the opportunity, at nominal cost, to profit from a rise in the market price of
the Class A Common Stock, which may negatively affect the terms upon which we
could issue additional Class A Common Stock during such term. In addition,
holders of warrants and options are likely to exercise them when, in all
likelihood, the Company could obtain additional capital on terms more favorable
than those provided by the warrants and options. Further, while these securities
are outstanding, our ability to obtain additional financing on favorable terms
may be negatively affected.
In addition, the holders of the Unit Purchase Option to purchase a total of
352,000 shares of Class A Common Stock (assuming exercise of the underlying
Class A Warrants) issued in our initial public offering have certain demand and
"piggy-back" registration rights . We have received waivers from holders of
these registration rights that are currently exercisable waiving their rights to
have their securities registered in this Offering. Sales of Class A Common Stock
or the possibility of such sales in the public market may negatively affect the
market price of the securities included in this Offering.
POSSIBLE DELISTING OF SECURITIES FROM THE NASDAQ STOCK MARKET. While our
Units, Class A Common Stock and Class A Warrants are listed on the Nasdaq
SmallCap Market, we can not assure that we will, on an ongoing basis, meet the
criteria for continued listing. Continued inclusion on Nasdaq would require that
(i) we maintain (A) net tangible assets of at least $2,000,000, (B) net income
of $500,000 in two of the last three years, or (C) market capitalization of at
least $35,000,000, (ii) the minimum bid price of the Class A Common Stock be
$1.00 per share, (iii) there be at least 500,000 shares in the public float
valued at $1,000,000 or more, (iv) the Class A Common stock have at least two
active market markers and (v) the Class A Common Stock be held by at least 300
holders. From time to time, our Class A Common Stock has traded below the $1.00
minimum bid price requirement.
-12-
<PAGE>
If we are unable to satisfy Nasdaq's maintenance requirements, our
securities may be delisted from Nasdaq and trading, if any, in these securities
would thereafter be conducted in the over-the-counter market in the so-called
"pink sheets" or the NASD's "Electronic Bulletin Board" and could also be
subject to additional restrictions. Consequently, the liquidity of these
securities could be impaired, not only in the number of securities which could
be bought and sold, but also through delays in the timing of transactions and
lower prices for our securities that may result.
NO DIVIDENDS. We have not paid any cash dividends on our Class A Common
Stock and do not expect to declare or pay any cash or other dividends in the
foreseeable future.
POTENTIAL ADVERSE EFFECT OF REDEMPTION OF WARRANTS. Beginning October 14,
1998, we may redeem the Class A Warrants at a redemption price of $.05 per
Warrant upon not less than 30 days' prior written notice if the closing bid
price of the Class A Common Stock averaged in excess of $9.10 per share for 30
consecutive trading days ending within 15 days of the notice. Redemption of the
Class A Warrants could force the holders (i) to exercise the Warrants and pay
the exercise price at a time when it may be disadvantageous for the holders to
do so, (ii) to sell the Warrants at the then current market price when they
might otherwise wish to hold the Warrants, or (iii) to accept the nominal
redemption price which, at the time the Warrants are called for redemption, is
likely to be substantially less than the market value of the Warrants.
CURRENT PROSPECTUS AND STATE REGISTRATION TO EXERCISE WARRANTS. Holders of
Class A Warrants will be able to exercise the Warrants only if (i) a current
prospectus under the Securities Act relating to the securities underlying the
Warrants is then in effect and (ii) such securities are qualified for sale or
exempt from qualification under the applicable securities laws of the states in
which the various holders of Warrants reside. Although we have undertaken and
intend to use our best efforts to maintain a current prospectus covering the
securities underlying the Warrants following completion of this Offering to the
extent required by Federal securities laws, we can not assure we will be able to
do so. The value of the Class A Warrants may be greatly reduced if a prospectus
covering the securities issuable upon the exercise of the Warrants is not kept
current or if the securities are not qualified, or exempt from qualification, in
the states in which the holders of Warrants reside. Persons holding Class A
Warrants who reside in jurisdictions in which such securities are not qualified
and in which there is no exemption will be unable to exercise their Warrants and
would either have to sell their Warrants in the open market or allow them to
expire unexercised. If and when the Class A Warrants become redeemable by their
terms, we may exercise
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<PAGE>
our redemption right even if it is unable to qualify the underlying securities
for sale under all applicable state securities laws.
RISKS OF LOW-PRICED OR "PENNY" STOCK. If our securities were delisted from
Nasdaq (See "-- Possible Delisting of Securities from The Nasdaq Stock Market,
Inc."), they could become subject to Rule 15g-9 under the Exchange Act, which
imposes additional sales practice requirements on broker-dealers which sell such
securities except in transactions exempted by such Rule, including transactions
meeting the requirements of Rule 505 or 506 of Regulation D under the Securities
Act and transactions in which the purchaser is an institutional accredited
investor (as defined) or an established customer (as defined) of the broker or
dealer. For transactions covered by this rule, a broker-dealer must make a
special suitability determination for the purchaser and have received the
purchaser's written consent to the transaction prior to sale. Consequently, such
rule may adversely affect the ability of broker-dealers to sell our securities.
SEC regulations define a "penny stock" to be any non-Nasdaq equity security
that has a market price (as therein defined) of less than $5.00 per share or
with an exercise price of less than $5.00 per share, subject to certain
exceptions. For any transaction involving a penny stock, unless exempt, the
rules require delivery, prior to any transaction in a penny stock, of a
disclosure schedule prepared by the SEC relating to the penny stock market.
Disclosure is also required to be made about commissions payable to both the
broker-dealer and the registered representative and current quotations for the
securities. Finally, monthly statements are required to be sent disclosing
recent price information for the penny stock held in the account and information
on the limited market in penny stocks.
The above required penny stock restrictions will not apply to our
securities if such securities are listed on Nasdaq and have certain price and
volume information provided on a current and continuing basis or meet certain
minimum net tangible assets or average revenue criteria. We can not assure that
our securities will qualify for exemption from these restrictions. In any event,
even if our securities were exempt from such restrictions, they would remain
subject to Section 15(b)(6) of the Exchange Act, which gives the Securities and
Exchange Commission the authority to prohibit any person that is engaged in
unlawful conduct while participating in a distribution of a penny stock from
associating with a broker-dealer or participating in a distribution of a penny
stock, if the Securities and Exchange Commission finds that such a restriction
would be in the public interest. If our securities were subject to the rules on
penny stocks, it may severely negative impact the market liquidity of our
securities.
USE OF PROCEEDS
We will receive proceeds upon exercise of the redeemable Class A Warrants
("Class A Warrants") and upon exercise of certain other outstanding warrants
(the "Other Warrants") currently held by two selling securityholders (the Class
A Warrants together with the Other Warrants are hereinafter collectively
referred to as the "Warrants"). In the event that all of the 2,855,250
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<PAGE>
outstanding Class A Warrants are exercised, we would receive net proceeds of
approximately $17,631,168.75 after deducting the solicitation fee payable to
D.H. Blair Investment Banking Corp. ("Blair"), the underwriter of the Company's
initial public offering and excluding other expenses of the Offering. The
Company has agreed to pay Blair a solicitation fee equal to 5% of the exercise
price upon exercise of the Class A Warrants under certain conditions. The
exercise price of the Class A Warrants was determined by negotiation between the
Company and Blair and are not necessarily related to the Company's asset value,
net worth or other established criteria of value. In the event that the 299,000
Other Warrants are exercised, we would receive net proceeds of approximately
$359,000.00, excluding expenses of the Offering.
Warrant
Warrant Solicitation Proceeds to
Exercise Price Fee (1) Company (2)
---------------- -------------- -----------
Per Class A Warrant ...... $ 6.50 $ .325 $ 6.175
Per Other Warrant(3) ..... $ 5.00 -- $ 5.00
$ 1.00 -- $ 1.00
-------------- ----------- --------------
Total .................... $18,918,125.00 $927,956.25 $17,990,168.75
- ------------------
(1) Represents solicitation fees the Company agreed to pay to Blair under the
Warrant Agreement between the Company and Blair. Specifically, the Company
agreed to pay Blair a 5% fee of the exercise price of each Class A Warrant
solicited by representatives if the market price of the Company's Class A
Common Stock on the date the Class A Warrant is exercised is greater than
the then Class A Warrant exercise price, the exercise of the Class A
Warrant was solicited by a member of the National Association of Securities
Dealers, Inc. ("NASD") as designated in writing on the Warrant Certificate
subscription form, the Class A Warrant is not held in a discretionary
account, disclosure of compensation arrangements was made both at the time
of the offering and at the time of the exercise of the Class A Warrants,
and the solicitation of exercise of the Class A Warrant was not in
violation of Regulation M promulgated under the Securities Exchange Act of
1934, as amended.
