As filed with the Securities & Exchange Commission on August 17, 1995
Registration No. 33-88032
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
HEALTHWATCH, INC.
(Exact name of issuer as specified in its charter)
Minnesota 84-0916792
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
2445 CADES WAY
VISTA, CALIFORNIA 92083
(619) 598-4333
(Address and telephone number of principal executive offices)
John D. Greenbaum
HealthWatch, Inc.
2445 Cades Way
Vista, California 92083
(619) 598-4333
(Name, address and telephone number of agent for service)
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this registration statement.
If the only securities being registered on this form are being offered pursuant
to dividend or 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, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
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.
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, dated August 16, 1995
375,000 Shares
HEALTHWATCH, INC.
Common Stock
The shares offered hereby are 375,000 issued and outstanding shares
(the "Shares") of Common Stock, $.01 par value ("Common Stock"), of HealthWatch,
Inc. ("HealthWatch" or the "Company") owned by various selling shareholders
("Selling Shareholders"), which may be sold from time to time by the Selling
Shareholders for their own accounts. The Company has been advised that the
Selling Shareholders may from time to time sell the Shares to or through brokers
or dealers in one or more transactions, on the Nasdaq Small Cap Market or
otherwise, at market prices prevailing at the time of sale, at prices relating
to such prevailing market prices, or at negotiated prices.
The Company's Common Stock is listed on the Nasdaq Small Cap Market
under the symbol HEAL. On August 15, 1995, the last reported sale price of
Common Stock, as reported on the Nasdaq Small Cap Market, was $.50 per share.
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK AND SHOULD
BE CONSIDERED ONLY BY PERSONS WHO CAN AFFORD TO LOSE THEIR ENTIRE INVESTMENT.
SEE "RISK FACTORS."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE COMMISSION NOR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
Since the Common Stock registered hereunder is being offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended (the "Act"), the Company cannot include herein information
about the price to the public of the Common Stock or the proceeds to the Selling
Shareholders. The Company will receive no proceeds from any sales of Common
Stock by the Selling Shareholders, and the Company is obligated to pay the
expenses of this offering, which are estimated at $5,000. The Selling
Shareholders will pay their own expenses in connection with sales of the Common
Stock. The Selling Shareholders and any brokers or dealers executing selling
orders on their behalf may be deemed "underwriters" within the meaning of the
Act, in which event the usual and customary selling commissions which may be
paid to the brokers or dealers may be deemed to be underwriting commissions
under the Act. There can be no assurance that any or all of the Shares
registered hereunder will be sold. See "PLAN OF DISTRIBUTION."
The date of this Prospectus is August 22, 1995.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended, and in accordance therewith files
reports, proxy statements and other information with the Securities and Exchange
Commission (the "Commission"). Reports, proxy statements and other information
filed by the Company with the Commission may be inspected and copied at the
public reference facilities maintained by the Commission at Room 1024, Judiciary
Plaza, 450 Fifth Street N.W., Washington, D.C. 20549, and inspected at the
Commission's regional offices at Suite 1400, 500 West Madison Street, Chicago,
Illinois 60661. Copies of such material can also be obtained from the Public
Reference Section of the Commission, 450 Fifth Street N.W., Washington, D.C.
20549, at prescribed rates.
The Company has filed with the Commission a Registration Statement on
Form S-3 under the Securities Act of 1933, as amended (the "Act"), with respect
to the securities offered hereby. This Prospectus omits certain information
included in such Registration Statement. For further information about the
Company and its securities, reference is made to such Registration Statement and
to the exhibits filed as part thereof or otherwise incorporated therein. Each
summary in this Prospectus of information included in the Registration Statement
or any exhibit thereto is qualified in its entirety by this reference to such
information or exhibit.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company is subject to the information requirements of the
Securities Exchange Act of 1934, as amended ("Exchange Act"), and, in accordance
therewith, files reports and other information with the Commission. The
following documents, which have been filed by the Company with the Commission
pursuant to the Exchange Act (File No. 0-11476), are incorporated by reference
in this registration statement:
(a) The Company's Quarterly Report on Form l0-QSB for the quarter
ended March 31, 1995.
(b) The Company's Annual Report on Form 10-KSB for the year ended
June 30, 1994.
(c) The Company's definitive Proxy Statement for the 1994 Annual
Meeting of Shareholders held on December 16, 1994.
(d) The Company's Current Report on Form 8-K, as amended, dated
June 29, 1995.
(e) The Company's Report on Form 10-C dated August 7, 1995.
(f) The Company's Report on Form 10-C dated August 17, 1995.
(g) The description of the Company's Common Stock contained in
the Company's Registration Statement on Form 8-A filed under the
Exchange Act.
All documents subsequently filed by the Company with the Commission
pursuant to Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act, prior to
the filing of a post-effective amendment that indicates that all securities
offered have been sold or that deregisters all securities then remaining unsold,
shall be deemed to be incorporated by reference herein and to be a part hereof
from the date of filing such documents.
Any statement contained herein or in a 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 other subsequently filed document which also is or
is deemed to be incorporated by reference herein, modifies or supersedes such
document. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
The Company undertakes to provide without charge to each person,
including any beneficial owner, to whom a Prospectus is delivered, upon written
or oral request of such person, a copy of any and all of the information that
has been incorporated by reference in this Prospectus. Requests may be directed
to John D. Greenbaum, President, HealthWatch, Inc., 2445 Cades Way, Vista,
California 92083, (619) 598-4333.
THE COMPANY AND RECENT DEVELOPMENTS
HealthWatch develops, manufactures and markets cardiovascular
noninvasive diagnostic instruments, accessories and services. The Company's
diagnostic instruments include non-invasive doppler and ultrasound imaging
systems designed to diagnose peripheral vascular (blood vessel) disease and
electrocardiograph and stress-testing equipment and interpretive software. In
1993, HealthWatch acquired Metamed, Inc. ("Metamed"), a development-stage
company which was engaged in the development of products for the infusion
therapy ("IV") industry. Infusion therapy generally involves the delivery of one
or more fluids, primarily pharmaceuticals or nutritionals, to a patient by means
of an infusion line inserted into the circulatory system. The Pacer, the
Company's first IV product, which was approved for marketing by the U.S. Food
and Drug Administration ("FDA") in April 1994, is in the final development
stage. Sales of the Pacer are expected to begin within the next two months.
Markets for the Company's diagnostic products have been adversely
affected by efforts to contain health-care costs as well as by the efforts of
many hospitals and other health-care institutions to reduce their costs by
consolidating operations with the operations of other institutions. This
consolidation has resulted in fewer customers for HealthWatch's diagnostic
products and for delays in obtaining purchase orders from institutions which are
evaluating possible consolidations with other institutions. In contrast, the
Company believes that its IV products will benefit from the health-care
industry's focus on reducing costs, as these products are expected to be
substantially less expensive and easier to use than most competing products. For
this reason, the Company's primary focus during the past year has been on the
development of the Pacer.
The Company's licensed patented IV technology utilizes proprietary
optics and computer technology to measure the size (volume) of drops as they
fall in a drip chamber. By combining this information with the rate of flow of
the drops, the system is able to determine and regulate the amount of the fluid
delivered to the patient. In effect, the Company's IV system utilizes the power
of a microprocessor chip and electronics to replace more cumbersome and
expensive mechanical-based systems. The cost of using the Company's IV systems
is expected to be significantly less than the cost for most competing systems,
both because the purchase prices for the Company's IV systems are expected to be
less than those for competing systems and because the Company's IV systems can
be used with generic IV sets which usually are significantly less expensive than
proprietary IV sets required to be used with most competing systems.
HealthWatch believes that there are more than 900,000 IV instruments
currently being used in the U.S. and that approximately 120,000 IV instruments
are sold annually in the U.S., and that the international market is equal in
size to the U.S. market. The Company intends to market the Pacer based on its
ease of use and the potentially significant cost savings which users of the
Pacer may recognize, both due to the lower cost of the Pacer and the ability to
use lower-priced IV sets.
On August 4, 1995, the Company completed a distribution of 1,040,987
Units of its securities. Each Unit consisted of four shares of the Company's
Common Stock and two Redeemable Common Stock Purchase Warrants. Each Warrant
entitles the holder to purchase one share of Common Stock at a price of $.75.
Gross receipts to the Company from the offering of the Units was $1,040,987. As
a result of the Unit offering, the Company's outstanding shares of Common Stock
was increased from 2,849,123 shares to 7,013,071 shares.
HealthWatch's executive offices are located at 2445 Cades Way, Vista,
California 92083, telephone number (619) 598-4333.
RISK FACTORS
In addition to the other information contained in this Prospectus,
prospective investors should carefully consider the following risk factors in
evaluating the Company and its business before purchasing the Shares of Common
Stock offered hereby.
DECLINE IN REVENUES; RECENT OPERATING LOSSES
The Company's product sales have declined in each of the past three
fiscal years and in the nine-month period ended March 31, 1995, compared to the
prior similar fiscal periods, primarily due, the Company believes, to the
uncertainty in the medical community regarding the effects of various proposals
for health-care reforms, consolidations and mergers of health-care institutions,
continued increased price competition and the Company's lack of sufficient
working capital to adequately fund marketing and product enhancement efforts. In
view of the Company's belief that there is substantially more potential for its
IV products than for its current diagnostic products, HealthWatch intends to
concentrate its efforts and limited working capital on the completion and
initial marketing of the Pacer, its first IV product. While sales of the Pacer
are expected to begin within two months, the Company does not expect to be able
to produce and ship significant quantities of the Pacer for several months after
it commences production of this product. The Company's sales may, therefore,
continue to decrease for the next six or more months.
The Company has incurred losses from operations in each of its last
three fiscal years and in the nine months ended March 31, 1995. The Company
expects to continue to incur losses from operations until it is able to generate
significant sales of the Pacer. The Pacer is still in the development stage and
there can be no assurance that the Company will be able to successfully complete
this product or, assuming such development is successful, realize significant
revenues from the sale of the Pacer. In addition, if the Company is not able to
generate sufficient sales of its existing products to support the value of
certain inventory items or of the intangible assets relating to certain of these
products, it could be required to recognize significant additional losses in
connection with the write-down of these assets for book purposes. At March 31,
1995, the Company had an accumulated deficit of ($9,413,364). There can be no
assurance that the Company will be able to operate at a profit in the future.
The Company is not able to finance current working capital requirements from
operations.
NEED FOR ADDITIONAL FINANCING
The Company estimates that it needs approximately $400,000 of
additional debt or equity capital to sustain its operations during the next
twelve months. In addition to the $400,000 required to sustain operations, the
Company estimates that it will need to obtain from $400,000 to $800,000 of
additional working capital to implement its marketing plan for the Pacer and to
provide adequate working capital to fund a rapid increase in product sales. In
the event that the Company is unable to raise additional capital, it will be
required to defer producing IV or other products, to sell certain assets or
enter into joint ventures with or grant licenses to other companies with respect
to one or more of its products and/or further reduce its operations in order to
sustain operations. There can be no assurance that the Company could, if it were
required to do so to sustain operations, sell any such assets or enter into any
such joint venture or grant any such license, if at all, on terms acceptable to
the Company.
METAMED ACQUISITION; NEW BUSINESS VENTURE; UNPROVEN PRODUCTS
In September 1993, the Company completed the acquisition of Metamed,
Inc., a development-stage company. The Metamed acquisition represented a
significant new business venture for HealthWatch, and the Company's ability to
successfully develop this business is subject to all of the risks inherent in
the establishment of a new business. HealthWatch had not previously been engaged
in the infusion therapy business and Metamed had only a limited history of
operations and had not generated any revenues.
HealthWatch believes that the Metamed acquisition is of strategic
importance because it offers the Company the opportunity to expand its product
offerings to include medical products which it believes will be less sensitive
than its existing diagnostic products to current market pressures and
uncertainties, as the Metamed products are expected to be not only easier to use
but also less costly than existing competing products. While the first Metamed
product, the Pacer, an IV controller, has recently been introduced, there can be
no assurance that it will achieve wide acceptance in the marketplace. Efforts to
obtain required governmental approvals for additional products based on the
Metamed patented technology may be costly and require significant time and
additional effort on behalf of the Company which could further deplete the
Company's limited resources and delay the introduction of additional Metamed
products. There can be no assurance that the Company will be able to obtain
necessary governmental approvals for additional Metamed products or that any
products based on the Metamed technology can be successfully introduced to the
marketplace.
DEPENDENCE ON SUPPLIERS; WORKING CAPITAL REQUIREMENTS
Certain raw materials for the Company's products, particularly its new
IV product, are available from only one or a limited number of suppliers,
require that orders be placed 60 days or more in advance of the desired delivery
date and may be available to the Company only if it places significant orders
which represent several months or more of the Company's projected needs for such
materials. The need to purchase significant quantities of these materials in
advance of their use substantially increases the Company's working capital
requirements.
There can be no assurance that the Company's current suppliers for
these products will continue to supply them to the Company. While alternative
sources for such items are currently available, the Company could be required to
redesign its products in order to be able to use the alternative materials
provided by these additional suppliers. Any such redesign of the Company's
products could be expensive and time consuming and could require six or more
months to complete. The Company is currently redesigning its first IV product so
that it can use a different microprocessor chip that is more readily available
to the Company than the microprocessor chip originally intended to be used in
this product. This redesign effort has delayed the first shipments of the Pacer,
with the first shipments now expected to occur in September or October 1995. The
Company believes that it either has or has commitments to supply adequate
quantities of the more difficult to obtain components for its initial IV
product.
DEPENDENCE ON NEW OR IMPROVED PRODUCTS; TECHNOLOGICAL CHANGES
In general, the medical products industry is subject to rapid and
significant technological changes and frequent introduction of new competitive
products. To respond to these expected changes and to improve or sustain the
marketability of its products, the Company will be required to commit
substantial investments in product improvement and development in order to
periodically enhance its existing products and successfully introduce new
products. There can be no assurance that the Company will either have the
resources required to make such investments or, assuming it has the required
resources, be able to respond adequately to changes in technology or changes in
the markets for its products. The development of new products or technologies by
other firms could have a material adverse effect on the Company's business. In
addition, to the extent that the Company seeks to develop new products, there
can be no assurance that such products will be successfully developed or, if
developed, that such products will be successfully introduced to the
marketplace.
COMPETITION
There are many companies that produce equipment which competes with the
Company's products, particularly its cardiology and current and proposed
infusion therapy products. Most of the Company's competitors have substantially
greater financial and marketing resources than the Company. Three companies
account for a substantial portion of the market for ECG products similar to
those sold by HealthWatch, and five companies account for over 80% of the U.S.
market for infusion therapy systems. All of such companies are substantially
larger than HealthWatch. The Company expects to encounter intense competition in
the market for its IV products. This could require that the Company commit
significantly greater resources to the introduction of its IV products than
would otherwise be required.
