<PAGE>
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1997
COMMISSION FILE NUMBER 0-19600
CORE, INC.
(Exact name of registrant as specified in its charter)
MASSACHUSETTS 04-2828817
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
18881 VON KARMAN AVENUE, SUITE 1750, IRVINE, CALIFORNIA 92612
(Address of principal executive offices) (zip code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (714) 442-2100
Indicate by check "X" whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
On November 7, 1997, there were 7,286,419 shares of the Registrant's Common
Stock outstanding.
<PAGE>
CORE, INC.
FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 1997
TABLE OF CONTENTS
Page
----
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Condensed Balance Sheets 3
Consolidated Condensed Statements of Operations 5
Consolidated Condensed Statements of Cash Flows 6
Notes to Consolidated Condensed Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
PART II OTHER INFORMATION
Item 1. Legal Proceedings N/A
Item 2. Change in Securities N/A
Item 3. Defaults Upon Senior Securities N/A
Item 4. Submission of Matters to a Vote of Security Holders N/A
Item 5. Other Information N/A
Item 6. Exhibits and Reports on Form 8-K 12
Signatures 13
<PAGE>
CORE, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1996 1997
(NOTE 1) (UNAUDITED)
-----------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 4,281,994 $ 3,467,129
Cash pledged as collateral 192,000
Investments available-for-sale 8,435,531 4,856,723
Accounts receivable, net of allowance
for doubtful accounts of $221,925 at
December 31,1996 and $160,433 at
September 30,1997 4,545,738 5,456,459
Notes receivable from officers 106,926 105,645
Prepaid expenses and other current assets 891,932 564,255
---------------------------
Total current assets 18,454,121 14,450,211
Property and equipment, net 6,445,420 6,542,326
Deposits and other assets 699,901 577,007
Goodwill, net of accumulated amortization
of $87,400 at December 31, 1996 and
$233,552 at September 30, 1997 2,035,604 8,673,589
Other intangibles, net 208,693 642,636
---------------------------
Total assets $27,843,739 $30,885,769
===========================
</TABLE>
See accompanying notes.
2
<PAGE>
CORE, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS - CONTINUED
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1996 1997
(NOTE 1) (UNAUDITED)
------------------------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 743,143 $ 646,077
Accrued expenses 1,200,323 1,426,690
Accrued payroll 465,520 158,400
Accrued restructuring costs 41,636
Deferred income taxes 68,316 68,316
Notes payable 58,099 60,700
Obligation from acquisition 1,125,000
Current portion of obligations to
former shareholders 50,000 50,000
Current portion of capital lease obligations 46,498 40,839
----------------------------
Total current liabilities 2,673,535 3,576,022
Long-term obligations to former shareholders,
net of current portion 50,000
Note payable 256,690 209,782
Capital lease obligations, net of
current portion 37,275 6,339
Deferred rent, net of current portion 220,539 189,297
Deferred income taxes 149,500 149,500
STOCKHOLDERS' EQUITY
Preferred stock, no par value, authorized 500,000
shares; no shares outstanding
Common stock, $0.10 par value per share;
authorized 30,000,000 shares; issued and
outstanding 7,172,711 and 7,275,965 at
December 31, 1996 and September 30, 1997,
respectively 717,271 727,597
Additional paid-in capital 34,465,146 34,845,446
Deferred compensation (38,640) (38,640)
Cumulative unrealized gain on investments
available-for-sale 31,983 8,538
Accumulated deficit (10,719,560) (8,788,112)
----------------------------
Total stockholders' equity 24,456,200 26,754,829
----------------------------
Total liabilities and stockholders' equity $27,843,739 $30,885,769
==========================
</TABLE>
See accompanying notes.
3
<PAGE>
CORE, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1996 1997 1996 1997
--------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues $7,460,262 $10,531,319 $20,603,169 $27,629,939
Cost of services 4,538,792 6,152,346 12,325,764 16,843,247
-------------------------------------------------------------------
Gross profit 2,921,470 4,378,973 8,277,405 10,786,692
Operating expenses:
General and administrative 1,584,502 2,091,029 4,483,418 5,956,582
Sales and marketing 337,892 663,979 1,236,383 1,791,257
Non-recurring write-off of AmHealth
Acquisition Costs 2,029,555 2,029,555
Depreciation and amortization 323,663 533,835 891,230 1,424,207
-------------------------------------------------------------------
Total operating expenses 4,275,612 3,288,843 8,640,586 9,172,046
-------------------------------------------------------------------
Income (loss) from operations (1,354,142) 1,090,130 (363,181) 1,614,646
Other income (expense):
Interest income 118,277 122,707 193,035 464,724
Interest expense (21,273) (6,538) (66,684) (18,661)
Realized gain on sale of investments
available-for-sale 16,003
Other income 250 481 250
-------------------------------------------------------------------
97,004 116,419 142,835 446,313
-------------------------------------------------------------------
Income (loss) before income taxes (1,257,138) 1,206,549 (220,346) 2,060,959
Provision for income taxes (98,144) (129,144)
-------------------------------------------------------------------
Net income (loss) ($1,257,138) $1,108,405 ($220,346) $1,931,815
===================================================================
Net income (loss) per common share:
Primary ($0.21) $0.14 ($0.04) $0.25
===================================================================
Fully diluted ($0.21) $0.14 ($0.04) $0.24
===================================================================
</TABLE>
See accompanying notes.