(2) Assumes the exercise of (i) all outstanding Class A Warrants and that the
solicitation fee is paid on all Class A Warrants exercised and (ii) the
Other Warrants. As of December 8, 1998, none of the Warrants had been
exercised.
(3) The exercise price of each of the two Other Warrants is $5.00 and $1.00,
respectively.
Selling Securityholders holding Warrants have no obligation to exercise
their Warrants. We can not be certain that holders of the Warrants will choose
to exercise all or any of their Warrants.
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<PAGE>
The Company intends to use the net proceeds received upon exercise of the
Warrants, if any, for general corporate purposes and working capital to support
anticipated growth, including future acquisitions. The Company is evaluating and
is engaged in discussions in connection with the potential acquisition of assets
or equity of certain similar or complementary businesses. However, the Company
has no agreements or commitments relating to any particular acquisition and we
can not assure that any such acquisitions will be consummated.
SELLING SECURITYHOLDERS
The following table sets forth certain information with respect to each
Selling Securityholder for whom the Company is registering securities for resale
to the public. The securities offered hereby are comprised of (i) 831,250 shares
of Class A Warrants, (ii) 831,250 shares of Class A Common Stock issuable upon
exercise of the Class A Warrants, (iii) 299,000 shares of Class A Common Stock
issuable upon exercise of Other Warrants and (iv) 132,000 shares of Class A
Common Stock currently issued and outstanding (the "Issued Shares").
Except as set forth below, there are no material relationships between any
of the Selling Securityholders and the Company, nor have any such material
relationships existed within the past three years and none of the Selling
Securityholders hold any other securities of the Company.
We have filed with the Securities and Exchange Commission ("Commission")
under the Securities Act a Registration Statement on Form S-3, of which this
Prospectus forms a part, with respect to the resale of the Securities. We have
agreed, among other things, to bear certain expenses in connection with the
registration and sale of the Securities being offered by the Selling
Securityholders. See "Plan of Distribution."
In February 1997, we issued 132,000 shares of Class A Common Stock to
Annette Lebor, the spouse of the President of M.K.D. Capital Corp. ("M.K.D.") as
consideration for consulting services that have been and will be rendered by
M.K.D. to HealthCore. In February and March 1997, we completed a private
placement and issued an aggregate of 1,150,000 warrants to certain investors.
According to the terms of the private placement, such warrants converted
automatically into Class A Warrants upon our initial public offering which was
completed in October 1997. We issued Other Warrants to purchase (i) an aggregate
of 284,000 shares of Class A Common Stock to Neal J. Polan in September 1997,
and (ii) an aggregate of 15,000 shares of Class A Common Stock to Eli Levitin in
October 1997. Mr. Polan has been Chairman of our Board since January 1997 and
our Chief Executive Officer since April 1997. Mr. Levitin has served as one of
our directors since July 1997.
<TABLE>
<CAPTION>
NUMBER OF
SELLING SECURITIES BENEFICIALLY
SECURITY HOLDER OWNED PRIOR TO OFFERING SECURITIES TO BE OFFERED SECURITIES BENEFICIALLY OWNED AFTER OFFERING
- --------------- ------------------------ --------------------------------------- ---------------------------------------------
SHARES OF SHARES OF SECURITIES
CLASS A CLASS A ISSUABLE UPON CLASS A
COMMON CLASS A COMMON CLASS A EXERCISE OF COMMON CLASS A PERCENT OF CLASS A
STOCK WARRANTS (2) STOCK WARRANTS WARRANTS STOCK WARRANTS COMMON STOCK (8)
-------- ------------- ------- -------- ------------- -------- -------- ------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Annette Lebor 132,000 132,000 0 0 0
Neal Polan(1) 284,000(4) 360,000(6) 0 5.6
</TABLE>
-16-
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF
SELLING SECURITIES BENEFICIALLY
SECURITY HOLDER OWNED PRIOR TO OFFERING SECURITIES TO BE OFFERED SECURITIES BENEFICIALLY OWNED AFTER OFFERING
- --------------- ------------------------ --------------------------------------- ---------------------------------------------
SHARES OF SHARES OF SECURITIES
CLASS A CLASS A ISSUABLE UPON CLASS A
COMMON CLASS A COMMON CLASS A EXERCISE OF COMMON CLASS A PERCENT OF CLASS A
STOCK WARRANTS (2) STOCK WARRANTS WARRANTS STOCK WARRANTS COMMON STOCK (8)
-------- ------------- ------- -------- ------------- -------- -------- ------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Eli Levitin 12,500(3) 12,500 27,500(5) 7,500(7) 0 *
Aleph Mad Family 12,500 12,500 12,500 0 0 0
Limited Partnership
Antelope Company 12,500 12,500 12,500 0 0 0
Bankruptcy 12,500 12,500 12,500 0 0 0
Consultants
Brynde Berkowitz 12,500 12,500 12,500 0 0 0
R. Harwood Belville 25,000 25,000 25,000 0 0 0
Jack B. Cook, M.D. 6,000 18,500 12,500 12,500 6,000 6,000 *
Michael J. Cayre 12,500 12,500 12,500 0 0 0
Jack Dushey 12,500 12,500 12,500 0 0 0
Dan Drykerman 25,000 25,000 25,000 0 0 0
Robert I. Earl 25,000 25,000 25,000 0 0 0
Harriet O. Fordham 12,500 12,500 12,500 0 0 0
Howard Freedberg 12,500 12,500 12,500 0 0 0
R. Merrill Hunter 25,000 25,000 25,000 0 0 0
Mosie Hendeles 12,500 12,500 12,500 0 0 0
Gregory C. Jewell 5,000 12,500 12,500 12,500 5,000 5,000 *
Martin Klein 12,500 12,500 12,500 0 0 0
Pontaray Corp. 12,500 12,500 12,500 0 0 0
Terry Rucker 50,000 50,000 50,000 0 0 0
Ahmed Helmy Selim 50,000 50,000 50,000 0 0 0
Sarco & Company 12,500 12,500 12,500 0 0 0
Mike Sheen 25,000 25,000 25,000 0 0 0
Michael J. Sherman 12,500 12,500 12,500 0 0 0
Joel A. Stone 90,225 102,725 12,500 12,500 90,225 90,225 1.5
John E. Bishop, M.D. 30,000 36,250 6,250 6,250 30,000 30,000 *
Thomas P. Farkas 18,750 18,750 18,750 0 0 0
Isadore Goldberg 25,000 25,000 25,000 0 0 0
Harvey Krauss 6,250 6,250 6,250 0 0 0
Ronald Krinick 25,000 25,000 25,000 0 0 0
Frank & Mary Anne 10,700 25,000 25,000 25,000 10,700 10,700 0
Loccisano
Lawrence Manus 12,500 12,500 12,500 0 0 0
Yasser H. Moustafa 50,000 50,000 50,000 0 0 0
Anthony Pace 6,250 6,250 6,250 0 0 0
Neal & Amy Polan 25,000 25,000 25,000 0 0 0
</TABLE>
-17-
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF
SELLING SECURITIES BENEFICIALLY
SECURITY HOLDER OWNED PRIOR TO OFFERING SECURITIES TO BE OFFERED SECURITIES BENEFICIALLY OWNED AFTER OFFERING
- --------------- ------------------------ --------------------------------------- ---------------------------------------------
SHARES OF SHARES OF SECURITIES
CLASS A CLASS A ISSUABLE UPON CLASS A
COMMON CLASS A COMMON CLASS A EXERCISE OF COMMON CLASS A PERCENT OF CLASS A
STOCK WARRANTS (2) STOCK WARRANTS WARRANTS STOCK WARRANTS COMMON STOCK (8)
-------- ------------- ------- -------- ------------- -------- -------- ------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Craig & Barbara 3,300 12,500 12,500 12,500 3,300 3,300 0
Petterson
Parvin N. Rahban 12,500 12,500 12,500 0 0 0
& Natasha R.
Baradaran
Eric Rose 25,000 25,000 25,000 0 0 0
Barry & Caren C. 6,250 6,250 6,250 0 0 0
Ruht, JTROS
Union Communi- 12,500 12,500 12,500 0 0 0
cations Company
Peter Muserlian 25,000 25,000 25,000 0 0 0
Rodney Ruebsahm 12,500 12,500 12,500 0 0 0
Sandra Seligman 25,000 25,000 25,000 0 0 0
Ernest Trefez 25,000 25,000 25,000 0 0 0
Leon Wagner 25,000 25,000 25,000 0 0 0
David Wohl 12,500 12,500 12,500 0 0 0
</TABLE>
- --------------
* Represents less than 1%.