GOVERNMENT REGULATION
The FDA regulates the testing, manufacturing, packaging, distribution
and marketing of medical devices in the U.S., including the products
manufactured by HealthWatch. The Company's infusion therapy products are Class
II devices for which permission to market can be obtained under Section 510(k)
of the Medical Device Amendments Act to the Food, Drug and Cosmetic Act.
Products requiring permission to market under 510(k) may be approved after
adequate demonstration of safety, effectiveness and documentation that the
product is substantially equivalent to a similar device in interstate commerce
prior to 1976. The Company submitted a 510(k) application with respect to its
first Metamed infusion therapy system in September 1993. On April 4, 1994, the
Company received notification from the FDA that this product could be marketed
in the U.S. Compliance with the provisions of the Food, Drug and Cosmetic Act
and the FDA's regulations is time consuming and expensive.
PRODUCT LIABILITY INSURANCE
Producers of medical instruments may face substantial liability from
the use of their products. HealthWatch has obtained product liability insurance
in the amount of $1,000,000 per occurrence and $2,000,000 in the aggregate. As
the installed base of IV products increases, the Company plans to raise the
amount of such insurance. There can be no assurance that any such liability of
the Company will be covered by its insurance or that damages will not exceed the
limits of the coverage.
CHANGES IN HEALTH-CARE INDUSTRY
The health-care industry is experiencing significant pressure to reduce
costs. The Clinton administration has identified the containment of health-care
costs as a major priority. While the Company cannot predict what effect any
proposals to contain health-care costs may have on its business, such proposals,
if enacted, could have a material adverse effect on portions of its business,
particularly its diagnostic instruments business. In order to reduce costs and
to improve utilization of facilities, many health-care organizations have
consolidated or merged or are considering consolidating or merging their
operations or portions of their operations with the operations of other
health-care organizations. The consolidation and merging of health-care
organizations has reduced and can be expected to continue to reduce the number
of potential purchasers for the Company's products, particularly its diagnostic
instruments.
RECENT SENIOR MANAGEMENT CHANGE
John D. Greenbaum, President of the Company, is on medical leave
through August 31, 1995. The absence of senior management for any period of time
could have a material adverse affect on the Company's business.
BROKER-DEALER SALES OF COMPANY COMMON STOCK
Securities and Exchange Commission Rule 15g-9 imposes additional sales
practice requirements on brokers-dealers who sell certain low-priced securities
to persons other than established customers. So long as the Company's Common
Stock continues to be quoted on the Nasdaq Small Cap Market, sales of its stock
are exempt from the application of this rule. In order for securities to
continue to be quoted on the Nasdaq Small Cap Market, they must meet certain
maintenance requirements, including a minimum bid price of at least $1.00 per
share or a market value of the public float for its common stock of at least
$1,000,000 and $2,000,000 in capital and surplus. The bid price for the
Company's Common Stock is below $1.00 per share. While the Company's capital and
surplus is currently slightly in excess of $2,000,000, further losses from
operations could result in such capital and surplus being less than $2,000,000.
It is possible that shareholders will be requested to consider a reverse split
of the Company's Common Stock in the future, if this would better assure the
Company's ability to satisfy the requirements for its Common Stock to continue
to be listed on the Nasdaq Small Cap Market. In the event that the Company's
Common Stock should cease to be traded on the Nasdaq Small Cap Market, or it
should otherwise cease to be exempt from the application of Rule 15g of the
Securities Exchange Act of 1934, it would become subject to Rule 15g-9. In this
event, prior to effecting transactions in the Company's Common Stock,
brokers-dealers would be required to make a special suitability determination
for the purchaser and receive the purchaser's written agreement to the
transaction prior to the sale. These requirements could adversely affect the
ability of brokers-dealers to sell the Company's securities. In addition, in the
event that the Company's securities ceased to be traded on the Nasdaq Small Cap
Market, an investor could find it more difficult to dispose of, or to obtain
accurate quotations as to the price of, the Company's securities.
POSSIBLE DILUTIVE EFFECT OF OUTSTANDING OPTIONS, WARRANTS AND CONVERTIBLE
DEBENTURES AND PREFERRED STOCK
As of August 18, 1995, there were up to 8,774,163 shares of Common
Stock reserved for issuance upon the exercise of stock purchase warrants or
options or the conversion of Debentures and Preferred Stock, at exercise or
conversion prices ranging from $.25 to $9.76 per share. To the extent the
trading price of the Company's Common Stock at the time of exercise or
conversion of any such warrants, options, Debentures or Preferred Stock exceeds
the exercise or conversion prices, any such exercise or conversion will have a
dilutive effect on the Company's shareholders.
The Company's Articles of Incorporation, as amended, authorize the
issuance of up to 100,000,000 shares of Common Stock, of which 7,868,592 shares
were outstanding on August 18, 1995. The Company's Board of Directors has the
authority to issue additional shares of Common Stock and to issue options and
warrants to purchase shares of the Company's Common Stock without shareholder
approval.
AUTHORIZATION AND ISSUANCE OF PREFERRED STOCK
HealthWatch is authorized to issue up to 10,000,000 shares of Preferred
Stock. The Board of Directors has the power to establish the dividend rates,
liquidation preferences, voting rights, redemption and conversion terms and
privileges with respect to any series of Preferred Stock. The issuance of any
shares of Preferred Stock having rights superior to those of HealthWatch's
Common Stock may result in a decrease in the value or market price of the Common
Stock and could further be used by the Board as a device to prevent a change in
control of HealthWatch. Holders of Preferred Stock may have the right to receive
dividends, certain preferences in liquidation and conversion rights. There are
400,000 authorized shares of Series A Preferred Stock. The Company does not have
any present intention to issue any other shares of Preferred Stock.
SELLING SHAREHOLDERS
Creative Business Strategies, Inc. acquired its Shares from the Company
pursuant to stock grants effective May 1, 1995 and June 28, 1995, in
consideration for services rendered. Sanford L. Schwartz, Chairman of the Board
of Directors of the Company, is an officer, director and shareholder of Creative
Business Strategies, Inc. Boulder Financial Group, LLC and D.S.N. Enterprises
Ltd. acquired their Shares pursuant to stock grants effective June 28, 1995 and
August 1, 1995, respectively, in consideration for services rendered to the
Company. Kenneth A. Selzer, M.D., acquired his Shares from the Company pursuant
to a stock grant effective May 1, 1995, in consideration for services rendered.
Dr. Selzer is a director of the Company.
The following table sets forth certain information with respect to the
offering and the ownership of Common Stock by the Selling Shareholders as of
August 18, 1995.
<TABLE>
<CAPTION>
Shares of Common Shares of Common Percentage of
Stock Owned Shares Stock Owned Common Stock
Name of Selling Beneficially Offered Beneficially After Owned Beneficially
Shareholder Before Offering Hereby Offering Before Opening After Opening
<S> <C> <C> <C> <C>
Creative Business 250,000 (1) 250,000 0 (1) 3.2% --
Strategies, Inc.
Boulder Financial 850,000 (2) 50,000 800,000 (2) 9.8% 9.2%
Group, LLC
D.S.N. Enterprises, 400,000 (3) 50,000 350,000 (3) 4.9% 4.3%
Ltd.
Kenneth A. Selzer, 112,500 (4) 25,000 87,500 (4) 1.4% 1.1%
M.D.
</TABLE>
(1) Does not include shares of the Company's Common Stock owned by Sanford
L. Schwartz, an officer, director and shareholder of Creative Business
Strategies, Inc. As of August 18, 1995, Mr. Schwartz owned 62,354
shares of the Common Stock and options and convertible debentures which
represented the right to acquire an additional 77,250 shares of the
Common Stock.
(2) Includes 800,000 shares of the Common Stock which are issuable within
60 days of the date of this Prospectus upon exercise of stock purchase
warrants.
(3) Includes 350,000 shares of the Common Stock which are issuable within
60 days of the date of this Prospectus upon exercise of stock purchase
warrants.
(4) Includes 87,500 shares of the Common Stock which are issuable within 60
days of the date of this Prospectus upon exercise of outstanding stock
purchase options.
PLAN OF DISTRIBUTION
The Company has been advised that the Shares may be sold from time to
time by the Selling Shareholders or by pledgees, donees, transferees, or other
successors in interest. Such sales may be made in the over-the-counter market or
otherwise at prices and at terms then prevailing or at prices related to the
then current market price or in negotiated transactions. The Shares may be sold
by one or more of the following: (a) a block trade in which the broker or dealer
so engaged will attempt to sell Shares as agent but may position and resell a
portion of the block as principal to facilitate the transaction; (b) purchases
by a broker or dealer as principal and resale by such broker or dealer for its
account pursuant to this Prospectus; (c) ordinary brokerage transactions and
transactions in which the broker solicits purchasers; and (d) in privately
negotiated transactions not involving a broker or dealer. In effecting sales,
brokers or dealers engaged to sell Shares may arrange for other brokers or
dealers to participate. Brokers or dealers engaged to sell Shares will receive
compensation in the form of commissions or discounts in amounts to be negotiated
immediately prior to each sale. Such brokers or dealers and any other
participating brokers or dealers may be deemed to be "underwriters" within the
meaning of the Securities Act of 1933, as amended, in connection with such
sales. The Company will receive no proceeds from any sales of Common Stock by
the Selling Shareholders, and it is anticipated that the brokers or dealers, if
any, participating in the sales of such securities will receive the usual and
customary selling commissions.
LEGAL MATTERS
The legality of the Common Stock will be passed upon for the Company by
the firm of Gray, Plant, Mooty, Mooty & Bennett, P.A. A member of such firm owns
230,000 shares of Common Stock and warrants representing the right to acquire
180,000 and 100,000 shares of Common Stock at $.25 and $.75 per share,
respectively.
EXPERTS
The audited financial statements of the Company for the years June 30,
1994 and 1993, which are incorporated by reference herein have been examined and
reported on by Silverman Olson Thorvilson & Kaufmann, Ltd., as indicated in
their reports with respect thereto, and are incorporated by reference, in
reliance upon the authority of said firm as experts in accounting and auditing.
PART II
INFORMATION NOT REQUIRED TO BE IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the various expenses of the Company in
connection with the sale and distribution of the Common Stock being registered.
All of the amounts shown are estimates, except for the Securities and Exchange
Commission registration fee.
Securities and Exchange Commission fee $ 208
NASD fee 592
Blue Sky fees and expenses 500
Accounting fees and expenses 400
Legal fees and expenses 3,000
Transfer Agent fees 100
Miscellaneous 200
TOTAL $5,000
ITEM 15. INDEMNIFICATION OF OFFICERS AND DIRECTORS
Minnesota Statutes Section 302A.521 provides that a Minnesota business
corporation shall indemnify any director, officer or employee of the corporation
made or threatened to be made a party to a proceeding, by reason of the former
or present official capacity (as defined) of the person, against judgments,
penalties, fines, settlements and reasonable expenses incurred by the person in
connection with the proceeding if certain statutory standards are met.
"Proceeding" means a threatened, pending or completed civil, criminal,
administrative, arbitration or investigative proceeding, including one by or in
the right of the corporation. Section 302A.521 contains detailed terms regarding
such right of indemnification and reference is made thereto for a complete
statement of such indemnification rights. The Company's Articles and Bylaws
provide for indemnification of the Company's officers, directors, employees and
agents to the fullest extent permitted by law.
In addition, the Company's Articles of Incorporation eliminate certain
personal liability of the directors of the Company for monetary damages for
certain breaches of directors' fiduciary duties as permitted by Minnesota
Statutes Section 302A.251.
ITEM 16. EXHIBITS
4.1 Specimen form of the Company's Common Stock certificate (1).
4.2 Warrant Agreement dated October 30, 1991 between the Company
and Corporation Stock Transfer, Inc. (2).
4.3 Form of Warrant Certificate for Class A and Class B Warrants
see Exhibit A to Exhibit 4.2.
4.4 HealthWatch, Inc. Stock Option Plan of 1989 (2).
4.5 Form of Incentive Stock Option Agreement (2).
4.6 Form of Nonstatutory Stock Option Agreement (2).
4.7 HealthWatch, Inc. Stock Option Plan of 1993 (3).
4.8 Subscription and Purchase Agreement dated as of the 14th day
of August 1992 between the Company and the Purchasers of the
Company's 10% convertible senior debentures due 1997
(including as an appendix thereto the form of the debenture
certificate) (4).
4.9 Subscription and Purchase Agreement dated August 31, 1993
between the Company and Redwood Microcap Fund, Inc., the
Rockies Fund, Inc. and associated investors of such funds,
including as an appendix thereto, the form of warrant
certificates (4).
4.10 Subscription and Purchase Agreement dated October 1993 between
the Company and Sogevalor S.A., including as an appendix
thereto, the form of warrant certificate (4).
4.11 Subscription and Purchase Agreement dated December 1993 by and
between the Company and Universal Solutions, Inc., including
as an appendix thereto a form of the warrant certificate (4).
4.12 Subscription and Investment Representation Agreement between
SMI Capital Corp. and the Company (3).
4.13 Subscription and Investment Representation Agreement between
Investor Resource Services, Inc. and the Company (3).
4.14 Warrant Agreement dated May 19, 1995 between the Company and
Corporate Stock Transfer, Inc. - (5).
4.15 Warrant Agreement dated November 30, 1994 between the Company
and investor - (5).
4.16 Form of Warrant Certificate -- see Exhibit A to Exhibit 4.14.
4.17 Form of Loan and Standby Purchase Agreement - (5).
4.18 Exchange Agreement for Preferred Stock and Stock Purchase
Warrant - (5).
4.19 Settlement Agreement effective May 11, 1995 among HealthWatch,
Inc., Investor Resource Services, SMI Capitol Corp. and
Charles Arnold - filed herewith.
4.20 Agreement between HealthWatch, Inc. and D.S.N. Enterprises
Ltd. - filed herewith.
4.21 Consultancy Agreement dated May 1, 1995 between HealthWatch,
Inc. and Boulder Financial Group, LLC - (5)
5.1 Opinion of Gray, Plant, Mooty, Mooty & Bennett, P.A. - filed
herewith.
23.1 Consent of Gray, Plant, Mooty, Mooty & Bennett, P.A. (see
Exhibit 5.1).
23.2 Consent of Silverman Olson Thorvilson & Kaufmann, Ltd. --
filed herewith.
24.1 Power of Attorney (included on page II-4 of the Registration
Statement).
(1) Incorporated herein by reference to Registration Statement, Form S-18
(File No. 285688D).
(2) Incorporated herein by reference to Registration Statement, Form S-2
(File No. 33-42831).
(3) Incorporated herein by reference to Registration Statement, Form
10-KSB, for the year ended June 30, 1994 (File No. 0-11476).