(1) Excludes other securities deemed to be beneficially owned by Mr. Polan,
including all of the 216,000 issued and outstanding shares of the Company's
Class B Common Stock, of which 48,000 shares of Class B Common Stock held
by Mr. Polan as custodian for his child. Mr. Polan is the beneficial owner
of such shares by virtue of his authority to vote and/or dispose of such
shares. Pursuant to a voting proxy granted to Mr. Polan, Mr. Polan also has
the power to vote 144,000 shares of Class A Common Stock. None of these
securities are included in this Offering.
(2) Excludes shares of Class A Common Stock issuable upon exercise of the
Warrants. All of the 831,250 Class A Warrants being registered are
currently exercisable.
(3) These 12,500 Class A Warrants were issued in connection with the private
placement completed in February and March 1997. Excludes 15,000 of the
Other Warrants that are currently exercisable.
(4) Of these warrants, 142,000 are currently exercisable. The remaining 142,000
warrants will become exercisable upon the Company's attainment of certain
earnings or market price thresholds.
(5) Includes (1) 12,500 Class A Warrants that were issued in connection with
the private placement completed in February and March 1997 and the (ii)
15,000 of the Other Warrants that are currently exercisable.
(6) Includes (i) the 144,000 shares of Class A Common Stock of which Mr. Polan
has the power to vote and (ii) the 216,000 shares of Class B Common Stock
which are convertible into Class A Common Stock upon the occurrence of
certain events.
(7) Represents 7,500 shares of Class A Common Stock underlying options held by
Eli Levitin, of which 3,750 are exercisable within 60 days and 3,750 are
exercisable on June 15, 1999.
(8) Assuming the sale of all securities registered for resale in the Offering.
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<PAGE>
PLAN OF DISTRIBUTION
We have been advised that the Selling Securityholders may sell Securities
from time to time in transactions on the Nasdaq SmallCap Market or on other
exchanges on which the Securities may be traded, in the over-the-counter market,
in negotiated transactions, through the writing of options on the Securities or
a combination of such methods of sale, or through other means. Sales may be
effected at fixed prices which may be changed, at market prices prevailing at
the time of sale, at prices related to such prevailing market prices or at
negotiated prices. The Selling Securityholders are not restricted as to the
price or prices at which they may sell their Securities. Sales of Securities by
the Selling Securityholders may depress the market price of our securities since
the number of Securities which may be sold by the Selling Securityholders is
relatively large compared to the historical average weekly trading of our
securities, and therefore, if the Selling Securityholders were to sell, or
attempt to sell, all of such Securities at once, the Company believes such a
transaction could adversely impact the market price for our securities. As used
herein, "Selling Securityholders" includes donees and pledgees selling
Securities received from a named Selling Securityholder after the date of this
Prospectus.
The Selling Securityholders may effect such transactions by selling the
Securities to or through broker-dealers, and such broker-dealers may receive
compensation in the form of discounts, concessions or commissions from the
Selling Securityholders or the purchasers of the Securities for whom such
broker-dealers may act as agent or to whom they sell as principal, or both
(which compensation to a particular broker-dealer might be in excess of
customary commissions). The Selling Securityholders and any broker-dealers or
agents who participate in the distribution of Securities hereunder may be deemed
to be "underwriters" as that term is defined in the Act, and any commissions
received by them and profit on any resale of the Securities as principal might
be deemed to be underwriting discounts and commissions under the Act.
The Company has been advised that Sandra Seligman, a Selling
Securityholder, is related to a member of the NASD.
The Company has registered the Securities for resale pursuant to agreements
with the Selling Securityholders and has agreed to pay the expenses of
registration in connection with the Offering and to indemnify the Selling
Securityholders against certain liabilities, including certain liabilities under
the Act. Selling Securityholders may agree to indemnify any agent, dealer or
broker-dealer that participates in transactions involving sales of the
Securities against certain liabilities, including liabilities arising under the
Securities Act. The Company will not receive any proceeds from the sale of
Securities by the Selling Securityholders although the Company will receive
proceeds from any exercise of the Warrants.
The Company has agreed not to solicit Class A Warrant exercises other than
through Blair. Upon any exercise of the Class A Warrants, the Company will pay
Blair a fee of 5% of the aggregate exercise price if (i) the market price of the
Company's Class A Common Stock on the date the Class A Warrant is exercised is
greater than the then exercise price of the Class A Warrants; (ii) the exercise
of the Class A Warrant was solicited by a member of the NASD as designated in
writing
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<PAGE>
on the Class A Warrant certificate subscription form; (iii) the Class A Warrant
is not held in a discretionary account; (iv) disclosure of compensation
arrangements was made both at the time of the offering and at the time of
exercise of the Class A Warrants, and (v) the solicitation of exercise of the
Warrant was not in violation of Regulation M promulgated under the Exchange Act.
At the time a particular offer of Securities is made, to the extent
required, a supplement to this Prospectus will be distributed which will
identify and set forth the aggregate amount of Securities being offered and the
terms of the offering.
The Selling Securityholders are subject to applicable provisions of the
Exchange Act, and the rules and regulations thereunder, including without
limitation, Regulation M, which provisions may limit the timing of purchases and
sales of the Securities by the Selling Securityholders.
In order to comply with certain states' securities laws, if applicable, the
Securities may be sold in such jurisdictions only through registered or licensed
brokers or dealers. In certain states the Securities may not be sold unless the
Securities have been registered or qualified for sale in such state, or unless
an exemption from registration or qualification is available and is obtained.
INDEMNIFICATION OF OFFICERS AND DIRECTORS
The Certificate of Incorporation and By-Laws of the Company provide that
the Company shall indemnify any person to the full extent permitted by the
Delaware General Corporation Law.
The Company also has Indemnification Agreements with each of its officers
and directors.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or controlling persons pursuant to the
foregoing provisions, or otherwise, the Registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
LEGAL MATTERS
The validity of the securities offered hereby have been passed upon for the
Company by Bachner, Tally, Polevoy & Misher LLP, New York, New York.
-20-
<PAGE>
EXPERTS
The balance sheet as of September 30, 1997 and the statements of
operations, changes in capital deficiency and cash flows for the years ended
September 30, 1997 and 1996 and the period from June 1, 1995 through September
30, 1997, incorporated in this Prospectus by reference to the Company's Annual
Report on Form 10-KSB for the year ended September 30, 1997, have been
incorporated herein in reliance on the report of Richard A. Eisner & Company,
LLP, independent accountants, given on the authority of that firm as experts
in accounting and auditing.
-21-
<PAGE>
No dealer, salesman or any other person has been authorized to give any
information or to make any representation not contained in this Prospectus in
connection with the Offering herein contained, and, if given or made, such
information or representation must not be relied upon as having been authorized
by the Company or any underwriter. This Prospectus does not constitute an offer
to sell or a solicitation of any offer to buy any of the securities offered
hereby in any jurisdiction to any person to whom it is unlawful to make such an
offer or solicitation in such jurisdiction. Neither the delivery of this
Prospectus nor any sale hereunder shall under any circumstances create any
implication that there has been no change in the affairs of the Company since
any of the dates as of which information is furnished herein or since the date
hereof.
TABLE OF CONTENTS
Page
----
Available Information.......................................................2
Incorporation of Certain Documents by Reference.............................2
Prospectus Summary..........................................................4
The Company.................................................................4
Risk Factors................................................................5
Use of Proceeds............................................................14
Selling Securityholders....................................................16
Plan of Distribution.......................................................19
Indemnification of Officers and Directors..................................20
Legal Matters..............................................................20
Experts....................................................................21
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The estimated expenses payable by the Company in connection with the
issuance and distribution of the securities being registered are as follows:
SEC Registration Fee................................................. $424
Accounting Fees and Expenses..................................... 5,000
Legal Fees and Expenses.......................................... 18,500
Miscellaneous Expenses........................................... 6,076
Total....................................................... $30,000
II-1
<PAGE>
Item 15. Indemnification of Directors and Officers.
The Certificate of Incorporation and By-Laws of the Company provide that
the Company shall indemnify any person to the full extent permitted by the
Delaware General Corporation Law.
Reference is hereby made to Section 145 of the Delaware General Corporation
Law relating to the indemnification of officers and directors which Section is
hereby incorporated herein by reference.
The Company also has Indemnification Agreements with each of its officers
and directors.
Item 16. Exhibits.
(a) Exhibits
4.1 - Warrant Agreement with Neal J. Polan
4.2 - Warrant Agreement with Eli Levitin
5.1 - Opinion of Bachner, Tally, Polevoy & Misher LLP*
23.1 - Consent of Richard A. Eisner & Company, LLP
23.2 - Consent of Bachner, Tally, Polevoy & Misher LLP -
Included in Exhibit 5.1*
24 - Power of Attorney - Included on II - 4
---------------
* To be filed by amendment.