(4) Incorporated herein by reference to Registration Statement, Form SB-2
(File No. 33-73462).
(5) Incorporated herein by reference to Registration Statement, Form SB-2
(File No. 33-88126).
ITEM 17. UNDERTAKINGS
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 of 1933, each such post-effective amendment 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 the initial bona fide offering thereof; and
(3) to remove from registration by means of a post-effective
amendment any of the securities being registered that remain unsold at
the termination of the offering.
B. The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 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 the initial bona fide offering thereof.
C. Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers, and controlling
persons of the registrant as discussed above, 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 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 Act and will be governed by the final adjudication of
such issue.
GP:104814 v1
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this amendment to
the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Vista, State of California, on August
15, 1995.
HEALTHWATCH, INC.
By /s/ John D. Greenbaum
John D. Greenbaum
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
amendment to the Registration Statement has been signed below on the 15th day of
August, 1995, by the following persons in the capacities indicated:
/s/ John D. Greenbaum President, Chief Executive Officer, Chief
John D. Greenbaum Financial Officer, and Director
(Principal Executive and Financial Officer)
/s/ Annette D. Agner Controller (Principal Accounting Officer)
Annette D. Agner
/s/ Sanford L. Schwartz Director
Sanford L. Schwartz
/s/ Kenneth A. Selzer, M.D. Director
Kenneth A. Selzer, M.D.
GP:104814 v1
HEALTHWATCH, INC.
AMENDMENT NO. 1 TO
FORM S-3
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Page No.
<S> <C> <C>
4.1 Specimen form of the Company's Common Stock certificate (1). --
4.2 Warrant Agreement dated October 30, 1991 between the Company and --
Corporation Stock Transfer, Inc. (2).
4.3 Form of Warrant Certificate for Class A and Class B Warrants -- --
see Exhibit A to Exhibit 4.2.
4.4 HealthWatch, Inc. Stock Option Plan of 1989 (2). --
4.5 Form of Incentive Stock Option Agreement (2). --
4.6 Form of Nonstatutory Stock Option Agreement (2). --
4.7 HealthWatch, Inc. Stock Option Plan of 1993 (3). --
4.8 Subscription and Purchase Agreement dated as of the 14th day of --
August 1992 between the Company and the Purchasers of the
Company's 10% convertible senior debentures due 1997 (including
as an appendix thereto the form of the debenture certificate) (4).
4.9 Subscription and Purchase Agreement dated August 31, 1993 between --
the Company and Redwood Microcap Fund, Inc., the Rockies Fund,
Inc. and associated investors of such funds, including as an
appendix thereto, the form of warrant certificates (4).
4.10 Subscription and Purchase Agreement dated October 1993 between --
the Company and Sogevalor S.A., including as an appendix thereto,
the form of warrant certificate (4).
4.11 Subscription and Purchase Agreement dated December 1993 by and --
between the Company and Universal Solutions, Inc., including as an
appendix thereto a form of the warrant certificate (4).
4.12 Subscription and Investment Representation Agreement between SMI --
Capital Corp. and the Company (3).
4.13 Subscription and Investment Representation Agreement between --
Investor Resource Services, Inc. and the Company (3).
4.14 Warrant Agreement dated May 19, 1995 between the Company and --
Corporate Stock Transfer, Inc. - (5).
4.15 Warrant Agreement dated November 30, 1994 between the Company and --
investor - (5).
4.16 Form of Warrant Certificate -- see Exhibit A to Exhibit 4.14. --
4.17 Form of Loan and Standby Purchase Agreement - (5). --
4.18 Exchange Agreement for Preferred Stock and Stock Purchase Warrant --
- (5).
4.19 Settlement Agreement effective May 11, 1995 among HealthWatch,
Inc., Investor Resource Services, SMI Capitol Corp. and Charles
Arnold - filed herewith.
4.20 Agreement between HealthWatch, Inc. and D.S.N. Enterprises Ltd. -
filed herewith.
4.21 Consultancy Agreement dated May 1, 1995 between HealthWatch, Inc. --
and Boulder Financial Group, LLC - (5)
5.1 Opinion of Gray, Plant, Mooty, Mooty & Bennett, P.A. - filed
herewith.
23.1 Consent of Gray, Plant, Mooty, Mooty & Bennett, P.A. (see Exhibit --
5.1).
23.2 Consent of Silverman Olson Thorvilson & Kaufmann, Ltd. -- filed
herewith.
24.1 Power of Attorney (included on page II-4 of the Registration --
Statement).
</TABLE>
(1) Incorporated herein by reference to Registration Statement, Form S-18
(File No. 285688D).
(2) Incorporated herein by reference to Registration Statement, Form S-2
(File No. 33-42831).
(3) Incorporated herein by reference to Registration Statement, Form
10-KSB, for the year ended June 30, 1994 (File No. 0-11476).
(4) Incorporated herein by reference to Registration Statement, Form SB-2
(File No. 33-73462).
(5) Incorporated herein by reference to Registration Statement, Form SB-2
(File No. 33-88126).
GP:104814 v1
EXHIBIT 4.2
AGREEMENT
AGREEMENT made this _____ day of ________________, 1995, by and between
HealthWatch, Inc., hereafter referred to as "H.E.A.L.", which has its offices at
2445 Cades Way, Vista, California 92083, and D.S.N. Enterprises Ltd., hereafter
referred to as "D.S.N.", which has its offices at 243 East 19th Avenue, Suite
214, Denver, Colorado 80203.
WHEREAS, D.S.N. provides professional consulting and advisory services
designed to inform interested parties as to the business, products, management,
marketing and financial potential of its clients; and
WHEREAS, H.E.A.L. is publicly held with its common stock trading on the
National Association of Securities Dealers Automated Quotation System; and
WHEREAS, H.E.A.L. desires to publicize itself with the intention of
making its name and business better known to its customers, shareholders,
prospective investors and investment banking firms; and
WHEREAS, D.S.N. desires to engage H.E.A.L. as a client and is duly
qualified to enter into this Agreement and is not subject to any claim or
legislation which would preclude such retention.
NOW, THEREFORE, in consideration of the premises, the terms, covenants
and conditions herein and other valuable consideration, the receipt, adequacy
and sufficiency of which the parties hereto acknowledge, the parties hereto
agree as follows:
1. TERM AND TERMINATION: This Agreement shall be effective as of
the 28th day of July 1995, and shall continue in effect for a period
of six months, and shall expire on the 28th day of January, 1996. Such
expiration date is subject to possible modification as stated
hereafter.
2. CONSULTING SERVICES: During the term of this Agreement, D.S.N.
shall provide services to H.E.A.L. Such services shall include but not
be limited to:
a. The preparation, implementation and monitoring of marketing
plans;
b. Assistance in the creation of literature describing
H.E.A.L.'s business, products and marketing plans; and
c. Such other related assistance as D.S.N. and H.E.A.L. shall
deem necessary or appropriate. Such services shall include,
but not be limited to, the following:
Public Relations: D.S.N. will assist H.E.A.L. in any and all
ways with public relations. These services will include, at
H.E.A.L.'s option:
i. Preparation and placement of written articles about
H.E.A.L. or its products;
ii. Preparation and placement of press releases regarding
H.E.A.L.; and
iii. Preparation and placement of advertisements in
financial publications regarding H.E.A.L.
Informational Approval: All information disseminated by
D.S.N. regarding H.E.A.L. shall be derived from written
information provided by H.E.A.L. to D.S.N. In the event that
the information is used in or incorporated in a different
format or literature, D.S.N. must obtain H.E.A.L.'s prior
written approval before distribution of or dissemination of
same.
3. PAYMENT: In consideration for the services to be rendered to
H.E.A.L. by D.S.N. as provided for herein, H.E.A.L. shall issue to
D.S.N. 50,000 (fifty thousand) shares of H.E.A.L.'s Common Stock, $.01
par value ("Common Stock"). D.S.N. acknowledges and represents as
follows:
(a) It has been given full access to information regarding
H.E.A.L. (including the opportunity to meet with H.E.A.L.'s
officers and to review all the documents that it may have
requested) and has utilized such access to its satisfaction
for the purpose of obtaining information.
(b) It has sufficient knowledge and experience in financial and
business matters that it is capable of evaluating the merits
and risks of investment in the Common Stock;
(c) It understands that the purchase of the Common Stock is a
highly speculative investment and involves a high degree of
risk;
(d) It believes that the investment in the Common Stock is
suitable based upon its investment objectives and financial
needs and that it has adequate means of providing for
current financial needs; and
(e) It understands that there are substantial restrictions on
the transfer of the Common Stock; and, accordingly, it may
not be able to liquidate an investment in the Common Stock
for an indefinite period.
D.S.N. has been advised that the Common Stock has not been
registered under the Act, or state securities laws and is being sold
pursuant to exemptions from the Act and such laws, and that H.E.A.L.'s
reliance upon such exemptions is predicated in part on its
representations contained herein. D.S.N. represents and warrants that
the Common Stock is being acquired for its account and for investment.
D.S.N. further represents and agrees that the Common Stock may not be
sold except pursuant to an effective registration statement under the
Act and applicable state securities laws, or an opinion of counsel
that such registration is not required.
H.E.A.L. shall file a registration statement for such shares
pursuant to the Securities Act of 1933 ("Act") and use its best
efforts to cause such registration statement to be made effective by
the Securities and Exchange Commission ("Commission") as soon as
possible following delivery of such shares.
All expenses incurred by H.E.A.L. in registering such shares,
including, without limitation, all registration and filing fees
(including all expenses incident to filing with the National
Association of Securities Dealers, Inc.), printing expenses, fees and
disbursements of counsel for the Company and the expense of any
special audits incident to or required by any such registration shall
be paid by H.E.A.L. Only the selling commission applicable to the sale
of the Common Stock and the expenses of counsel, if any, for D.S.N.,
shall be borne by D.S.N.
D.S.N. agrees to supply H.E.A.L. with such information as may be
required by the Company to register or qualify the Common Stock.
D.S.N. represents and warrants that it will comply with all applicable
federal and state laws in connection with the offer and sale of the
Common Stock. In connection with such filing and the subsequent
disposition of the shares of Common Stock, D.S.N. agrees as follows:
a. It has no agreement or understanding with any broker/dealer
or underwriter with respect to the proposed sale of such
stock and hereby agrees and warrants that if it shall at a
later date enter into any agreement for an underwritten
offering of all or a portion of such shares, it will
immediately so advise H.E.A.L. and provide H.E.A.L. with the
details of any such undertaking;
b. It expects that any of the shares of the Common Stock which
it sells pursuant to the registration statement will be sold
in the over-the-counter market at prices and at terms then
prevailing or at prices related to the then current market
price or in negotiated transactions and that no more than
ordinary and customary fees will be paid to a broker/dealer
in connection with any such sale and agrees to notify
H.E.A.L. if there is any change in such expectation; and
c. It understands that the sale of any of the shares subject to
the registration statement must be accompanied by the
delivery of an effective prospectus and agrees that it will
inform any broker/dealer who it engages to sell any of its
shares of Common Stock subject to the registration statement
that the sale must be accompanied by the delivery of a
prospectus. The undersigned further understands that it is
its sole responsibility to provide the broker/dealer with a
copy of the prospectus. (H.E.A.L. will advise D.S.N. when
the registration statement has been declared effective by
the Commission, prior to which no sales pursuant to the
registration statement may be made.)
If within 15 days from the date of signing this Agreement,
H.E.A.L. has been unable to complete the registration of such shares
pursuant to the Act, H.E.A.L. shall make an advance to D.S.N. in the
amount of $4,000.00. Such payment shall be made to D.S.N. on the 15th
day after the date of signing this Agreement. In the instance that
H.E.A.L. continues to be unable to complete such registration,
H.E.A.L. shall make additional advances, in the amount of $4,000.00
per payment, every thirty days thereafter until such stock is so
registered. By way of clarification, if such stock is not so
registered, an additional advance of $4,000.00 shall be made by
H.E.A.L. to D.S.N. on the 45th, 75th, 105th day, etc., after the date
of signing this Agreement. Upon H.E.A.L.'s completion of such
registration, D.S.N. shall have 45 days in which to pay back to
H.E.A.L. any such sums advanced to D.S.N. prior to the completion of
such registration.
Additionally, at the time of signing this Agreement, H.E.A.L.
shall issue to D.S.N. warrants purchase up to 500,000 shares of Common
Stock at an initial exercise price of $.30 per share and to purchase
up to 200,000 shares of Common Stock at an exercise price of $.50 per
share, such warrants to be in the form of Exhibits A and B to this
Agreement.
4. EXPENSES: H.E.A.L. shall reimburse D.S.N. only for such
reasonable travel and other expenses, pre-approved in writing by
H.E.A.L., which are incurred by D.S.N. during the term of this
Agreement in rendering services to H.E.A.L. hereunder. D.S.N. shall
provide receipts and vouchers to H.E.A.L. for all such expenses for
which reimbursement is claimed.
5. PERSONNEL: D.S.N. is, and shall be, an independent contractor,
and no personnel utilized by D.S.N. in providing services hereunder
shall be deemed to be an employee or agent of H.E.A.L. Moreover,
neither D.S.N. nor any such personnel shall be empowered hereunder to
act on behalf of H.E.A.L. D.S.N. shall have sole and exclusive
responsibility and liability for, and to, such personnel, and D.S.N.
alone shall be responsible to make, and shall make, all necessary or
appropriate payments for all such personnel.
6. DISCLAIMER BY D.S.N.: D.S.N. makes no representation that, as
a result of its services to be performed pursuant to this Agreement,
(a) the price of H.E.A.L.'s publicly traded securities will increase,
(b) any person will purchase securities in H.E.A.L., or (c) any
investor will lend money to or invest in or with H.E.A.L.
7. NON-ASSIGNABILITY: The rights, obligations and benefits
established by this Agreement shall not be assignable by either party
hereto without the written consent of the other. This Agreement shall
be binding upon and shall inure to the benefits of the parties and
their successors.
8. CONFIDENTIALITY: Neither D.S.N. nor any of its personnel,
consultants or officers or directors shall disclose any knowledge or
information it has, or they have, obtained in the course of performing
the services provided for herein, which knowledge or information
concerns the confidential affairs of H.E.A.L. with respect to
H.E.A.L.'s business or its finances.
9. LIMITED LIABILITY: Neither D.S.N. nor any of its consultants,
officers or directors shall be held liable for consequential or
incidental damages of any kind to H.E.A.L. that may arise out of or in
connection with any services performed by D.S.N. hereunder, except if
such damages are the result of unlawful conduct or gross willful
misconduct on the part of D.S.N.