Item 17. Undertakings
Undertaking Required by Regulation S-B, Item 512(a).
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement to include
any material information with respect to the plan of distribution not
previously disclosed in the registration statement or any material change
to such information in the registration statement;
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
II-2
<PAGE>
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
Undertaking required by Regulation S-B, Item 512(e).
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or controlling persons pursuant to
the foregoing provisions, or otherwise, the Registrant has been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
Undertaking Required by Regulation S-B, Item 512(f).
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the
Exchange Act that is incorporated by reference in the registration
statement shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Act, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing Form S-3 and has duly caused this Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of New York on the 8th day of December, 1998.
HEALTHCORE MEDICAL SOLUTIONS, INC.
By: /s/ Neal J. Polan 4
---------------------------------------
Neal J. Polan
Chairman and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below under the heading "Signature" constitutes and appoints Neal J. Polan, his
true and lawful attorney-in-fact and agent with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities to sign any or all amendments to this registration statement, and to
file the same, with all exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, each acting alone, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully for all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, each acting alone, or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
Name Title Date
---- ----- ----
<S> <C> <C>
/s/ DAVID MULLIKIN
- ------------------------------------------ President, Chief Operating December 8, 1998
David Mullikin Officer & Director
/s/ NEAL J. POLAN
- ------------------------------------------ Chairman of the Board December 8, 1998
Neal J. Polan and Chief Executive Officer
(principal executive officer)
/s/ JAMES H. STEINHEIDER
- ------------------------------------------ Chief Financial Officer December 8, 1998
James H. Steinheider (principal financial
and accounting officer)
/s/ ELI LEVITIN
- ------------------------------------------ Director December 8, 1998
Eli Levitin
/s/ NORMAN H. WERTHWEIN
- --------------------------------------- Director December 8, 1998
Norman H. Werthwein
</TABLE>
II-4
<PAGE>
Exhibit Index
(a) Exhibits
4.1 - Warrant Agreement with Neal J. Polan
4.2 - Warrant Agreement with Eli Levitin
5.1 - Opinion of Bachner, Tally, Polevoy & Misher LLP*
23.1 - Consent of Richard A. Eisner & Company, LLP
23.2 - Consent of Bachner, Tally, Polevoy & Misher LLP --
Included in Exhibit 5.1*
24 - Power of Attorney - Included on II - 4
-------------
* To be filed by amendment.
II-5
<PAGE>
December 8, 1998
VIA EDGAR
- ---------
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: HealthCore Medical Solutions, Inc. (the "Company")
--------------------------------------------------
Ladies and Gentlemen:
Accompanying this letter for filing pursuant to the Securities Act of 1933,
as amended, is a conformed copy of the Registration Statement on Form S-3
relating to a public offering by certain securityholders of the Company of an
aggregate of 831,250 Class A Warrants and 3,286,250 shares of Common Stock of
the Company. Manually executed signature pages and consents have been executed
prior to the time of this electronic filing.
In payment of the additional registration fee, $424 was transferred to the
Commission's account by federal wire transfer as required pursuant to Rule 13(c)
of Regulation S-T on November 24, 1998 and December 8, 1998.
Very truly yours,
BACHNER, TALLY, POLEVOY & MISHER LLP
By: /s/ STEVEN SKOLNICK
---------------------------------
Enclosures
cc:
- --------------------------------------------------------------------------------
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE
"ACT") NOR UNDER ANY STATE SECURITIES LAW AND MAY NOT BE PLEDGED, SOLD, ASSIGNED
OR OTHERWISE TRANSFERRED UNTIL A (1) REGISTRATION STATEMENT UNDER THE ACT AND
ANY APPLICABLE STATE SECURITIES LAW HAS BECOME EFFECTIVE WITH RESPECT THERETO,
OR (2) RECEIPT BY THE COMPANY OF AN OPINION OF COUNSEL TO THE COMPANY TO THE
EFFECT THAT REGISTRATION UNDER THE ACT OR APPLICABLE STATE SECURITIES LAW IS NOT
REQUIRED IN CONNECTION WITH THE PROPOSED TRANSFER.
Void after 5:00 p.m. New York Time, on September 7, 2007.
Warrant to Purchase 284,000 Shares of Class A Common Stock.
WARRANT TO PURCHASE CLASS A COMMON STOCK
OF
HEALTHCORE MEDICAL SOLUTIONS, INC.
This is to Certify That, FOR VALUE RECEIVED, Neal J. Polan, or assigns
("Holder"), is entitled to purchase, subject to the provisions of this Warrant,
from HealthCore Medical Solutions, Inc., a Delaware corporation ("Company"),
284,000 fully paid, validly issued and nonassessable shares of Class A Common
Stock, par value $.01 per share, of the Company ("Class A Common Stock") at a
price of $1.00 per share at any time or from time to time during the period from
September 8, 1997 to September 7, 2007, as set forth under (a) below, but not
later than 5:00 p.m. New York City Time, on September 7, 2007. The number of
shares of Class A Common Stock to be received upon the exercise of this Warrant
and the price to be paid for each share of Class A Common Stock may be adjusted
from time to time as hereinafter set forth. The shares of Class A Common Stock
deliverable upon such exercise, and as adjusted from time to time, are
hereinafter sometimes referred to as "Warrant Shares" and the exercise price of
a share of Class A Common Stock in effect at any time and as adjusted from time
to time is hereinafter sometimes referred to as the "Exercise Price".
(a) EXERCISE OF WARRANT.
(1) This Warrant may be exercised in whole or in part at any time or from
time to time, on a cumulative basis and until September 7, 2007 as follows:
(a) warrants to purchase 142,000 shares of Class A Common Stock shall
become exercisable on September 8, 1997; and
(b) warrants to purchase 142,000 shares of Class A Common Stock shall
become exercisable upon the achievement by the Company, if any, of one or
more of the following conditions: (i) the Company's Minimum
<PAGE>
Pretax Income (as defined in the Escrow Agreement between the Corporation
and the stockholders listed on the signature page thereto (the "Escrow
Agreement")) amounts to at least $3,800,000 for the fiscal year ending
September 30, 1998; (ii) the Company's Minimum Pretax Income amounts to at
least $5,500,000 for the fiscal year ending September 30, 1999; (iii) the
Company's Minimum Pretax Income amounts to at least $7,500,000 for the
fiscal year ending September 30, 2000; (iv) the Closing Price (as defined
in the Escrow Agreement) of the Class A Common Stock averages in excess of
$12.50 per share for 30 consecutive business days during the 18-month
period commencing on the date hereof or (v) the Closing Price of the Class
A Common Stock averages in excess of $16.50 per share for 30 consecutive
business days during the 18-month period commencing with the nineteenth
month from the date hereof;
provided, however, that if such day is a day on which banking institutions in
the State of New York are authorized by law to close, then on the next
succeeding day which shall not be such a day. This Warrant may be exercised by
presentation and surrender hereof to the Company at its principal office, or at
the office of its stock transfer agent, if any, with the Purchase Form annexed
hereto duly executed and accompanied by payment of the Exercise Price for the
number of Warrant Shares specified in such form. As soon as practicable after
each such exercise of the warrants, but not later than seven (7) days from the
date of such exercise, the Company shall issue and deliver to the Holder a
certificate or certificate for the Warrant Shares issuable upon such exercise,
registered in the name of the Holder or its designee. If this Warrant should be
exercised in part only, the Company shall, upon surrender of this Warrant for
cancellation, execute and deliver a new Warrant evidencing the rights of the
Holder thereof to purchase the balance of the Warrant Shares purchasable
thereunder. Upon receipt by the Company of this Warrant at its office, or by the
stock transfer agent of the Company at its office, in proper form for exercise,
the Holder shall be deemed to be the holder of record of the shares of Class A
Common Stock issuable upon such exercise, notwithstanding that the stock
transfer books of the Company shall then be closed or that certificates
representing such shares of Class A Common Stock shall not then be physically
delivered to the Holder.