10. COMPLIANCE AND GOVERNING LAW: D.S.N., together with its
agents and associates, shall take all necessary, appropriate and
reasonable steps to provide the services in accordance with all
federal and state securities laws, as well as in accordance with the
rules and regulations of the National Association of Securities
Dealers, Inc. The terms and provisions of this Agreement shall be
governed and construed by the laws of the State of Colorado and any
dispute or cause of action arising under this Agreement shall be
litigated, if at all, in the federal or state courts located n Denver,
Colorado, and the parties hereby submit to the jurisdiction of such
courts and shall not object to or challenge venue in such courts. The
prevailing party in any litigation to enforce its rights under this
Agreement shall be entitled to costs, charges and expenses, including
court costs and reasonable attorneys' fees, and costs of collection,
incurred by the prevailing party in enforcing this Agreement.
11. NOTICES: Notice hereunder shall be in writing and shall be
deemed to have been given at the time when deposited for mailing in a
receptacle under the control of the United States Postal Service, by
registered or certified mail, prepaid, return receipt requested. Such
notices shall be mailed to the address of the parties as aforestated
herein.
12. NO OTHER AGREEMENT: This Agreement supersedes all prior
understandings, written or orally given and constitutes the entire
agreement between the parties hereto with respect to the subject
matter hereof. No waiver, modification or termination of this
Agreement shall be valid unless in writing signed by each of the
parties hereto.
13. SEVERABILITY: Should any clause or provision of this
Agreement be declared illegal, or contrary to existing case law or
state or federal statute, the parties hereto agree that such clause or
provision is deemed stricken and that the rest and remainder of the
Agreement shall not be affected thereby and shall remain in full force
and effect.
IN WITNESS WHEREOF, the parties have hereunto set their hands this
_____ day of _____________, 1995.
HealthWatch, Inc. D.S.N. Enterprises Ltd.
By By
Dirk Nye
Its Its President
GP:208378 v1
SEE PARAGRAPH 7 FOR RESTRICTIONS ON THE TRANSFER OF THIS WARRANT
No. DSN-1
Warrant
to Purchase 500,000
Shares
WARRANT TO PURCHASE COMMON STOCK OF
HEALTHWATCH, INC.
THIS CERTIFIES THAT for value received D.S.N. Enterprises, Ltd. is
entitled, subject to the terms and conditions hereinafter set forth, to purchase
from HEALTHWATCH, INC., a Minnesota corporation (the "Company"), 500,000 fully
paid and non-assessable shares of Common Stock of the Company (herein called the
"Common Stock"), upon presentation and surrender of this Warrant with the
Subscription Form duly executed, at any time during the term hereof, at the
principal office of the Company or at such other office as shall have
theretofore been designated by the Company by notice pursuant hereto and upon
payment therefor of the Purchase Price, in lawful money of the United States of
America, determined as set forth below. The term of this Warrant shall commence
on the date hereof, and terminate, if not exercised or redeemed prior thereto,
at 5:00 p.m. California Time, on July 28, 1996.
This Warrant is subject to the following terms and conditions:
1. The purchase rights represented by this Warrant are exercisable at
the option of the Holder, in whole at any time, or in part from time to time
(but not as to a fractional share of Common Stock). In the case of the purchase
of less than all the shares purchasable under this Warrant, the Company shall
cancel this Warrant upon the surrender hereof and shall execute and deliver a
new Warrant of like tenor for the balance of the shares purchasable hereunder.
Subject to the terms hereof, the Company may at any time after the later of
January 28, 1996, or five months after the effective date of the registration
statement to be filed pursuant to paragraph 8 hereof, redeem this Warrant, at
its discretion, upon payment to the Holder hereof of one cent ($.01) per Warrant
to be redeemed. The Company shall give written notice of the date set by the
Company for such redemption (the "Redemption Date") at least 10 days prior to
the Redemption Date. The Redemption Date shall be the expiration date for the
Warrant, provided that the Company tenders on the Redemption Date payment of the
redemption price for the Warrants to be redeemed. Following the Redemption Date,
this Warrant shall be deemed to have expired and the Holder hereof shall have no
rights with respect hereto, except the right to receive payment of the
redemption price upon surrender of this Warrant certificate.
2. The purchase price for each share of Common Stock purchasable
pursuant to the exercise of this Warrant shall be thirty cents ($.30) per share,
such price being sometimes hereinafter referred to as the "Base Purchase Price".
The Base Purchase Price and, from time to time, the number of shares of Common
Stock subject to purchase hereunder are subject to adjustment in certain
circumstances provided for below, and the Base Purchase Price, as it may be
adjusted from time to time, is hereinafter referred to as the "Purchase Price".
(a) In case the Company shall (i) pay a dividend in shares of its
capital stock (other than an issuance of shares of capital stock to
holders of Common Stock who have elected to receive a dividend in shares
in lieu of cash), (ii) subdivide its outstanding shares of Common Stock,
(iii) reduce, consolidate or combine its outstanding shares of Common
Stock into a smaller number of shares, or (iv) issue by reclassification
of its shares of Common Stock any shares of the Company, the Purchase
Price in effect immediately prior thereto shall be adjusted to that
amount determined by multiplying the Purchase Price in effect
immediately prior to such date by a fraction, of which the numerator
shall be the number of shares of Common Stock outstanding on such date
before giving effect to such division, subdivision, reduction,
combination or consolidation or stock dividend and of which the
denominator shall be the number of shares of Common Stock after giving
effect thereto. Such adjustment shall be made successively whenever any
such effective date or record date shall occur. An adjustment made
pursuant to this subsection (a) shall become effective retroactively,
immediately after the record date in the case of a dividend and shall
become effective immediately after the effective date in the case of a
subdivision, reduction, consolidation, combination or reclassification.
The Purchase Rate in effect immediately prior to any such issuance,
subdivision, reduction, consolidation or combination shall be increased
or decreased, effective at the opening of business on the day following
the date of such issuance, subdivision, reduction, consolidation or
combination so that the Purchase Rate (i.e., the number of shares
issuable upon exercise of the Warrants) when multiplied by the Purchase
Price, shall be equal to the product of thirty cents ($.30) times the
number of shares of Common Stock for which this Warrant was initially
exercisable.
(b) In the event the Company shall at any time be consolidated
with or merged into any other corporation or corporations, or shall sell
or lease all or substantially all of its property and business as an
entirety, lawful provision shall be as part of the terms of such
consolidation, merger, sale, or lease as the Board of Directors of the
Company deems necessary and appropriate to protect the rights of the
Holder of this Warrant.
3. In case at any time:
(a) The Company shall declare any cash dividend on its Common
Stock at a rate in excess of the rate of the last cash dividend
theretofore paid;
(b) The Company shall pay any dividend payable in stock upon its
Common Stock or make any distribution (other than regular cash
dividends) to the holders of its Common Stock;
(c) The Company shall offer for subscription pro rata to the
holders of its Common Stock any additional shares of stock of any class
or other rights;
(d) There shall be any capital reorganization, or
reclassification of the capital stock of the Company or consolidation or
merger of the Company with, or sales of all or substantially all of its
assets to, another corporation; or
(e) There shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Company;
then, in any one or more of said cases, the Company shall give written notice,
by first class mail, postage prepaid, addressed to the Holder at the address of
such holder as shown on the books of the Company, of the date on which (1) the
books of the Company shall close or a record shall be taken for such dividend,
distribution or subscription rights, or (2) such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding up shall take place, as the case may be. Such notice shall also specify
the date as of which the holders of Common Stock of record shall participate in
such dividend, distribution or subscription rights, or shall be entitled to
exchange their Common Stock for securities or other property deliverable upon
such reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation, or winding up, as the case may be. Such written notice shall be
given at least 20 days prior to the action in question and not less than 20 days
prior to the record date or the date on which the Company's transfer books are
closed in respect thereto.
4. If any event occurs as to which, in the sole opinion of the Board of
Directors of the Company, the other provisions of this Warrant are not strictly
applicable or if strictly applicable would not fairly protect the rights of the
Holder in accordance with the essential intent and principles of such
provisions, then the Board of Directors shall make such adjustment in the
application of such provisions as may be necessary, in the sole judgment of such
Board, in accordance with such essential intent and principles, to protect such
rights as aforesaid.
5. Exercise of this Warrant shall be made by the surrender hereof by the
Holder to the Company at its principal office together with (i) the attached
Subscription Form designating the number of shares of Common Stock being
purchased, (ii) a certified check or cash in payment for such shares and (iii) a
letter of transmittal setting forth the computation of the amount of said
payment. The Company shall thereafter promptly (in any event within seven (7)
business days after such exercise) issue certificates for the number of shares
of the Common Stock of the Company purchased at the Purchase Price in effect at
the time of such exercise. The Holder shall be deemed to be the record owner of
such shares of Common Stock as of the close of business on the date of such
exercise. The Holder shall not be entitled to receive a fractional share, but in
lieu thereof the Company shall pay in cash an amount equal to the market value
of such fractional share if the Common Stock has a market value, or if not, the
book value of such fractional share. The Company shall thereupon cancel this
Warrant; and in the event that less than the entire number of shares purchasable
are purchased, shall issue a new Warrant for the number not so purchased.
6. The Company covenants and agrees that all shares which may be issued
upon the exercise of this Warrant will, upon issuance, be duly and validly
authorized and issued, fully paid and nonassessable, and free from all taxes,
liens and charges with respect to the issue thereof; and without limiting the
generality of the foregoing, the Company covenants and agrees that it will, from
time to time, take all such action as may be requisite to assure that the par
value or stated value per share of the Common Stock to be acquired upon the
exercise of this Warrant is at all times equal to or less than the then
effective Purchase Price per share of the Common Stock issuable pursuant to
exercise of this Warrant. The Company further covenants and agrees that during
the period within which this Warrant may be exercised, the Company will at all
times have authorized and reserved for the purpose of the issue upon exercise of
this Warrant a sufficient number of shares of its Common Stock to provide for
such exercise.
7. (a) The Holder represents that he is acquiring this Warrant and, in
the absence of an effective registration statement under the Securities Act of
1933 (the "1933 Act") for the shares of Common Stock issuable hereunder, such
shares, for the purpose of investment and not with a view to or for sale in
connection with any distribution thereof. The Holder and the holder of any
shares of Common Stock issued upon exercise hereof, by his acceptance hereof,
agrees that he/she/it will notify the Company in writing before selling or
otherwise disposing of this Warrant or any shares of Common Stock issued to
him/her/it upon exercise hereof, describing briefly the nature of any such sale
or other disposition, and no such sale or other disposition shall be made unless
and until (i) the Company has received an opinion of counsel reasonably
acceptable to it that no registration (or perfection of an exemption) under the
1933 Act is required with respect to such sale or disposition (which opinion may
be conditioned upon the transferee's assuming the Holder's obligation under this
paragraph 7) or (ii) an appropriate registration statement with respect to such
Warrant or such Common Stock, or both, has been filed with the Securities and
Exchange Commission (the "Commission") and declared effective by the Commission.
The Company may require that this Warrant and certificates representing shares
of Common Stock issued upon exercise hereof be stamped or imprinted with an
appropriate legend reflecting the foregoing restrictions. For the purposes of
this paragraph 7, the term "Securities" shall include this Warrant and the
shares of Common Stock issued or issuable upon the exercise hereof.
(b) The restrictions imposed by this paragraph 7 on the transfer of the
Securities shall terminate as to any portion of the Securities when:
(i) Such portion of the Securities shall have been effectively
registered under the 1933 Act and sold by the holder thereof in
accordance with such registration or exemption; or
(ii) Written opinions to the effect that such a registration is
no longer required or necessary under any federal or state law or
regulation of governmental authority shall have been received from legal
counsel for the Company and counsel for the holder of such portion of
the Securities; or, if a favorable opinion is obtained from holder's
counsel, and counsel for the Company declines to render such an opinion,
upon the holder's undertaking to indemnify the Company, on terms
satisfactory to the Company, against all liability or loss the Company
may sustain in connection with such transfer; or
Whenever the restrictions imposed by this paragraph 7 shall terminate,
as provided above, any holder of the Securities as to which such restrictions
shall have terminated shall be entitled to receive promptly from the Company,
without expense to him, a new certificate, not bearing the restrictive legend
referred to in clause (a) hereof.
8. The Company shall file as soon as reasonably possible a registration
statement under the 1933 Act with respect to the Common Stock issuable upon
exercise of this Warrant. The Company shall be required to effect only one
registration pursuant to this Section 8. In connection with such registration,
the Company will:
(a) Use its best efforts to cause such registration statement
to become and remain effective for a period of 120 days following the
exercise of the Warrant; provided, however, that the Company shall not
be obligated to maintain such registration after July 28, 1996;
(b) Prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective and to comply with the provisions of the 1933 Act
with respect to the sale or other disposition of the Common Stock;
(c) Furnish to the Holder hereof such number of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the 1933 Act, and such other documents as it may
reasonably request in order to facilitate the public sale or other
disposition of the Common Stock;
(d) Notify the Holder hereof at any time when a prospectus
relating to the Common Stock covered by such registration statement is
required to be delivered under the 1933 Act within the appropriate
period, of the happening of any event as a result of which the
prospectus included in such registration statement, as then in effect,
includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances
then existing, and at the Holder's request, prepare and furnish to each
of them a reasonable number of copies of a supplement to, or an
amendment of, such prospectus as may be necessary so that, as
thereafter delivered to the purchasers of the Common Stock, such
prospectus shall not include an untrue statement of a material fact or
omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in the light of
the circumstances then existing.
All expenses incurred by the Company in complying with this Section 8,
including, without limitation, all registration and filing fees (including all
expenses incident to filing with the National Association of Securities Dealers,
Inc.), printing expenses, fees and disbursements of counsel for the Company and
the expense of any special audits incident to or required by any such
registration shall be paid by the Company. Only the underwriting discount or
selling commission applicable to the sale of the Common Stock and the expenses
of counsel, if any, for the Holder hereof, shall be borne by the Holder hereof.
The Holder hereof agrees to supply the Company with such information as
may be required by the Company to register or qualify the Common Stock. The
Holder hereof represents and warrants that it will comply with all applicable
federal and state laws in connection with the offer and sale of the Common
Stock. In connection with such filing and the subsequent disposition of the
shares of Common Stock, the Holder agrees as follows:
(i) It has no agreement or understanding with any broker/dealer or
underwriter with respect to the proposed sale of such stock
and hereby agrees and warrants that if it shall at a later
date enter into any agreement for an underwritten offering of
all or a portion of such shares, it will immediately so advise
the Company and provide the Company with the details of any
such undertaking;
(ii) It expects that any of the shares of the Common Stock which it
sells pursuant to the registration statement will be sold in
the over-the-counter market at prices and at terms then
prevailing or at prices related to the then current market
price or in negotiated transactions and that no more than
ordinary and customary fees will be paid to a broker/dealer in
connection with any such sale and agrees to notify the Company
if there is any change in such expectation; and
(iii) It understands that the sale of any of the shares subject to
the registration statement must be accompanied by the delivery
of an effective prospectus and agrees that it will inform any
broker/dealer who it engages to sell any of its shares of
Common Stock subject to the registration statement that the
sale must be accompanied by the delivery of a prospectus. The
undersigned further understands that it is its sole
responsibility to provide the broker/dealer with a copy of the
prospectus. (The Company will advise selling stockholders when
the registration statement has been declared effective by the
Commission, prior to which no sales pursuant to the
registration statement may be made.)
9. This Warrant is exchangeable, upon the surrender hereof by the Holder
at the principal office of the Company, for new warrants of like tenor and date
representing in the aggregate the right to purchase the number of shares
purchasable hereunder, each of such new Warrants to represent the right to
purchase such number of shares as shall be designated by said Holder at the time
of such surrender. Subject to paragraph 7 hereof, this Warrant and all rights
hereunder are transferable in whole or in part by the Holder, in person or by
duly authorized attorney, upon surrender of this Warrant duly endorsed, at the
principal office of the Company.
10. Upon the receipt by the Company of evidence reasonably satisfactory
to it of the loss, theft, destruction or mutilation of this Warrant, and, in
case of loss, theft or destruction, of indemnity or security reasonably
satisfactory to it, and reimbursement to the Company of all reasonable expenses
incidental thereto, and upon surrender and cancellation of this Warrant, if
mutilated, the Company will make and deliver a new Warrant of like tenor, in
lieu of this Warrant.
11. All notices, requests, consents and other communications hereunder
shall be in writing and shall be deemed to have been made when delivered or
mailed first-class postage prepaid or delivered to a telegraph office for
transmission:
(a) If to the Holder, at such address as may have been furnished
by such holder to the Company in writing; and
(b) If to the Company, at such address as may have been furnished
by the Company to the Holder of this Warrant in writing.
12. This Warrant shall be binding upon any successors or assigns of the
Company.
13. This Warrant shall be construed in accordance with and governed by
the laws of the State of California.
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed and delivered as of the date set forth below by one of its officers
thereunto duly authorized.
Dated: ______________, 1995.
HEALTHWATCH, INC.
By
Its President and Chief
Executive Officer
GP:208396 v1
SUBSCRIPTION FORM
To be signed only upon exercise of Warrant
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise the purchase right represented by such Warrant for and to
purchase thereunder, ___________ of the shares of Common Stock of HEALTHWATCH,
INC. to which such Warrant relates, and herewith makes payment of $____________
therefor, in cash or by certified check, and requests that the certificates for
such shares be issued in the name of, and be delivered to,___________________,
the address for which is set forth below the signature of the undersigned.
Dated: ______________________
______________________
______________________
(Signature)
______________________
______________________
(Address)
To be signed only upon transfer of Warrant
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto___________________ the right to purchase _________ shares of Common Stock
of HEALTHWATCH, INC. to which the within Warrant relates and appoints
___________________, attorney, to transfer said right on the books of
HEALTHWATCH, INC. with full power of substitution in the premises.
Dated: ___________________
______________________
______________________
(Signature)
______________________
______________________
(Address)
GP:208396 v1
SEE PARAGRAPH 7 FOR RESTRICTIONS ON THE TRANSFER OF THIS WARRANT
No. DSN-2
Warrant
to Purchase 200,000
Shares
WARRANT TO PURCHASE COMMON STOCK OF
HEALTHWATCH, INC.
THIS CERTIFIES THAT for value received D.S.N. Enterprises, Ltd. is
entitled, subject to the terms and conditions hereinafter set forth, to purchase
from HEALTHWATCH, INC., a Minnesota corporation (the "Company"), 200,000 fully
paid and non-assessable shares of Common Stock of the Company (herein called the
"Common Stock"), upon presentation and surrender of this Warrant with the
Subscription Form duly executed, at any time during the term hereof, at the
principal office of the Company or at such other office as shall have
theretofore been designated by the Company by notice pursuant hereto and upon
payment therefor of the Purchase Price, in lawful money of the United States of
America, determined as set forth below. The term of this Warrant shall commence
on the date hereof, and terminate, if not exercised or redeemed prior thereto,
at 5:00 p.m. California Time, on July 28, 1996.
This Warrant is subject to the following terms and conditions:
1. The purchase rights represented by this Warrant are exercisable at
the option of the Holder, in whole at any time, or in part from time to time
(but not as to a fractional share of Common Stock). In the case of the purchase
of less than all the shares purchasable under this Warrant, the Company shall
cancel this Warrant upon the surrender hereof and shall execute and deliver a
new Warrant of like tenor for the balance of the shares purchasable hereunder.
Subject to the terms hereof, the Company may at any time after the later of
January 28, 1996, or five months after the effective date of the registration
statement to be filed pursuant to paragraph 8 hereof, redeem this Warrant, at
its discretion, upon payment to the Holder hereof of one cent ($.01) per Warrant
to be redeemed. The Company shall give written notice of the date set by the
Company for such redemption (the "Redemption Date") at least 10 days prior to
the Redemption Date. The Redemption Date shall be the expiration date for the
Warrant, provided that the Company tenders on the Redemption Date payment of the
redemption price for the Warrants to be redeemed. Following the Redemption Date,
this Warrant shall be deemed to have expired and the Holder hereof shall have no
rights with respect hereto, except the right to receive payment of the
redemption price upon surrender of this Warrant certificate.
2. The purchase price for each share of Common Stock purchasable
pursuant to the exercise of this Warrant shall be fifty ($.50) per share, such
price being sometimes hereinafter referred to as the "Base Purchase Price". The
Base Purchase Price and, from time to time, the number of shares of Common Stock
subject to purchase hereunder are subject to adjustment in certain circumstances
provided for below, and the Base Purchase Price, as it may be adjusted from time
to time, is hereinafter referred to as the "Purchase Price".
(a) In case the Company shall (i) pay a dividend in shares of its
capital stock (other than an issuance of shares of capital stock to
holders of Common Stock who have elected to receive a dividend in shares
in lieu of cash), (ii) subdivide its outstanding shares of Common Stock,
(iii) reduce, consolidate or combine its outstanding shares of Common
Stock into a smaller number of shares, or (iv) issue by reclassification
of its shares of Common Stock any shares of the Company, the Purchase
Price in effect immediately prior thereto shall be adjusted to that
amount determined by multiplying the Purchase Price in effect
immediately prior to such date by a fraction, of which the numerator
shall be the number of shares of Common Stock outstanding on such date
before giving effect to such division, subdivision, reduction,
combination or consolidation or stock dividend and of which the
denominator shall be the number of shares of Common Stock after giving
effect thereto. Such adjustment shall be made successively whenever any
such effective date or record date shall occur. An adjustment made
pursuant to this subsection (a) shall become effective retroactively,
immediately after the record date in the case of a dividend and shall
become effective immediately after the effective date in the case of a
subdivision, reduction, consolidation, combination or reclassification.
The Purchase Rate in effect immediately prior to any such issuance,
subdivision, reduction, consolidation or combination shall be increased
or decreased, effective at the opening of business on the day following
the date of such issuance, subdivision, reduction, consolidation or
combination so that the Purchase Rate (i.e., the number of shares
issuable upon exercise of the Warrants) when multiplied by the Purchase
Price, shall be equal to the product of fifty cents ($.50) times the
number of shares of Common Stock for which this Warrant was initially
exercisable.
(b) In the event the Company shall at any time be consolidated
with or merged into any other corporation or corporations, or shall sell
or lease all or substantially all of its property and business as an
entirety, lawful provision shall be as part of the terms of such
consolidation, merger, sale, or lease as the Board of Directors of the
Company deems necessary and appropriate to protect the rights of the
Holder of this Warrant.
3. In case at any time:
(a) The Company shall declare any cash dividend on its Common
Stock at a rate in excess of the rate of the last cash dividend
theretofore paid;
(b) The Company shall pay any dividend payable in stock upon its
Common Stock or make any distribution (other than regular cash
dividends) to the holders of its Common Stock;
(c) The Company shall offer for subscription pro rata to the
holders of its Common Stock any additional shares of stock of any class
or other rights;
(d) There shall be any capital reorganization, or
reclassification of the capital stock of the Company or consolidation or
merger of the Company with, or sales of all or substantially all of its
assets to, another corporation; or
(e) There shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Company;
then, in any one or more of said cases, the Company shall give written notice,
by first class mail, postage prepaid, addressed to the Holder at the address of
such holder as shown on the books of the Company, of the date on which (1) the
books of the Company shall close or a record shall be taken for such dividend,
distribution or subscription rights, or (2) such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding up shall take place, as the case may be. Such notice shall also specify
the date as of which the holders of Common Stock of record shall participate in
such dividend, distribution or subscription rights, or shall be entitled to
exchange their Common Stock for securities or other property deliverable upon
such reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation, or winding up, as the case may be. Such written notice shall be
given at least 20 days prior to the action in question and not less than 20 days
prior to the record date or the date on which the Company's transfer books are
closed in respect thereto.
4. If any event occurs as to which, in the sole opinion of the Board of
Directors of the Company, the other provisions of this Warrant are not strictly
applicable or if strictly applicable would not fairly protect the rights of the
Holder in accordance with the essential intent and principles of such
provisions, then the Board of Directors shall make such adjustment in the
application of such provisions as may be necessary, in the sole judgment of such
Board, in accordance with such essential intent and principles, to protect such
rights as aforesaid.
5. Exercise of this Warrant shall be made by the surrender hereof by the
Holder to the Company at its principal office together with (i) the attached
Subscription Form designating the number of shares of Common Stock being
purchased, (ii) a certified check or cash in payment for such shares and (iii) a
letter of transmittal setting forth the computation of the amount of said
payment. The Company shall thereafter promptly (in any event within seven (7)
business days after such exercise) issue certificates for the number of shares
of the Common Stock of the Company purchased at the Purchase Price in effect at
the time of such exercise. The Holder shall be deemed to be the record owner of
such shares of Common Stock as of the close of business on the date of such
exercise. The Holder shall not be entitled to receive a fractional share, but in
lieu thereof the Company shall pay in cash an amount equal to the market value
of such fractional share if the Common Stock has a market value, or if not, the
book value of such fractional share. The Company shall thereupon cancel this
Warrant; and in the event that less than the entire number of shares purchasable
are purchased, shall issue a new Warrant for the number not so purchased.
6. The Company covenants and agrees that all shares which may be issued
upon the exercise of this Warrant will, upon issuance, be duly and validly
authorized and issued, fully paid and nonassessable, and free from all taxes,
liens and charges with respect to the issue thereof; and without limiting the
generality of the foregoing, the Company covenants and agrees that it will, from
time to time, take all such action as may be requisite to assure that the par
value or stated value per share of the Common Stock to be acquired upon the
exercise of this Warrant is at all times equal to or less than the then
effective Purchase Price per share of the Common Stock issuable pursuant to
exercise of this Warrant. The Company further covenants and agrees that during
the period within which this Warrant may be exercised, the Company will at all
times have authorized and reserved for the purpose of the issue upon exercise of
this Warrant a sufficient number of shares of its Common Stock to provide for
such exercise.
7. (a) The Holder represents that he is acquiring this Warrant and, in
the absence of an effective registration statement under the Securities Act of
1933 (the "1933 Act") for the shares of Common Stock issuable hereunder, such
shares, for the purpose of investment and not with a view to or for sale in
connection with any distribution thereof. The Holder and the holder of any
shares of Common Stock issued upon exercise hereof, by his acceptance hereof,
agrees that he/she/it will notify the Company in writing before selling or
otherwise disposing of this Warrant or any shares of Common Stock issued to
him/her/it upon exercise hereof, describing briefly the nature of any such sale
or other disposition, and no such sale or other disposition shall be made unless
and until (i) the Company has received an opinion of counsel reasonably
acceptable to it that no registration (or perfection of an exemption) under the
1933 Act is required with respect to such sale or disposition (which opinion may
be conditioned upon the transferee's assuming the Holder's obligation under this
paragraph 7) or (ii) an appropriate registration statement with respect to such
Warrant or such Common Stock, or both, has been filed with the Securities and
Exchange Commission (the "Commission") and declared effective by the Commission.
The Company may require that this Warrant and certificates representing shares
of Common Stock issued upon exercise hereof be stamped or imprinted with an
appropriate legend reflecting the foregoing restrictions. For the purposes of
this paragraph 7, the term "Securities" shall include this Warrant and the
shares of Common Stock issued or issuable upon the exercise hereof.
(b) The restrictions imposed by this paragraph 7 on the transfer of the
Securities shall terminate as to any portion of the Securities when:
(i) Such portion of the Securities shall have been effectively
registered under the 1933 Act and sold by the holder thereof in
accordance with such registration or exemption; or
(ii) Written opinions to the effect that such a registration is
no longer required or necessary under any federal or state law or
regulation of governmental authority shall have been received from legal
counsel for the Company and counsel for the holder of such portion of
the Securities; or, if a favorable opinion is obtained from holder's
counsel, and counsel for the Company declines to render such an opinion,
upon the holder's undertaking to indemnify the Company, on terms
satisfactory to the Company, against all liability or loss the Company
may sustain in connection with such transfer; or
Whenever the restrictions imposed by this paragraph 7 shall terminate,
as provided above, any holder of the Securities as to which such restrictions
shall have terminated shall be entitled to receive promptly from the Company,
without expense to him, a new certificate, not bearing the restrictive legend
referred to in clause (a) hereof.
8. The Company shall file as soon as reasonably possible a registration
statement under the 1933 Act with respect to the Common Stock issuable upon
exercise of this Warrant. The Company shall be required to effect only one
registration pursuant to this Section 8. In connection with such registration,
the Company will:
(a) Use its best efforts to cause such registration statement
to become and remain effective for a period of 120 days following the
exercise of the Warrant; provided, however, that the Company shall not
be obligated to maintain such registration after July 28, 1996;
(b) Prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective and to comply with the provisions of the 1933 Act
with respect to the sale or other disposition of the Common Stock;
(c) Furnish to the Holder hereof such number of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the 1933 Act, and such other documents as it may
reasonably request in order to facilitate the public sale or other
disposition of the Common Stock;
(d) Notify the Holder hereof at any time when a prospectus
relating to the Common Stock covered by such registration statement is
required to be delivered under the 1933 Act within the appropriate
period, of the happening of any event as a result of which the
prospectus included in such registration statement, as then in effect,
includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances
then existing, and at the Holder's request, prepare and furnish to each
of them a reasonable number of copies of a supplement to, or an
amendment of, such prospectus as may be necessary so that, as
thereafter delivered to the purchasers of the Common Stock, such
prospectus shall not include an untrue statement of a material fact or
omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in the light of
the circumstances then existing.