(2) At any time during the term of this Warrant, the Holder may, at its
option, exchange this Warrant, in whole or in part (a "Warrant Exchange"), into
the number of Warrant Shares determined in accordance with this Section (a)(2),
by surrendering this Warrant at the principal office of the Company or at the
office of its stock transfer agent, accompanied by a notice stating such
Holder's intent to effect such exchange, the number of Warrant Shares to be
exchanged and the date on which the Holder requests that such Warrant Exchange
occur (the "Notice of Exchange"). The Warrant Exchange shall take place on the
date specified in the Notice of Exchange or, if later, the date the Notice of
Exchange is received by the Company (the "Exchange Date"). Certificates for the
shares issuable upon such Warrant Exchange and, if applicable, a new warrant of
like tenor evidencing the balance of the shares remaining subject to this
Warrant, shall be issued as of the Exchange Date and delivered to the Holder
within seven (7) days following the Exchange Date. In connection with any
Warrant Exchange, this Warrant shall represent the right to subscribe for and
acquire the number of Warrant Shares (rounded to the next highest integer) equal
2
<PAGE>
to (i) the number of Warrant Shares specified by the Holder in its Notice of
Exchange (the "Total Number") less (ii) the number of Warrant Shares equal to
the quotient obtained by dividing (A) the product of the Total Number and the
existing Exercise Price by (B) the current market value of a share of Class A
Common Stock. Current market value shall have the meaning set forth Section (c)
below, except that for purposes hereof, the date of exercise, as used in such
Section (c), shall mean the Exchange Date.
(b) RESERVATION OF SHARES. The Company shall at all times reserve for
issuance and/or delivery upon exercise of this Warrant such number of shares of
its Class A Common Stock as shall be required for issuance and delivery upon
exercise of the Warrants.
(c) FRACTIONAL SHARES. No fractional shares or script representing
fractional shares shall be issued upon the exercise of this Warrant. With
respect to any fraction of a share called for upon any exercise hereof, the
Company shall pay to the Holder an amount in cash equal to such fraction
multiplied by the current market value of a share, determined as follows:
(1) If the Class A Common Stock is listed on a national securities
exchange or admitted to unlisted trading privileges on such exchange or
listed for trading on the Nasdaq National Market, the current market value
shall be the last reported sale price of the Class A Common Stock on such
exchange or market on the last business day prior to the date of exercise
of this Warrant or if no such sale is made on such day, the average closing
bid and asked prices for such day on such exchange or market; or
(2) If the Class A Common Stock is not so listed or admitted to
unlisted trading privileges, but is traded on the Nasdaq Small Cap Market,
the current Market Value shall be the average of the closing bid and asked
prices for such day on such market and if the Class A Common Stock is not
so traded, the current market value shall be the mean of the last reported
bid and asked prices reported by the National Quotation Bureau, Inc. on the
last business day prior to the date of the exercise of this Warrant; or
(3) If the Class A Common Stock is not so listed or admitted to
unlisted trading privileges and bid and asked prices are not so reported,
the current market value shall be an amount, not less than book value
thereof as at the end of the most recent fiscal year of the Company ending
prior to the date of the exercise of the Warrant, determined in such
reasonable manner as may be prescribed by the Board of Directors of the
Company.
(d) EXCHANGE, TRANSFER, ASSIGNMENT OR LOSS OF WARRANT. This Warrant is
exchangeable, without expense, at the option of the Holder, upon presentation
and surrender hereof to the Company or at the office of its stock transfer
agent, if any, for other warrants of different denominations entitling the
holder thereof to purchase in the aggregate the same number of shares of Class A
Common Stock purchasable hereunder. This Warrant is not transferable (other than
by will or pursuant to the laws of descent and distribution). Upon surrender of
this Warrant to the Company at its principal office or at the office of its
stock transfer agent, if any, with the
3
<PAGE>
Assignment Form annexed hereto duly executed and funds sufficient to pay any
transfer tax, the Company shall, without charge, execute and deliver a new
Warrant in the name of the assignee named in such instrument of assignment and
this Warrant shall promptly be cancelled. This Warrant may be divided or
combined with other warrants which carry the same rights upon presentation
hereof at the principal office of the Company or at the office of its stock
transfer agent, if any, together with a written notice specifying the names and
denominations in which new Warrants are to be issued and signed by the Holder
hereof. The term "Warrant" as used herein includes any Warrants into which this
Warrant may be divided or exchanged. Upon receipt by the Company of evidence
satisfactory to it of the loss, theft, destruction or mutilation of this
Warrant, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Warrant, if mutilated, the Company will execute and deliver a new Warrant of
like tenor and date. Any such new Warrant executed and delivered shall
constitute an additional contractual obligation on the part of the Company,
whether or not this Warrant so lost, stolen, destroyed, or mutilated shall be at
any time enforceable by anyone.
(e) RIGHTS OF THE HOLDER. The Holder shall not, by virtue hereof, be
entitled to any rights of a shareholder in the Company, either at law or equity,
and the rights of the Holder are limited to those expressed in the Warrant and
are not enforceable against the Company except to the extent set forth herein.
(f) ANTI-DILUTION PROVISIONS. The Exercise Price in effect at any time and
the number and kind of securities purchasable upon the exercise of the Warrants
shall be subject to adjustment from time to time upon the happening of certain
events as follows:
(1) In case the Company shall (i) declare a dividend or make a
distribution on its outstanding shares of Class A Common Stock in shares of
Class A Common Stock, (ii) subdivide or reclassify its outstanding shares
of Class A Common Stock into a greater number of shares, or (iii) combine
or reclassify its outstanding shares of Class A Common Stock into a smaller
number of shares, the Exercise Price in effect at the time of the record
date for such dividend or distribution or of the effective date of such
subdivision, combination or reclassification shall be adjusted so that it
shall equal the price determined by multiplying the Exercise Price by a
fraction, the denominator of which shall be the number of shares of Class A
Common Stock outstanding after giving effect to such action, and the
numerator of which shall be the number of shares of Class A Common Stock
outstanding immediately prior to such action. Such adjustment shall be made
successively whenever any event listed above shall occur.
(2) Whenever the Exercise Price payable upon exercise of each Warrant
is adjusted pursuant to Subsection (1) above, the number of Shares
purchasable upon exercise of this Warrant shall simultaneously be adjusted
by multiplying the number of Shares initially issuable upon exercise of
this Warrant by the Exercise Price in effect on the date hereof and
dividing the product so obtained by the Exercise Price, as adjusted.
4
<PAGE>
(3) No adjustment in the Exercise Price shall be required unless such
adjustment would require an increase or decrease of at least five cents
($0.05) in such price; provided, however, that any adjustments which by
reason of this Subsection (3) are not required to be made shall be carried
forward and taken into account in any subsequent adjustment required to be
made hereunder. All calculations under this Section (f) shall be made to
the nearest cent or to the nearest one-hundredth of a share, as the case
may be. Anything in this Section (f) to the contrary notwithstanding, the
Company shall be entitled, but shall not be required, to make such changes
in the Exercise Price, in addition to those required by this Section (f),
as it shall determine, in its sole discretion, to be advisable in order
that any dividend or distribution in shares of Class A Common Stock, or any
subdivision, reclassification or combination of Class A Common Stock,
hereafter made by the Company shall not result in any Federal Income tax
liability to the holders of Class A Common Stock or securities convertible
into Class A Common Stock (including Warrants).
(4) Whenever the Exercise Price is adjusted, as herein provided, the
Company shall promptly but no later than 20 days after any request for such
an adjustment by the Holder, cause a notice setting forth the adjusted
Exercise Price and adjusted number of Shares issuable upon exercise of each
Warrant, and, if requested, information describing the transactions giving
rise to such adjustments, to be mailed to the Holders at their last
addresses appearing in the Warrant Register, and shall cause a certified
copy thereof to be mailed to its transfer agent, if any. The Company may
retain a firm of independent certified public accountants selected by the
Board of Directors (who may be the regular accountants employed by the
Company) to make any computation required by this Section (f), and a
certificate signed by such firm shall be conclusive evidence of the
correctness of such adjustment.
(5) In the event that at any time, as a result of an adjustment made
pursuant to Subsection (1) above, the Holder of this Warrant thereafter
shall become entitled to receive any shares of the Company, other than
Class A Common Stock, thereafter the number of such other shares so
receivable upon exercise of this Warrant shall be subject to adjustment
from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to the Class A Common Stock
contained in Subsection (1) above.
(6) Irrespective of any adjustments in the Exercise Price or the
number or kind of shares purchasable upon exercise of this Warrant,
Warrants theretofore or thereafter issued may continue to express the same
price and number and kind of shares as are stated in the similar Warrants
initially issuable pursuant to this Warrant.
(g) OFFICER'S CERTIFICATE. Whenever the Exercise Price shall be adjusted as
required by the provisions of the foregoing Section, the Company shall forthwith
file in the custody of its Secretary or an Assistant Secretary at its principal
office and with its stock transfer agent, if any, an officer's certificate
showing the adjusted Exercise Price determined as herein provided, setting forth
in reasonable detail the facts requiring such adjustment, including a statement
of the number of additional shares of Class A Common Stock, if any, and such
other facts as shall be necessary to show the reason for and the manner of
computing such adjustment. Each
5
<PAGE>
such officer's certificate shall be made available at all reasonable times for
inspection by the holder or any holder of a Warrant executed and delivered
pursuant to Section (a) and the Company shall, forthwith after each such
adjustment, mail a copy by certified mail of such certificate to the Holder or
any such holder.