All expenses incurred by the Company in complying with this Section 8,
including, without limitation, all registration and filing fees (including all
expenses incident to filing with the National Association of Securities Dealers,
Inc.), printing expenses, fees and disbursements of counsel for the Company and
the expense of any special audits incident to or required by any such
registration shall be paid by the Company. Only the underwriting discount or
selling commission applicable to the sale of the Common Stock and the expenses
of counsel, if any, for the Holder hereof, shall be borne by the Holder hereof.
The Holder hereof agrees to supply the Company with such information as
may be required by the Company to register or qualify the Common Stock. The
Holder hereof represents and warrants that it will comply with all applicable
federal and state laws in connection with the offer and sale of the Common
Stock. In connection with such filing and the subsequent disposition of the
shares of Common Stock, the Holder agrees as follows:
(i) It has no agreement or understanding with any broker/dealer or
underwriter with respect to the proposed sale of such stock
and hereby agrees and warrants that if it shall at a later
date enter into any agreement for an underwritten offering of
all or a portion of such shares, it will immediately so advise
the Company and provide the Company with the details of any
such undertaking;
(ii) It expects that any of the shares of the Common Stock which it
sells pursuant to the registration statement will be sold in
the over-the-counter market at prices and at terms then
prevailing or at prices related to the then current market
price or in negotiated transactions and that no more than
ordinary and customary fees will be paid to a broker/dealer in
connection with any such sale and agrees to notify the Company
if there is any change in such expectation; and
(iii) It understands that the sale of any of the shares subject to
the registration statement must be accompanied by the delivery
of an effective prospectus and agrees that it will inform any
broker/dealer who it engages to sell any of its shares of
Common Stock subject to the registration statement that the
sale must be accompanied by the delivery of a prospectus. The
undersigned further understands that it is its sole
responsibility to provide the broker/dealer with a copy of the
prospectus. (The Company will advise selling stockholders when
the registration statement has been declared effective by the
Commission, prior to which no sales pursuant to the
registration statement may be made.)
9. This Warrant is exchangeable, upon the surrender hereof by the Holder
at the principal office of the Company, for new warrants of like tenor and date
representing in the aggregate the right to purchase the number of shares
purchasable hereunder, each of such new Warrants to represent the right to
purchase such number of shares as shall be designated by said Holder at the time
of such surrender. Subject to paragraph 7 hereof, this Warrant and all rights
hereunder are transferable in whole or in part by the Holder, in person or by
duly authorized attorney, upon surrender of this Warrant duly endorsed, at the
principal office of the Company.
10. Upon the receipt by the Company of evidence reasonably satisfactory
to it of the loss, theft, destruction or mutilation of this Warrant, and, in
case of loss, theft or destruction, of indemnity or security reasonably
satisfactory to it, and reimbursement to the Company of all reasonable expenses
incidental thereto, and upon surrender and cancellation of this Warrant, if
mutilated, the Company will make and deliver a new Warrant of like tenor, in
lieu of this Warrant.
11. All notices, requests, consents and other communications hereunder
shall be in writing and shall be deemed to have been made when delivered or
mailed first-class postage prepaid or delivered to a telegraph office for
transmission:
(a) If to the Holder, at such address as may have been
furnished by such holder to the Company in writing; and
(b) If to the Company, at such address as may have been furnished
by the Company to the Holder of this Warrant in writing.
12. This Warrant shall be binding upon any successors or assigns of the
Company.
13. This Warrant shall be construed in accordance with and governed by
the laws of the State of California.
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed and delivered as of the date set forth below by one of its officers
thereunto duly authorized.
Dated: ______________, 1995.
HEALTHWATCH, INC.
By
Its President and Chief
Executive Officer
GP:208407 v1
SUBSCRIPTION FORM
To be signed only upon exercise of Warrant
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise the purchase right represented by such Warrant for and to
purchase thereunder, _________________ of the shares of Common Stock of
HEALTHWATCH, INC. to which such Warrant relates, and herewith makes payment of $
_________________ therefor, in cash or by certified check, and requests that the
certificates for such shares be issued in the name of, and be delivered to, ,
the address for which is set forth below the signature of the undersigned.
Dated: _________________
______________________
______________________
(Signature)
______________________
______________________
(Address)
To be signed only upon transfer of Warrant
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto ______________________________ the right to purchase _________ shares of
Common Stock of HEALTHWATCH, INC. to which the within Warrant relates and
appoints ________________________, attorney, to transfer said right on the books
of HEALTHWATCH, INC. with full power of substitution in the premises.
Dated: ___________________
______________________
______________________
(Signature)
______________________
______________________
(Address)
GP:208407 v1
EXHIBIT 4.19
SETTLEMENT AGREEMENT
This Settlement Agreement (the "Agreement") is made and entered into
effective the 11th day of May, 1995, among HealthWatch, Inc. (the "Company"),
Investor Resource Services, Inc. ("IRI"), SMI Capital Corp. ("SMI') and Charles
Arnold ("Arnold").
WHEREAS, pursuant to Subscription and Investment Agreements executed in
June, 1994 between the Company and IRI and SMI, IRSI and SMI acquired 200,000
shares each of the Common Stock, $.01 par value, of the Company (the "Common
Stock");
WHEREAS, certain matters have arisen in connection with the purchase of
the Common Stock by IRI and SMI;
WHEREAS, the Company, IRI, SMI and Arnold desire to resolve open
matters and issues between them in connection with the purchase of the Common
Stock and otherwise.
NOW, THEREFORE, in consideration of and in reliance upon the mutual
representations, warranties and agreements contained herein and in the exhibits
hereto, the parties hereto agree as follows:
1. Conversion of Common Stock to Preferred Stock. Within fifteen (15)
days of the execution of this Agreement by each of the parties hereto, IRI and
SMI shall each deliver to the Company certificates for 200,000 shares of the
Common Stock (the "Common Shares"). Simultaneously with such delivery, the
Company shall issue and deliver to each of IRI and SMI certificates representing
200,000 shares of the Series A Convertible Preferred Stock of the Company (the
"Preferred Shares"), the Preferred Shares having the rights, terms and
obligations as set forth in the Certificate of Designation of Series A
Convertible Preferred Stock attached as Exhibit A hereto. IRI and SMI each
represents and warrants that it has the unrestricted and absolute power to
assign its Common Shares to the Company. IRI and SMI further represent and
warrant that they have the full corporate power to execute and deliver this
Agreement and have taken all action required by law, their respective Articles
of Incorporation, Bylaws or otherwise to authorize such execution and delivery
and that this Agreement is a valid and binding obligation of each of them and
that it owns its Common Shares free and clear of any liens or encumbrances and
agreements, and that upon delivery of certificates for such shares to the
Company, the Company will acquire title to such shares free and clear of any
liens or encumbrances. The Company represents that the Certificate of
Designation of Series A Convertible Preferred Stock shall be filed with the
Minnesota Secretary of State prior to the issuance of the certificates for the
Preferred Shares and that upon issuance of the Preferred Shares, such shares
shall be duly authorized, fully paid and nonassessable shares of the Series A
Convertible Preferred Stock of the Company. The Company further represents and
warrants that it has the corporate power to execute and deliver this Agreement
and has taken all action required by law, its Articles of Incorporation, its
Bylaws or otherwise to authorize such execution and delivery and that this
Agreement is a valid and binding obligation of the Company.
2. Issuance of Warrant. Simultaneously with the delivery of the
certificates for the Preferred Shares, the Company shall deliver to each of IRI
and SMI, a stock warrant representing the right to purchase 50,000 shares of
Common Stock (the "Warrants"), the Warrants to be in the form of Exhibit B
hereto.
3. Representations of IRI and SMI. IRI and SMI, each acknowledges and
represents as follows:
(a) It has been given full access to information regarding the
Company (including the opportunity to meet with Company
officers and to review all the documents that it may have
requested) and has utilized such access to its satisfaction
for the purpose of obtaining information.
(b) It has sufficient knowledge and experience in financial and
business matters that it is capable of evaluating the merits
and risks of investment in the Preferred Shares;
(c) It understands that the purchase of the Preferred Shares is a
highly speculative investment and involves a high degree of
risk;
(d) It believes that the investment in the Preferred Shares is
suitable based upon its investment objectives and financial
needs and that it has adequate means of providing for current
financial needs and contingencies, has no need for liquidity
of investment with respect to the Preferred Shares and can
afford a complete loss of such investment; and
(e) It understands that there are substantial restrictions
on the transfer of the Preferred Shares; and, accordingly, it
may not be able to liquidate an investment in the Preferred
Shares for an indefinite period.
4. Investment Intent; Restrictions on Transfer. IRI and SMI each has
been advised that the Preferred Shares are not being registered under the
Secuities Act of 1933, as amended (the "Act"), or state securities laws and are
being sold pursuant to exemptions from the Act and such laws, and that the
Company's reliance upon such exemptions is predicated in part on its
representations contained herein. Each of IRI and SMI represents and warrants
that the Preferred Shares is being purchased for its account and for investment
without the intention of reselling or redistributing the same, and that its
financial condition is such that it is not likely that it will be necessary to
dispose of any of such shares in the foreseeable future. Each of IRI and SMI
further represents and agrees that the Preferred Shares may not be sold except
pursuant to an effective registration statement under the Act and applicable
state securities laws, or an opinion of counsel that such registration is not
required. Each of IRI and SMI understands that a legend will be placed on the
certificates representing the Preferred Shares containing substantially the
following language:
These shares have been purchased for investment within the
meaning of the Securities Act of 1933 as amended ("Act") and
applicable state securities laws, and they may not be sold,
offered for sale, pledged, or otherwise transferred without an
effective registration statement under the Act and applicable
state securities laws or an opinion of counsel satisfactory to
the Company to the effect that the proposed transaction will
be exempt from registration.
5. Registration Rights. The Company shall file a Registration Statement
under the Act with respect to the Common Stock (i) issuable upon conversion of
the Preferred Shares, (ii) payable in lieu of cash payments for the dividends on
the Preferred Shares and (iii) issuable upon exercise of the Warrants. The
Company shall be required to effect only one registration pursuant to this
Section 5. In connection with such registration, the Company will:
(a) Use its best efforts to cause such registration statement
to become and remain effective for a period of 120 days following
conversion of all of the Preferred Shares; provided, however, that the
Company shall not be obligated to maintain such registration after
December 31, 1996;
(b) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective and to comply with the provisions of the Act with
respect to the sale or other disposition of the Common Stock;
(c) Furnish to each of IRI and SMI such number of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Act, and such other documents as it may reasonably
request in order to facilitate the public sale or other disposition of
the Common Stock;
(d) Notify IRI and SMI at any time when a prospectus relating
to the Common Stock covered by such registration statement is required
to be delivered under the Act within the appropriate period, of the
happening of any event as a result of which the prospectus included in
such registration statement, as then in effect, includes an untrue
statement of a material fact or omits to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing, and at
IRI's or SMI's request, prepare and furnish to each of them a
reasonable number of copies of a supplement to, or an amendment of,
such prospectus as may be necessary so that, as thereafter delivered to
the purchasers of the Common Stock, such prospectus shall not include
an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing.
All expenses incurred by the Company in complying with this Section 5,
including, without limitation, all registration and filing fees (including all
expenses incident to filing with the National Association of Securities Dealers,
Inc.), printing expenses, fees and disbursements of counsel for the Company and
the expense of any special audits incident to or required by any such
registration shall be paid by the Company. Only the underwriting discount or
selling commission applicable to the sale of the Common Stock and the expenses
of counsel, if any, for IRI and SMI, shall be borne by IRI and SMI.
IRI and SMI agree to supply the Company with such information as may be
required by the Company to register or qualify the Common Stock. IRI and SMI
represent and warrant that they will comply with all applicable federal and
state laws in connection with the offer and sale of the Common Stock. In
connection with such filing and the subsequent disposition of the shares of
Common Stock, each of IRI and SMI agrees as follows:
(i) It has no agreement or understanding with any broker/dealer or
underwriter with respect to the proposed sale of such stock
and hereby agrees and warrants that if it shall at a later
date enter into any agreement for an underwritten offering of
all or a portion of such shares, it will immediately so advise
the Company and provide the Company with the details of any
such undertaking;
(ii) It expects that any of the shares of the Common Stock which it
sells pursuant to the registration statement will be sold in
the over-the-counter market at prices and at terms then
prevailing or at prices related to the then current market
price or in negotiated transactions and that no more than
ordinary and customary fees will be paid to a broker/dealer in
connection with any such sale and agrees to notify the Company
if there is any change in such expectation; and
(iii) It understands that the sale of any of the shares subject to
the registration statement must be accompanied by the delivery
of an effective prospectus and agrees that it will inform any
broker/dealer who it engages to sell any of its shares of
Common Stock subject to the registration statement that the
sale must be accompanied by the delivery of a prospectus. The
undersigned further understands that it is its sole
responsibility to provide the broker/dealer with a copy of the
prospectus. (The Company will advise selling stockholders when
the registration statement has been declared effective by the
Commission, prior to which no sales pursuant to the
registration statement may be made.)
6. Sales of Common Stock. IRI, SMI and Arnold, jointly and severally,
represent and warrant that neither they nor any of their affiliates or
associates will at any time prior to the conversion of all of the Preferred
Shares, engage in so called "short sales" of Common Stock.
7. General Releases. Subject to only the following paragraph, IRI, SMI
and Arnold, jointly and severally, for themselves and their respective
successors and assigns, hereby release and discharge the Company and each and
all of its present and past agents, servants, employees, representatives,
directors, officers, subsidiaries, affiliates, attorneys, successors and assigns
(collectively, "Company Releasees") from, and hereby acknowledge full and
complete satisfaction of, any and all rights, claims, demands, debts,
liabilities, accounts, obligations and causes of action of every kind and nature
which they or any of them has or may have against any of the Company Releasees,
in each case whether now existing or hereafter arising, known or unknown,
absolute or contingent, determined or speculative, in equity or at law, or by
act or omission. Subject only to the following paragraph, the Company for its
self and its respective successors and assigns, hereby releases and discharges
IRI, SMI and Arnold and each and all of their present and past agents, servants,
employees, representatives, directors, officers, subsidiaries, affiliates,
attorneys, successors and assigns (collectively, "IRI, SMI and Arnold
Releasees") from, and hereby acknowledges full and complete satisfaction of, any
and all rights, claims, demands, debts, liabilities, accounts, obligations, and
causes of action of every kind and nature which it has or may have against any
of the IRI, SMI and Arnold Releasees, in each case whether now existing or
hereafter arising, known or unknown, absolute or contingent, determined or
speculative, in equity or at law, or by any act or omission.