(h) NOTICES TO WARRANT HOLDERS. So long as this Warrant shall be
outstanding, (i) if the Company shall pay any dividend or make any distribution
upon the Class A Common Stock or (ii) if the Company shall offer to the holders
of Class A Common Stock for subscription or purchase by them any share of any
class or any other rights or (iii) if any capital reorganization of the Company,
reclassification of the capital stock of the Company, consolidation or merger of
the Company with or into another corporation, sale, lease or transfer of all or
substantially all of the property and assets of the Company to another
corporation, or voluntary or involuntary dissolution, liquidation or winding up
of the Company shall be effected, then in any such case, the Company shall cause
to be mailed by certified mail to the Holder, at least fifteen days prior the
date specified in (x) or (y) below, as the case may be, a notice containing a
brief description of the proposed action and stating the date on which (x) a
record is to be taken for the purpose of such dividend, distribution or rights,
or (y) such reclassification, reorganization, consolidation, merger, conveyance,
lease, dissolution, liquidation or winding up is to take place and the date, if
any is to be fixed, as of which the holders of Class A Common Stock or other
securities shall receive cash or other property deliverable upon such
reclassification, reorganization, consolidation, merger, conveyance,
dissolution, liquidation or winding up.
(i) RECLASSIFICATION, REORGANIZATION OR MERGER. In case of any
reclassification, capital reorganization or other change of outstanding shares
of Class A Common Stock of the Company, or in case of any consolidation or
merger of the Company with or into another corporation (other than a merger with
a subsidiary in which merger the Company is the continuing corporation and which
does not result in any reclassification, capital reorganization or other change
of outstanding shares of Class A Common Stock of the class issuable upon
exercise of this Warrant) or in case of any sale, lease or conveyance to another
corporation of the property of the Company as an entirety, the Company shall, as
a condition precedent to such transaction, cause effective provisions to be made
so that the Holder shall have the right thereafter by exercising this Warrant at
any time prior to the expiration of the Warrant, to purchase the kind and amount
of shares of stock and other securities and property receivable upon such
reclassification, capital reorganization and other change, consolidation,
merger, sale or conveyance by a holder of the number of shares of Class A Common
Stock which might have been purchased upon exercise of this Warrant immediately
prior to such reclassification, change, consolidation, merger, sale or
conveyance. Any such provision shall include provision for adjustments which
shall be as nearly equivalent as may be practicable to the adjustments provided
for in this Warrant. The foregoing provisions of this Section (i) shall
similarly apply to successive reclassification, capital reorganizations and
changes of shares of Class A Common Stock and to successive consolidations,
mergers, sales or conveyances. In the event that in connection with any such
capital reorganization or reclassification, consolidation, merger, sale or
conveyance, additional shares of Class A Common Stock shall be issued in
exchange, conversion, substitution or payment, in whole or in part, for a
security of the Company other than Class A Common Stock, any such issue shall be
treated as an issue of Class A Common Stock covered by the provisions of
Subsection (1) of Section (f) hereof. A distribution in securities, rights to
acquire securities, or other property (except for cash dividends)
6
<PAGE>
made with respect to Class A Common Stock or other securities of the Company or
a successor corporation, to the extent that such distribution shall not be
covered by the provisions of Subsection (1) of Section (f) hereof, shall be
deemed to be a capital reorganization within the meaning of this Section (i).
(j) RESTRICTIVE LEGEND. Each Warrant Share, when issued, shall include a
legend in substantially the following form: THESE SHARES HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT") NOR UNDER ANY STATE
SECURITIES LAW AND MAY NOT BE PLEDGED, SOLD, ASSIGNED OR OTHERWISE TRANSFERRED
UNTIL A (1) REGISTRATION STATEMENT UNDER THE ACT AND ANY APPLICABLE STATE
SECURITIES LAW HAS BECOME EFFECTIVE WITH RESPECT THERETO, OR (2) RECEIPT BY THE
COMPANY OF AN OPINION OF COUNSEL TO THE COMPANY TO THE EFFECT THAT REGISTRATION
UNDER THE ACT OR APPLICABLE STATE SECURITIES LAW IS NOT REQUIRED IN CONNECTION
WITH THE PROPOSED TRANSFER.
(k) The Company will not, by amendment of its charter or through
reorganization, consolidation, merger, dissolution, sale of assets or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms of this Warrant, but will at all times in good faith assist in the
carrying out of all such terms and in the taking of all such action as my be
necessary or appropriate in order to protect the rights of the holder of this
Warrant against impairment.
HEALTHCORE MEDICAL SOLUTIONS, INC.
By /s/ JAMES H. STEINHEIDER
-------------------------------
James H. Steinheider,
Chief Finanical Officer
and Chief Operating Officer
[SEAL]
Dated: September 8, 1997
Attest:
/s/ RONALD F. TORCHIC
- -----------------------------
Secretary
7
<PAGE>
PURCHASE FORM
Dated ____________, 19__
The undersigned hereby irrevocably elects to exercise the within Warrant to
the extent of purchasing _______ shares of Class A Common Stock and hereby makes
payment of _______ in payment of the actual exercise price thereof.
----------------
INSTRUCTIONS FOR REGISTRATION OF STOCK
Name _______________________________________
(Please typewrite or print in block letters)
Address ____________________________________
Signature __________________________________
<PAGE>
ASSIGNMENT FORM
FOR VALUE RECEIVED, ______________ hereby sells, assigns and transfers unto
Name _______________________________________
(Please typewrite or print in block letters)
Address ____________________________________
the right to purchase Class A Common Stock represented by this Warrant to the
extent of ______ shares as to which such right is exercisable and does hereby
irrevocably constitute and appoint ___________ as attorney, to transfer the same
on the books of the Company with full power of substitution in the premises.
Date ____________, 19__
Signature ___________________
<PAGE>
********************************************************************************
STOCK PURCHASE WARRANT
To Purchase Class A Common Stock of
HEALTHCORE MEDICAL SOLUTIONS, INC.
********************************************************************************
- --------------------------------------------------------------------------------
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE
"ACT") NOR UNDER ANY STATE SECURITIES LAW AND MAY NOT BE PLEDGED, SOLD, ASSIGNED
OR OTHERWISE TRANSFERRED UNTIL A (1) REGISTRATION STATEMENT UNDER THE ACT AND
ANY APPLICABLE STATE SECURITIES LAW HAS BECOME EFFECTIVE WITH RESPECT THERETO,
OR (2) RECEIPT BY THE COMPANY OF AN OPINION OF COUNSEL TO THE COMPANY TO THE
EFFECT THAT REGISTRATION UNDER THE ACT OR APPLICABLE STATE SECURITIES LAW IS NOT
REQUIRED IN CONNECTION WITH THE PROPOSED TRANSFER.
Void after 5:00 p.m. New York Time, on October 8, 2007.
Warrant to Purchase 15,000 Shares of Class A Common Stock.
WARRANT TO PURCHASE CLASS A COMMON STOCK
OF
HEALTHCORE MEDICAL SOLUTIONS, INC.
This is to Certify That, FOR VALUE RECEIVED, Eli Levitin, or assigns
("Holder"), is entitled to purchase, subject to the provisions of this Warrant,
from HealthCore Medical Solutions, Inc., a Delaware corporation ("Company"),
15,000 fully paid, validly issued and nonassessable shares of Class A Common
Stock, par value $.01 per share, of the Company ("Class A Common Stock") at a
price of $5.00 per share at any time or from time to time during the period from
October 9, 1997 to October 8, 2007, as set forth under (a) below, but not later
than 5:00 p.m. New York City Time, on October 8, 2007. The number of shares of
Class A Common Stock to be received upon the exercise of this Warrant and the
price to be paid for each share of Class A Common Stock may be adjusted from
time to time as hereinafter set forth. The shares of Class A Common Stock
deliverable upon such exercise, and as adjusted from time to time, are
hereinafter sometimes referred to as "Warrant Shares" and the exercise price of
a share of Class A Common Stock in effect at any time and as adjusted from time
to time is hereinafter sometimes referred to as the "Exercise Price".
(a) EXERCISE OF WARRANT.
(1) This Warrant may be exercised in whole or in part at any time or from
time to time from October 9, 1997 and until October 8, 2007; provided, however,
that if such day is a day on which banking institutions in the State of New York
are authorized by law to close, then on the next succeeding day which shall not
be such a day. This Warrant may be exercised by presentation and surrender
hereof to the Company at its principal office, or at the office of its stock
transfer agent, if any, with the Purchase Form annexed hereto duly executed and
accompanied by payment of the Exercise Price for the number of Warrant Shares
specified in such form. As soon as practicable after each such exercise of the
warrants, but not later than seven (7) days from the date of such exercise, the
Company shall issue and deliver to the Holder a certificate or certificate for
the
1
<PAGE>
Warrant Shares issuable upon such exercise, registered in the name of the Holder
or its designee. If this Warrant should be exercised in part only, the Company
shall, upon surrender of this Warrant for cancellation, execute and deliver a
new Warrant evidencing the rights of the Holder thereof to purchase the balance
of the Warrant Shares purchasable thereunder. Upon receipt by the Company of
this Warrant at its office, or by the stock transfer agent of the Company at its
office, in proper form for exercise, the Holder shall be deemed to be the holder
of record of the shares of Class A Common Stock issuable upon such exercise,
notwithstanding that the stock transfer books of the Company shall then be
closed or that certificates representing such shares of Class A Common Stock
shall not then be physically delivered to the Holder.
(2) At any time during the term of this Warrant, the Holder may, at its
option, exchange this Warrant, in whole or in part (a "Warrant Exchange"), into
the number of Warrant Shares determined in accordance with this Section (a)(2),
by surrendering this Warrant at the principal office of the Company or at the
office of its stock transfer agent, accompanied by a notice stating such
Holder's intent to effect such exchange, the number of Warrant Shares to be
exchanged and the date on which the Holder requests that such Warrant Exchange
occur (the "Notice of Exchange"). The Warrant Exchange shall take place on the
date specified in the Notice of Exchange or, if later, the date the Notice of
Exchange is received by the Company (the "Exchange Date"). Certificates for the
shares issuable upon such Warrant Exchange and, if applicable, a new warrant of
like tenor evidencing the balance of the shares remaining subject to this
Warrant, shall be issued as of the Exchange Date and delivered to the Holder
within seven (7) days following the Exchange Date. In connection with any
Warrant Exchange, this Warrant shall represent the right to subscribe for and
acquire the number of Warrant Shares (rounded to the next highest integer) equal
to (i) the number of Warrant Shares specified by the Holder in its Notice of
Exchange (the "Total Number") less (ii) the number of Warrant Shares equal to
the quotient obtained by dividing (A) the product of the Total Number and the
existing Exercise Price by (B) the current market value of a share of Class A
Common Stock. Current market value shall have the meaning set forth Section (c)
below, except that for purposes hereof, the date of exercise, as used in such
Section (c), shall mean the Exchange Date.
(b) RESERVATION OF SHARES. The Company shall at all times reserve for
issuance and/or delivery upon exercise of this Warrant such number of shares of
its Class A Common Stock as shall be required for issuance and delivery upon
exercise of the Warrants.
(c) FRACTIONAL SHARES. No fractional shares or script representing
fractional shares shall be issued upon the exercise of this Warrant. With
respect to any fraction of a share called for upon any exercise hereof, the
Company shall pay to the Holder an amount in cash equal to such fraction
multiplied by the current market value of a share, determined as follows:
(1) If the Class A Common Stock is listed on a national securities
exchange or admitted to unlisted trading privileges on such exchange or
listed for trading on the Nasdaq National Market, the current market value
shall be the last reported sale price of the Class A Common Stock on such
exchange or market on the last business day prior to the date of exercise
of this Warrant or if no such sale is made on such day, the average closing
bid and asked prices for such day on such exchange or market; or
2
<PAGE>
(2) If the Class A Common Stock is not so listed or admitted to
unlisted trading privileges, but is traded on the Nasdaq Small Cap Market,
the current Market Value shall be the average of the closing bid and asked
prices for such day on such market and if the Class A Common Stock is not
so traded, the current market value shall be the mean of the last reported
bid and asked prices reported by the National Quotation Bureau, Inc. on the
last business day prior to the date of the exercise of this Warrant; or
(3) If the Class A Common Stock is not so listed or admitted to
unlisted trading privileges and bid and asked prices are not so reported,
the current market value shall be an amount, not less than book value
thereof as at the end of the most recent fiscal year of the Company ending
prior to the date of the exercise of the Warrant, determined in such
reasonable manner as may be prescribed by the Board of Directors of the
Company.
(d) EXCHANGE, TRANSFER, ASSIGNMENT OR LOSS OF WARRANT. This Warrant is
exchangeable, without expense, at the option of the Holder, upon presentation
and surrender hereof to the Company or at the office of its stock transfer
agent, if any, for other warrants of different denominations entitling the
holder thereof to purchase in the aggregate the same number of shares of Class A
Common Stock purchasable hereunder. This Warrant is not transferable (other than
by will or pursuant to the laws of descent and distribution). Upon surrender of
this Warrant to the Company at its principal office or at the office of its
stock transfer agent, if any, with the Assignment Form annexed hereto duly
executed and funds sufficient to pay any transfer tax, the Company shall,
without charge, execute and deliver a new Warrant in the name of the assignee
named in such instrument of assignment and this Warrant shall promptly be
cancelled. This Warrant may be divided or combined with other warrants which
carry the same rights upon presentation hereof at the principal office of the
Company or at the office of its stock transfer agent, if any, together with a
written notice specifying the names and denominations in which new Warrants are
to be issued and signed by the Holder hereof. The term "Warrant" as used herein
includes any Warrants into which this Warrant may be divided or exchanged. Upon
receipt by the Company of evidence satisfactory to it of the loss, theft,
destruction or mutilation of this Warrant, and (in the case of loss, theft or
destruction) of reasonably satisfactory indemnification, and upon surrender and
cancellation of this Warrant, if mutilated, the Company will execute and deliver
a new Warrant of like tenor and date. Any such new Warrant executed and
delivered shall constitute an additional contractual obligation on the part of
the Company, whether or not this Warrant so lost, stolen, destroyed, or
mutilated shall be at any time enforceable by anyone.
(e) RIGHTS OF THE HOLDER. The Holder shall not, by virtue hereof, be
entitled to any rights of a shareholder in the Company, either at law or equity,
and the rights of the Holder are limited to those expressed in the Warrant and
are not enforceable against the Company except to the extent set forth herein.
(f) ANTI-DILUTION PROVISIONS. The Exercise Price in effect at any time and
the number and kind of securities purchasable upon the exercise of the Warrants
shall be subject to adjustment from time to time upon the happening of certain
events as follows:
3
<PAGE>
(1) In case the Company shall (i) declare a dividend or make a
distribution on its outstanding shares of Class A Common Stock in shares of
Class A Common Stock, (ii) subdivide or reclassify its outstanding shares
of Class A Common Stock into a greater number of shares, or (iii) combine
or reclassify its outstanding shares of Class A Common Stock into a smaller
number of shares, the Exercise Price in effect at the time of the record
date for such dividend or distribution or of the effective date of such
subdivision, combination or reclassification shall be adjusted so that it
shall equal the price determined by multiplying the Exercise Price by a
fraction, the denominator of which shall be the number of shares of Class A
Common Stock outstanding after giving effect to such action, and the
numerator of which shall be the number of shares of Class A Common Stock
outstanding immediately prior to such action. Such adjustment shall be made
successively whenever any event listed above shall occur.
(2) Whenever the Exercise Price payable upon exercise of each Warrant
is adjusted pursuant to Subsection (1) above, the number of Shares
purchasable upon exercise of this Warrant shall simultaneously be adjusted
by multiplying the number of Shares initially issuable upon exercise of
this Warrant by the Exercise Price in effect on the date hereof and
dividing the product so obtained by the Exercise Price, as adjusted.
(3) No adjustment in the Exercise Price shall be required unless such
adjustment would require an increase or decrease of at least five cents
($0.05) in such price; provided, however, that any adjustments which by
reason of this Subsection (3) are not required to be made shall be carried
forward and taken into account in any subsequent adjustment required to be
made hereunder. All calculations under this Section (f) shall be made to
the nearest cent or to the nearest one-hundredth of a share, as the case
may be. Anything in this Section (f) to the contrary notwithstanding, the
Company shall be entitled, but shall not be required, to make such changes
in the Exercise Price, in addition to those required by this Section (f),
as it shall determine, in its sole discretion, to be advisable in order
that any dividend or distribution in shares of Class A Common Stock, or any
subdivision, reclassification or combination of Class A Common Stock,
hereafter made by the Company shall not result in any Federal Income tax
liability to the holders of Class A Common Stock or securities convertible
into Class A Common Stock (including Warrants).