The foregoing general releases do not release any of the parties to
this Agreement from their respective undertakings, representations and
obligations set forth in this Agreement.
8. Agreement to Negotiate. The parties shall negotiate in good faith to
resolve any controversy or claim arising out of or relating to this Agreement,
or the breach thereof. If any party to this Agreement believes that such a
controversy or claim has arisen, that party may give notice to the other parties
requesting such negotiations. Any dispute not settled pursuant to such
negotiations shall be submitted to binding arbitration in California in
accordance with the applicable rules of the American Arbitration Association (or
any other dispute resolution organization agreed upon by the parties), by three
independent or impartial arbitrators, of whom the Company shall appoint one and
IRI, SMI and Arnold shall appoint one and the third shall be appointed by the
two arbitrators selected by the parties. Judgment upon the award may be entered
by any court having jurisdiction.
9. Binding on Successors and Assigns. This Agreement and all of the
provisions hereof shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns.
10. Entire Agreement. This Agreement and the Exhibits hereto represent
the entire Agreement of the parties hereto with respect to the subject matter
hereof, superseding all prior agreements, understandings, discussions,
negotiations and comments of any kind.
11. Execution and Counterparts. This Agreement may be executed in any
number of counterparts and by different parties on separate counterparts, each
of which counterparts, when so executed and delivered, shall taken together
constitute but one and the same Agreement.
12. Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the state of California without giving
effect to conflict of laws principles thereof.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered, effective as of May 11, 1995.
Dated: ______________, 1995 HealthWatch, Inc.
By ______________________
John D. Greenbaum
Its President
Dated: ______________, 1995 Investor Resource Services, Inc.
By ______________________
Its ____________________
Dated: _______________, 1995 SMI Capital Corp.
By ______________________
Its ____________________
Dated: _______________, 1995 _________________________
Charles Arnold
GP:200506 v1
CERTIFICATE OF THE DESIGNATION,
PREFERENCES, RIGHTS AND LIMITATIONS OF THE
SERIES A CONVERTIBLE PREFERRED STOCK OF
HEALTHWATCH, INC.
HealthWatch, Inc., hereinafter called the "Corporation", a corporation
organized and existing under the Minnesota Business Corporation Act, does hereby
certify that, pursuant to authority conferred upon the Board of Directors by the
Articles of Incorporation, as amended, of the Corporation, said Board of
Directors at a meeting duly called and held on June 28, 1995, and at which a
quorum was at all times present, duly adopted a Resolution providing for the
issuance of a series of 400,000 shares of Series A Convertible Preferred Stock,
which Resolution is as follows:
"RESOLVED, that pursuant to the authority expressly granted to and
vested in the Board of Directors of this Corporation in accordance with the
provisions of its Articles of Incorporation, as amended, a series of Preferred
Stock of the Corporation be and it hereby is given the distinctive designation
of "Series A Convertible Preferred Stock" (hereinafter referred to as the
"Series A Stock"), said Series to consist of Four Hundred Thousand (400,000)
shares of the stated value of One Dollar and Fifty Cents ($1.50) per share, of
which Two Hundred Thousand (200,000) shares shall be subdesignated "Series A
Stock-No. 1" and Two Hundred Thousand (200,000) shares shall be subdesignated
"Series A Stock-No. 2", the preferences and relative, participating, optional or
other special rights, and the qualifications, limitations or restrictions
thereof shall be as follows:
1. Dividends on Series A Stock.
(a) The holders of the Series A Stock shall be
entitled to receive dividends at the rate of ten percent (10%)
per annum, payable quarterly to holders of the Series A Stock
of record at the close of business on the day immediately
preceding the payment date, such payments to commence on
October 1, 1995 and to be paid on each succeeding January 1,
April 1, July 1 an October 1 until the Series A Stock is
redeemed or converted. If the record date for the payment of
any quarterly dividend in the city where is located the office
of any Transfer Agent for the Series A Stock or in the city in
which the Company's primary offices are located if it is
serving as transfer agent for such stock shall be a legal
holiday or a day on which banking institutions are authorized
by law to close, then the record date for that dividend shall
be the next preceding day not in such city a legal holiday or
a day on which banking institutions are authorized by law to
close. If the dividend on the Series A Stock for any dividend
period shall not have been paid or set apart in full for the
Series A Stock, the aggregate deficiency shall be cumulative
and shall be fully paid or set apart for payment before any
dividends shall be paid or set apart for the Common Stock of
the Corporation.
(b) Dividends on the Series A Stock shall commence to
accrue from October 1, 1994, and shall be paid, at the option
of the Corporation, in whole or in part, in cash or in shares
of the Corporation's Common Stock; provided that such shares
of Common Stock are at the time of any such payment subject to
an effective registration statement under the Securities Act
of 1933. In the event that all or a portion of any dividend is
paid in shares of Common Stock, the Common Stock shall be
deemed to have a value of fifty percent (50%) of the then
market value for the Common Stock, determined as set forth in
paragraph 4 hereof; provided that such value shall in no case
be deemed to be less than $.25 per share.
2. Redemption of Series A. Stock.
(a) The Series A Stock shall be redeemable, in whole
or in part, at the option of the Corporation by resolution of
its Board of Directors, at any time and from time and to time
on or after issuance and prior to any conversion thereof at a
redemption price in cash equal to $1.50 per share (the "Stated
Value") plus accrued and unpaid dividends.
(b) In the event that less than all of the
outstanding shares of Series A Stock are redeemed at any one
time, the shares to be redeemed shall be selected by lot,
first from the Series A Stock-No. 1 and following redemption
of all of the Series A Stock-No. 1, from the Series A
Stock-No. 2 in a manner to be determined by the Board of
Directors of the Corporation. Not less than thirty (30) nor
more than sixty (60) days prior to the date fixed for
redemption of the Series A Stock or any part thereof, a notice
specifying the time and place thereof and the redemption price
per share of Series A Stock shall be given by mail to the
holders of record of the shares of Series A Stock selected for
redemption at their respective addresses as the same shall
appear on the stock books of the Corporation. Any notice which
was mailed in the manner herein provided shall be conclusively
presumed to have been duly given whether or not the holder
receives the notice. Upon such notice of redemption (unless
the Corporation shall default in the payment of the redemption
price as set forth in such notice), the holders of shares of
Series A Stock selected for redemption and to whom notice has
been duly given shall cease to be stockholders with respect to
such shares and shall have no interest in or claim against the
Corporation by virtue thereof, and shall have no voting or
other rights with respect to such shares except the right to
receive the moneys payable upon such redemption from the
Corporation or otherwise, without interest thereon, upon
surrender (and endorsement, if required by the Corporation) of
the certificates, and the shares represented thereby shall no
longer be deemed to be outstanding.
3. Voting Rights.
Unless and except to the extent otherwise required by law the
holders of the Series A Stock shall have no voting power with
respect to any matter whatsoever. Unless and except to the
extent otherwise required by law, the holders of the Series A
Stock shall have no right to vote as a class with respect to
any matter whatsoever. Should the Series A Stock or any series
thereof be entitled to vote on any matter pursuant to a
requirement of law, each holder of such stock shall be
entitled to one vote in respect to each share of such stock
held of record in respect to such matter, unless some other
vote is required by law.
4. Conversion of Series A Stock into Common Stock.
(a) Subject to the provisions of this paragraph 4,
the holder of record of any share or shares of Series A Stock
shall have the right, at his option, at any time after
issuance, to convert each said share or shares of Series A
Stock into one (1) fully-paid and non-assessable share of
Common Stock, $.01 par value (hereinafter referred to as
"Common Stock), of the Corporation provided that such holder
has given the Corporation at least fifteen (15) days prior
notice of his election to convert, during which period the
Corporation shall have the right to redeem such stock as
provided in paragraph 2 hereof. In the event that the
Corporation has not redeemed the Series A Stock-No. 1 on or
before March 12, 1996, the conversion rate for each share of
such stock shall thereafter be subject to adjustment based
upon the market price for the Common Stock on the first day of
the notice of election to convert given as provided above. The
number of shares into which each such share of Series A
Stock-No. 1 is thereafter convertible shall be equal to the
quotient of $1.50 (the Stated Value) divided by the lesser of
One Dollar ($1.00) or fifty percent (50%) of the then market
value for the Common Stock provided that for this purpose, the
market value shall not be less than $.25 per share or, if
less, the lowest price at which the Corporation has sold
Common Stock during the period that the Series A Stock is
outstanding (the price at which the Corporation sold Common
Stock in the Unit Offering commended May 19, 1995 being deemed
to be $.25 per share). In the event that the Corporation has
not redeemed the Series A Stock-No. 2 on or before August 12,
1996, the conversion rate for each share of Series A Stock-No.
2 shall thereafter be subject to adjustment on the same basis
as the Series A Stock-No. 1.
The market value for the Common Stock on a given date
shall be the average of the mean between the high and low bid
prices for the Common Stock during the twenty (20)-day period
prior to the date that the Common Stock is to be issued in the
case of the payment of dividends pursuant to paragraph 1
hereof or the first day of the notice to convert given in
connection with the conversion of Series A Stock as provided
herein. The Corporation shall not be required to issue
fractional shares in connection with the conversion of any of
the Series A Stock and shall, in lieu thereof, pay to the
holder requesting conversion, an amount equal to the value
(determined in accordance with the foregoing) of such
fractional share.
In case any shares of Series A Stock shall have been
called for redemption, such right of conversion in respect of
the shares so called for redemption shall cease and terminate,
unless default shall be made in the payment of the redemption
price.
(b) Any holder of a share or shares of Series A Stock
desiring to convert such Series A Stock into Common Stock,
shall surrender the certificate or certificates representing
the share or shares of Series A Stock so to be converted, duly
endorsed (if required by the Corporation) to the Corporation
or in blank, at the office of any Transfer Agent for the
Series A Stock (or such other place as may be designated by
the Corporation), and shall give written notice to the
Corporation at said office that he elects to convert the same
as provided above, and setting forth the name or names (with
the address or addresses) in which the shares of Common Stock
are to be issued.
(c) Conversion of Series A Stock shall be subject to
the following additional terms and provisions:
(1) As promptly as practicable after
the surrender for conversion of any Series A
Stock, the Corporation shall deliver or
cause to be delivered at the principal
office of the Transfer Agent for the Series
A Stock (or such other place as may be
designated by the Corporation), to or upon
the written order of the holder of such
Series A Stock, certificates representing
the shares of Common Stock issuable upon
such conversion issued in such name or names
as such holder may direct. Shares of the
Series A Stock shall be deemed to have been
converted as of the close of business on the
date of the surrender of the Series A Stock
for conversion, as provided above, and the
rights of the holders of such Series A Stock
shall cease at such time, and the person or
persons in whose name or names the
certificates for such shares are to be
issued shall be treated for all purposes as
having become the record holder or holders
of such Common Stock at such time; provided,
however, that any such surrender on any date
when the stock transfer books of the
Corporation shall be closed shall constitute
the person or persons in whose name or names
the certificate for such shares are to be
issued as the record holder or holders
thereof for all purposes at the close of
business on the next succeeding day on which
shall stock transfer books are open.
(2) The Corporation shall make no
payment or adjustment on account of any
dividends accrued on the shares of Series A
Stock surrendered for conversion.
(3) The Corporation shall at all
times reserve and keep available solely for
the purpose of issuance upon conversion of
Series A Stock, as herein provided, such
number of shares of Common Stock as shall be
issuable upon the conversion of all
outstanding Series A Stock.
(d) The issuance of certificates for shares of Common
Stock upon conversion of the Series A Stock shall be made
without charge for any tax in respect of such issuance.
However, if any certificate is to be issued in a name other
than that of the holder of record of the Series A Stock so
converted, the person or persons requesting the issuance
thereof shall pay to the Corporation the amount of any tax
which may be payable in respect of any transfer involved in
such issuance, or shall establish to the satisfaction of the
Corporation that such tax has been paid or is not due and
payable.
5. General.
(a) Conversion adjustment. In the event that the
Corporation shall at any time prior to conversion either (a)
subdivide the outstanding shares of Common Stock into a
greater number of shares, (b) combine the outstanding shares
of Common Stock into a smaller number of shares, (c) change
the outstanding shares of Common Stock into the same or a
given number of shares of any other class or classes of stock,
(d) declare on or in respect of the Common Stock a dividend
payable in shares or other securities of the Corporation, then
the holders of the Series A Stock shall be entitled to receive
the same number of shares or other securities of the
Corporation, or shall be entitled to subscribe for and
purchase at the same price that the shares or securities are
offered to holders of Common Stock, the number of such shares
or the amount of such securities as will represent the same
proportion of the outstanding Common Stock prior to such
increase or decrease as they would have been entitled to
receive or subscribe for, as the case may be, had they been
holders of the number of shares of Common Stock into which
their shares of Series A Stock were convertible on the record
date for any such dividend or subscription. The Board of
Directors shall determine what adjustments shall be made in
the Stated Value and in the market prices for the
Corporation's Common Stock in order to appropriately reflect
and account for any such change.
(b) Merger. In the event the Corporation at any time
while any of the shares of Series A Stock are outstanding
shall be consolidated with or merged into any other
corporation or corporations, or shall sell or lease all or
substantially all of its property and business as an entirety,
lawful provision shall be made as part of the terms of such
consolidation, merger, sale, or lease so that the holder of
any shares of Series A Stock may thereafter receive in lieu of
such shares of Common Stock otherwise issuable to him upon
conversion of his shares of Series A Stock, but at the
conversion rate which would otherwise be in effect at the time
of conversion as hereinbefore provided, the same kind and
amount of securities or assets as may be issuable,
distributable, or payable upon such consolidation, merger,
sale, or lease, with respect to shares of Common Stock of the
Corporation. The Board of Directors shall determine what
adjustments shall be made in the Stated Value and in the
market prices for the Corporation's Common Stock in order to
appropriately reflect and account for any such change.
(c) Nothing herein shall be deemed to require the
Corporation in the event of any such subdivision, combination,
reclassification, recapitalization, consolidation, merger or
sale of assets, or liquidation, dissolution or winding up, to
issue or distribute fractional interests in shares of capital
stock or any other security of the Corporation or another
issuer, and the Corporation may make such arrangements as the
Board of Directors of the Corporation shall approve with
respect to any such event for settlement in lieu of issuance
of a fractional interest in a share of capital stock or other
security of the Corporation or another issuer to any holder of
the Series A Stock.
(d) The shares of Series A Stock shall not be subject
to the operation of a purchase, retirement or sinking fund.
(e) The issuance of additional shares of Series A
Stock shall not be subject to any restrictions as to issuance,
nor shall the holders of the Series A Stock be entitled to any
restriction with respect to the issuance of shares of any
other series of the Corporation's Common Stock or Preferred
Stock, or as to the powers, preferences or rights of any such
other series."
IN WITNESS WHEREOF, I have hereunto subscribed my hand this 1st day of
August, 1995.
HealthWatch, Inc.
By _____________________
John Greenbaum, President
GP:200602 v1
SEE PARAGRAPH 7 FOR RESTRICTIONS ON THE TRANSFER OF THIS WARRANT
No. WA-PS-__
Series PS Warrant
to Purchase 50,000
Shares
WARRANT TO PURCHASE COMMON STOCK OF
HEALTHWATCH, INC.
THIS CERTIFIES THAT for value received _________________ is entitled,
subject to the terms and conditions hereinafter set forth, to purchase from
HEALTHWATCH, INC., a Minnesota corporation (the "Company"), 50,000 fully paid
and non-assessable shares of Common Stock of the Company (herein called the
"Common Stock"), upon presentation and surrender of this Warrant with the
Subscription Form duly executed, at any time after October 1, 1995 and during
the balance of the term hereof, at the principal office of the Company or at
such other office as shall have theretofore been designated by the Company by
notice pursuant hereto and upon payment therefor of the Purchase Price, in
lawful money of the United States of America, determined as set forth below. The
term of this Warrant shall commence on the date hereof, and terminate, if not
exercised prior thereto, at 5:00 p.m. California Time, on December 31, 1996.
This Warrant is subject to the following terms and conditions:
1. The purchase rights represented by this Warrant are exercisable at
the option of the Holder, in whole at any time, or in part from time to time
(but not as to a fractional share of Common Stock). In the case of the purchase
of less than all the shares purchasable under this Warrant, the Company shall
cancel this Warrant upon the surrender hereof and shall execute and deliver a
new Warrant of like tenor for the balance of the shares purchasable hereunder.
2. The purchase price for each share of Common Stock purchasable
pursuant to the exercise of this Warrant shall be Forty-Two Cents ($.42) per
share, such price being sometimes hereinafter referred to as the "Base Purchase
Price". The Base Purchase Price and, from time to time, the number of shares of
Common Stock subject to purchase hereunder are subject to adjustment in certain
circumstances provided for below, and the Base Purchase Price, as it may be
adjusted from time to time, is hereinafter referred to as the "Purchase Price".
(a) In case the Company shall (i) pay a dividend in shares of its
capital stock (other than an issuance of shares of capital stock to
holders of Common Stock who have elected to receive a dividend in shares
in lieu of cash), (ii) subdivide its outstanding shares of Common Stock,
(iii) reduce, consolidate or combine its outstanding shares of Common
Stock into a smaller number of shares, or (iv) issue by reclassification
of its shares of Common Stock any shares of the Company, the Purchase
Price in effect immediately prior thereto shall be adjusted to that
amount determined by multiplying the Purchase Price in effect
immediately prior to such date by a fraction, of which the numerator
shall be the number of shares of Common Stock outstanding on such date
before giving effect to such division, subdivision, reduction,
combination or consolidation or stock dividend and of which the
denominator shall be the number of shares of Common Stock after giving
effect thereto. Such adjustment shall be made successively whenever any
such effective date or record date shall occur. An adjustment made
pursuant to this subsection (a) shall become effective retroactively,
immediately after the record date in the case of a dividend and shall
become effective immediately after the effective date in the case of a
subdivision, reduction, consolidation, combination or reclassification.
The Purchase Rate in effect immediately prior to any such issuance,
subdivision, reduction, consolidation or combination shall be increased
or decreased, effective at the opening of business on the day following
the date of such issuance, subdivision, reduction, consolidation or
combination so that the Purchase Rate (i.e., the number of shares
issuable upon exercise of the Warrants) when multiplied by the Purchase
Price, shall be equal to the product of Forty-Two Cents ($.42) times the
number of shares of Common Stock for which this Warrant was initially
exercisable.
(b) In the event the Company shall at any time be consolidated
with or merged into any other corporation or corporations, or shall sell
or lease all or substantially all of its property and business as an
entirety, lawful provision shall be as part of the terms of such
consolidation, merger, sale, or lease as the Board of Directors of the
Company deems necessary and appropriate to protect the rights of the
Holder of this Warrant.
3. In case at any time:
(a) The Company shall declare any cash dividend on its Common
Stock at a rate in excess of the rate of the last cash dividend
theretofore paid;
(b) The Company shall pay any dividend payable in stock upon its
Common Stock or make any distribution (other than regular cash
dividends) to the holders of its Common Stock;
(c) The Company shall offer for subscription pro rata to the
holders of its Common Stock any additional shares of stock of any class
or other rights;
(d) There shall be any capital reorganization, or
reclassification of the capital stock of the Company or consolidation or
merger of the Company with, or sales of all or substantially all of its
assets to, another corporation; or
(e) There shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Company;
then, in any one or more of said cases, the Company shall give written notice,
by first class mail, postage prepaid, addressed to the Holder at the address of
such holder as shown on the books of the Company, of the date on which (1) the
books of the Company shall close or a record shall be taken for such dividend,
distribution or subscription rights, or (2) such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding up shall take place, as the case may be. Such notice shall also specify
the date as of which the holders of Common Stock of record shall participate in
such dividend, distribution or subscription rights, or shall be entitled to
exchange their Common Stock for securities or other property deliverable upon
such reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation, or winding up, as the case may be. Such written notice shall be
given at least 20 days prior to the action in question and not less than 20 days
prior to the record date or the date on which the Company's transfer books are
closed in respect thereto.
4. If any event occurs as to which, in the sole opinion of the Board of
Directors of the Company, the other provisions of this Warrant are not strictly
applicable or if strictly applicable would not fairly protect the rights of the
Holder in accordance with the essential intent and principles of such
provisions, then the Board of Directors shall make such adjustment in the
application of such provisions as may be necessary, in the sole judgment of such
Board, in accordance with such essential intent and principles, to protect such
rights as aforesaid.
5. Exercise of this Warrant shall be made by the surrender hereof by the
Holder to the Company at its principal office together with (i) the attached
Subscription Form designating the number of shares of Common Stock being
purchased, (ii) a certified check or cash in payment for such shares and (iii) a
letter of transmittal setting forth the computation of the amount of said
payment. The Company shall thereafter promptly (in any event within seven (7)
business days after such exercise) issue certificates for the number of shares
of the Common Stock of the Company purchased at the Purchase Price in effect at
the time of such exercise. The Holder shall be deemed to be the record owner of
such shares of Common Stock as of the close of business on the date of such
exercise. The Holder shall not be entitled to receive a fractional share, but in
lieu thereof the Company shall pay in cash an amount equal to the market value
of such fractional share if the Common Stock has a market value, or if not, the
book value of such fractional share. The Company shall thereupon cancel this
Warrant; and in the event that less than the entire number of shares purchasable
are purchased, shall issue a new Warrant for the number not so purchased.
6. The Company covenants and agrees that all shares which may be issued
upon the exercise of this Warrant will, upon issuance, be duly and validly
authorized and issued, fully paid and nonassessable, and free from all taxes,
liens and charges with respect to the issue thereof; and without limiting the
generality of the foregoing, the Company covenants and agrees that it will, from
time to time, take all such action as may be requisite to assure that the par
value or stated value per share of the Common Stock to be acquired upon the
exercise of this Warrant is at all times equal to or less than the then
effective Purchase Price per share of the Common Stock issuable pursuant to
exercise of this Warrant. The Company further covenants and agrees that during
the period within which this Warrant may be exercised, the Company will at all
times have authorized and reserved for the purpose of the issue upon exercise of
this Warrant a sufficient number of shares of its Common Stock to provide for
such exercise.
7. (a) The Holder represents that he is acquiring this Warrant and, in
the absence of an effective registration statement under the Securities Act of
1933 (the "1933 Act") for the shares of Common Stock issuable hereunder, such
shares for the purpose of investment and not with a view to or for sale in
connection with any distribution thereof. The Holder and the holder of any
shares of Common Stock issued upon exercise hereof, by his acceptance hereof,
agrees that he/she/it will notify the Company in writing before selling or
otherwise disposing of this Warrant or any shares of Common Stock issued to
him/her/it upon exercise hereof, describing briefly the nature of any such sale
or other disposition, and no such sale or other disposition shall be made unless
and until (i) the Company has received an opinion of counsel reasonably
acceptable to it that no registration (or perfection of an exemption) under the
1933 Act is required with respect to such sale or disposition (which opinion may
be conditioned upon the transferee's assuming the Holder's obligation under this
paragraph 7) or (ii) an appropriate registration statement with respect to such
Warrant or such Common Stock, or both, has been filed with the Securities and
Exchange Commission (the "Commission") and declared effective by the Commission.
The Company may require that this Warrant and certificates representing shares
of Common Stock issued upon exercise hereof be stamped or imprinted with an
appropriate legend reflecting the foregoing restrictions. For the purposes of
this paragraph 7, the term "Securities" shall include this Warrant and the
shares of Common Stock issued or issuable upon the exercise hereof.
(b) The restrictions imposed by this paragraph 7 on the transfer of the
Securities shall terminate as to any portion of the Securities when:
(i) Such portion of the Securities shall have been effectively
registered under the 1933 Act and sold by the holder thereof in
accordance with such registration or exemption; or
(ii) Written opinions to the effect that such a registration is
no longer required or necessary under any Federal or State law or
regulation of governmental authority shall have been received from legal
counsel for the Company and counsel for the holder of such portion of
the Securities; or, if a favorable opinion is obtained from holder's
counsel, and counsel for the Company declines to render such an opinion,
upon the holder's undertaking to indemnify the Company, on terms
satisfactory to the Company, against all liability or loss the Company
may sustain in connection with such transfer; or
Whenever the restrictions imposed by this paragraph 7 shall terminate,
as provided above, any holder of the Securities as to which such restrictions
shall have terminated shall be entitled to receive promptly from the Company,
without expense to him, a new certificate, not bearing the restrictive legend
referred to in clause (a) hereof.
8. As more fully set forth in that certain Settlement Agreement among
the Company, Investor Resources, Inc., SMI Capital Corporation and Charles
Arnold, effective as of May 11, 1995, on or before August 4, 1995, the Company
shall file with the Securities and Exchange Commission a registration statement
or similar document under the 1933 Act and shall use its best efforts to cause
all of the shares of Common Stock issuable upon exercise of this Warrant to be
registered under the 1933 Act.
9. This Warrant is exchangeable, upon the surrender hereof by the Holder
at the principal office of the Company, for new warrants of like tenor and date
representing in the aggregate the right to purchase the number of shares
purchasable hereunder, each of such new Warrants to represent the right to
purchase such number of shares as shall be designated by said Holder at the time
of such surrender. Subject to paragraph 7 hereof, this Warrant and all rights
hereunder are transferable in whole or in part by the Holder, in person or by
duly authorized attorney, upon surrender of this Warrant duly endorsed, at the
principal office of the Company.
10. Upon the receipt by the Company of evidence reasonably satisfactory
to it of the loss, theft, destruction or mutilation of this Warrant, and, in
case of loss, theft or destruction, of indemnity or security reasonably
satisfactory to it, and reimbursement to the Company of all reasonable expenses
incidental thereto, and upon surrender and cancellation of this Warrant, if
mutilated, the Company will make and deliver a new Warrant of like tenor, in
lieu of this Warrant.
11. All notices, requests, consents and other communications hereunder
shall be in writing and shall be deemed to have been made when delivered or
mailed first-class postage prepaid or delivered to a telegraph office for
transmission:
(a) If to the Holder, at such address as may have been furnished
by such holder to the Company in writing; and
(b) If to the Company, at such address as may have been furnished
by the Company to the Holder of this Warrant in writing.
12. This Warrant shall be binding upon any successors or assigns of the
Company.
13. This Warrant shall be construed in accordance with and governed by
the laws of the State of California.
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed and delivered as of the date set forth below by one of its officers
thereunto duly authorized.
Dated: August ___, 1995.
HEALTHWATCH, INC.
By
Its President and Chief
Executive Officer
SUBSCRIPTION FORM
To be signed only upon exercise of Warrant
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise the purchase right represented by such Warrant for and to
purchase thereunder, _________________ of the shares of Common Stock of
HEALTHWATCH, INC. to which such Warrant relates, and herewith makes payment of
$_________________ therefor, in cash or by certified check, and requests that
the certificates for such shares be issued in the name of, and be delivered to,
, the address for which is set forth below the signature of the undersigned.
Dated: _________________
______________________
______________________
(Signature)
______________________
______________________
(Address)
To be signed only upon transfer of Warrant
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto ______________________ the right to purchase _________ shares of Common
Stock of HEALTHWATCH, INC. to which the within Warrant relates and appoints
_______________________ , attorney, to transfer said right on the books of
HEALTHWATCH, INC. with full power of substitution in the premises.
Dated: ___________________
______________________
______________________
(Signature)
______________________
______________________
(Address)
GP:200721 v1
EXHIBIT 5.1
LINDLEY S. BRANSON
612 343-2827
August 16, 1995
HealthWatch, Inc.
2445 Cades Way
Vista, California 92083
RE: Registration Statement on Form S-3
No. 33-88032
Ladies/Gentlemen:
This opinion is furnished in connection with the registration, pursuant
to the Securities Act of 1933, as amended ("Act"), of an aggregate of 375,000
shares of common stock (the "Shares") of HealthWatch, Inc. (the "Company").
We have acted as counsel to the Company in connection with the
preparation of the Registration Statement on Form S-3. We have examined the
Articles of Incorporation, as amended, and the Bylaws of the Company, such
records of proceedings of the Company as we deemed material and such other
certificates, records and documents as we considered necessary for the purposes
of this opinion.
Based on the foregoing, we are of the opinion that the Shares are
legally issued, fully paid and non-assessable securities of the Company. We
understand that this opinion is to be used in connection with the Registration
Statement. We consent to a filing of a copy of this opinion with the
Registration Statement.
Very truly yours,
GRAY, PLANT, MOOTY,
MOOTY & BENNETT, P.A.
By ______________________________
Lindley S. Branson
LSB/pbk
GP:213816 v1
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
We hereby consent to the incorporation by reference of our report dated August
12, 1994, except for Note 11 which is dated August 31, 1994, accompanying the
consolidated financial statements of HealthWatch, Inc. as of June 30, 1994 and
1993, included in the Company's Annual Report on Form 10-KSB and to the
reference made to our firm under the caption "Experts" in Amendment No. 1 to the
Registration Statement on Form S-3 (File No. 33-88032) expected to be filed by
HealthWatch, Include on or about August 16, 1995.
SILVERMAN OLSON THORVILSON & KAUFMANN LTD
CERTIFIED PUBLIC ACCOUNTANTS
Minneapolis, Minnesota
August 16, 1995
GP:213799 v1
GP:213797 v1