(4) Whenever the Exercise Price is adjusted, as herein provided, the
Company shall promptly but no later than 20 days after any request for such
an adjustment by the Holder, cause a notice setting forth the adjusted
Exercise Price and adjusted number of Shares issuable upon exercise of each
Warrant, and, if requested, information describing the transactions giving
rise to such adjustments, to be mailed to the Holders at their last
addresses appearing in the Warrant Register, and shall cause a certified
copy thereof to be mailed to its transfer agent, if any. The Company may
retain a firm of independent certified public accountants selected by the
Board of Directors (who may be the regular accountants employed by the
Company) to
4
<PAGE>
make any computation required by this Section (f), and a certificate signed
by such firm shall be conclusive evidence of the correctness of such
adjustment.
(5) In the event that at any time, as a result of an adjustment made
pursuant to Subsection (1) above, the Holder of this Warrant thereafter
shall become entitled to receive any shares of the Company, other than
Class A Common Stock, thereafter the number of such other shares so
receivable upon exercise of this Warrant shall be subject to adjustment
from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to the Class A Common Stock
contained in Subsection (1) above.
(6) Irrespective of any adjustments in the Exercise Price or the
number or kind of shares purchasable upon exercise of this Warrant,
Warrants theretofore or thereafter issued may continue to express the same
price and number and kind of shares as are stated in the similar Warrants
initially issuable pursuant to this Warrant.
(g) OFFICER'S CERTIFICATE. Whenever the Exercise Price shall be adjusted as
required by the provisions of the foregoing Section, the Company shall forthwith
file in the custody of its Secretary or an Assistant Secretary at its principal
office and with its stock transfer agent, if any, an officer's certificate
showing the adjusted Exercise Price determined as herein provided, setting forth
in reasonable detail the facts requiring such adjustment, including a statement
of the number of additional shares of Class A Common Stock, if any, and such
other facts as shall be necessary to show the reason for and the manner of
computing such adjustment. Each such officer's certificate shall be made
available at all reasonable times for inspection by the holder or any holder of
a Warrant executed and delivered pursuant to Section (a) and the Company shall,
forthwith after each such adjustment, mail a copy by certified mail of such
certificate to the Holder or any such holder.
(h) NOTICES TO WARRANT HOLDERS. So long as this Warrant shall be
outstanding, (i) if the Company shall pay any dividend or make any distribution
upon the Class A Common Stock or (ii) if the Company shall offer to the holders
of Class A Common Stock for subscription or purchase by them any share of any
class or any other rights or (iii) if any capital reorganization of the Company,
reclassification of the capital stock of the Company, consolidation or merger of
the Company with or into another corporation, sale, lease or transfer of all or
substantially all of the property and assets of the Company to another
corporation, or voluntary or involuntary dissolution, liquidation or winding up
of the Company shall be effected, then in any such case, the Company shall cause
to be mailed by certified mail to the Holder, at least fifteen days prior the
date specified in (x) or (y) below, as the case may be, a notice containing a
brief description of the proposed action and stating the date on which (x) a
record is to be taken for the purpose of such dividend, distribution or rights,
or (y) such reclassification, reorganization, consolidation, merger, conveyance,
lease, dissolution, liquidation or winding up is to take place and the date, if
any is to be fixed, as of which the holders of Class A Common Stock or other
securities shall receive cash or other property deliverable upon such
reclassification, reorganization, consolidation, merger, conveyance,
dissolution, liquidation or winding up.
5
<PAGE>
(i) RECLASSIFICATION, REORGANIZATION OR MERGER. In case of any
reclassification, capital reorganization or other change of outstanding shares
of Class A Common Stock of the Company, or in case of any consolidation or
merger of the Company with or into another corporation (other than a merger with
a subsidiary in which merger the Company is the continuing corporation and which
does not result in any reclassification, capital reorganization or other change
of outstanding shares of Class A Common Stock of the class issuable upon
exercise of this Warrant) or in case of any sale, lease or conveyance to another
corporation of the property of the Company as an entirety, the Company shall, as
a condition precedent to such transaction, cause effective provisions to be made
so that the Holder shall have the right thereafter by exercising this Warrant at
any time prior to the expiration of the Warrant, to purchase the kind and amount
of shares of stock and other securities and property receivable upon such
reclassification, capital reorganization and other change, consolidation,
merger, sale or conveyance by a holder of the number of shares of Class A Common
Stock which might have been purchased upon exercise of this Warrant immediately
prior to such reclassification, change, consolidation, merger, sale or
conveyance. Any such provision shall include provision for adjustments which
shall be as nearly equivalent as may be practicable to the adjustments provided
for in this Warrant. The foregoing provisions of this Section (i) shall
similarly apply to successive reclassification, capital reorganizations and
changes of shares of Class A Common Stock and to successive consolidations,
mergers, sales or conveyances. In the event that in connection with any such
capital reorganization or reclassification, consolidation, merger, sale or
conveyance, additional shares of Class A Common Stock shall be issued in
exchange, conversion, substitution or payment, in whole or in part, for a
security of the Company other than Class A Common Stock, any such issue shall be
treated as an issue of Class A Common Stock covered by the provisions of
Subsection (1) of Section (f) hereof. A distribution in securities, rights to
acquire securities, or other property (except for cash dividends) made with
respect to Class A Common Stock or other securities of the Company or a
successor corporation, to the extent that such distribution shall not be covered
by the provisions of Subsection (1) of Section (f) hereof, shall be deemed to be
a capital reorganization within the meaning of this Section (i).
(j) RESTRICTIVE LEGEND. Each Warrant Share, when issued, shall include a
legend in substantially the following form: THESE SHARES HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT") NOR UNDER ANY STATE
SECURITIES LAW AND MAY NOT BE PLEDGED, SOLD, ASSIGNED OR OTHERWISE TRANSFERRED
UNTIL A (1) REGISTRATION STATEMENT UNDER THE ACT AND ANY APPLICABLE STATE
SECURITIES LAW HAS BECOME EFFECTIVE WITH RESPECT THERETO, OR (2) RECEIPT BY THE
COMPANY OF AN OPINION OF COUNSEL TO THE COMPANY TO THE EFFECT THAT REGISTRATION
UNDER THE ACT OR APPLICABLE STATE SECURITIES LAW IS NOT REQUIRED IN CONNECTION
WITH THE PROPOSED TRANSFER.
6
<PAGE>
(k) The Company will not, by amendment of its charter or through
reorganization, consolidation, merger, dissolution, sale of assets or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms of this Warrant, but will at all times in good faith assist in the
carrying out of all such terms and in the taking of all such action as my be
necessary or appropriate in order to protect the rights of the holder of this
Warrant against impairment.
HEALTHCORE MEDICAL SOLUTIONS, INC.
By /s/ NEAL J. POLAN
------------------------------------
Neal J. Polan, Chairman and
Chief Executive Officer
[SEAL]
Dated: October 9, 1997
Attest:
/s/ RONALD F. TORCHIC
- -----------------------------
Secretary
7
<PAGE>
PURCHASE FORM
Dated ____________, 19
The undersigned hereby irrevocably elects to exercise the within Warrant to
the extent of purchasing _______ shares of Class A Common Stock and hereby makes
payment of _______ in payment of the actual exercise price thereof.
----------------
INSTRUCTIONS FOR REGISTRATION OF STOCK
Name ________________________________
(Please typewrite or print in block letters)
Address ______________________________
Signature _____________________________
<PAGE>
ASSIGNMENT FORM
FOR VALUE RECEIVED, ______________ hereby sells, assigns and transfers unto
Name _______________________________________
(Please typewrite or print in block letters)
Address ____________________________________
the right to purchase Class A Common Stock represented by this Warrant to the
extent of ______ shares as to which such right is exercisable and does hereby
irrevocably constitute and appoint ___________ as attorney, to transfer the same
on the books of the Company with full power of substitution in the premises.
Date ____________, 19__
Signature ___________________
<PAGE>
********************************************************************************
STOCK PURCHASE WARRANT
To Purchase Class A Common Stock of
HEALTHCORE MEDICAL SOLUTIONS, INC.
********************************************************************************
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to
the incorporation by reference in the Registration Statement of HealthCore
Medical Solutions, Inc. (the "Company") on Form S-3 and the related Prospectus
of the Company for the registration of 831,250 of its Class A Warrants and
3,286,250 Shares of Class A Common Stock of our report dated October 22, 1997
(with respect to Note M, November 10, 1997) with respect to the financial
statements included in the Company's Annual Report on Form 10-KSB for the year
ended September 30, 1997.
RICHARD A. EISNER & COMPANY, LLP
Florham Park, New Jersey
December 8, 1998