4
<PAGE>
CORE, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------
1996 1997
-------------------------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) $ (220,346) $ 1,931,815
Adjustments to reconcile net income (loss)
to net cash provided by (used in)
operating activities:
Depreciation 1,037,790 1,225,074
Amortization 632,314
Realized gain on sale of investments
available-for-sale (16,003)
Decrease in obligations to former
shareholders (372,666)
Changes in operating assets
and liabilities:
Increase in accounts receivable (1,929,208) (910,721)
(Increase) decrease in prepaid
expenses and other current assets (840,026) 105,306
Increase (decrease) in accounts
payable and accrued expenses 534,391 (331,138)
------------------------------
Net cash provided by (used in)
operating activities (1,806,068) 2,652,650
INVESTING ACTIVITIES:
Additions to property and equipment (3,168,926) (1,401,074)
Additions to goodwill (176,119)
Decrease in cash pledged as collateral 106,000 192,000
Purchases of investments
available-for-sale (17,085,027) (31,886,685)
Sales of investments available-for-sale 5,284,467 35,442,048
Decrease (increase) in notes receivable
from officers (72,095) 1,281
Payments for acquisitions, net of
cash acquired (5,697,703)
Additions to intangible assets (500,000)
Decrease in deposits and other assets 8,140 122,894
------------------------------
Net cash used in investing activities (15,103,560) (3,727,239)
FINANCING ACTIVITIES:
Payments on notes payable (155,994) (44,307)
Payments on capital lease obligations (56,591) (36,595)
Payments on obligations to
former shareholders (379,084) (50,000)
Proceeds from issuance of common stock 16,351,379
Issuance of common stock upon exercise
of stock options and warrants 251,575 390,626
------------------------------
Net cash provided by financing activities 16,011,285 259,724
------------------------------
Net decrease in cash and cash equivalents (898,348) (814,865)
Cash and cash equivalents at
beginning of period 1,005,807 4,281,994
------------------------------
Cash and cash equivalents at end of period $ 107,464 $ 3,467,129
==============================
Supplemental disclosure of cash
flow information:
Interest paid $ 35,803 $ 16,509
==============================
Noncash investing activities:
Obligations incurred in connection
with the purchase of SSDC $ 1,125,000
==============================
</TABLE>
See accompanying notes.
5
<PAGE>
CORE, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
SEPTEMBER 30, 1997
Note 1 - Basis of Presentation
The accompanying unaudited consolidated condensed financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and pursuant to the rules and regulations of the
Securities and Exchange Commission, but do not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. The balance sheet at December 31, 1996 has been derived
from the audited financial statements of CORE, INC. (the "Company") at that
date.
In the opinion of management, all adjustments (consisting of only normal
recurring adjustments) considered necessary for a fair presentation have been
included. Operating results for the three and nine month period ended September
30, 1997 are not necessarily indicative of the results that may be expected for
the year ended December 31, 1997. For further information, refer to the
consolidated financial statements for the year ended December 31, 1996 contained
in the Company's annual report filed on Form 10-K (File #0-19600) with the
Securities and Exchange Commission on March 28, 1997.
Note 2 - Earnings Per Share
In February 1997, the Financial Accounting Standards Board issued Statement No.
128, Earnings Per Share, which is required to be adopted on December 31, 1997.
At that time, the Company will be required to change the method currently used
to compute earnings per share and to restate all prior periods. Under the new
requirements for calculating primary earnings per share, the dilutive effect of
stock options will be excluded. The impact of Statement 128 on the calculation
of primary and fully diluted earnings per share is not expected to be material.
Note 3 Business Acquisitions
On June 25, 1997, a wholly-owned subsidiary of the Company purchased certain
assets and liabilities of Social Security Disability Consultants and Disability
Services, Inc. (collectively, "SSDC") for an initial purchase price of
$6,500,000, additional performance related cash payments and stock options.
Cash payments of $5,375,000 have been made as of September 30, 1997. Additional
payments of $1,125,000 and performance based payments of up to $920,000 are
payable through June 1999. SSDC provides disability management services with
two key areas of business: social security disability benefits advocacy and
Medicare coordination of benefits. The acquisition has been accounted for as a
purchase.
The pro forma unaudited results of operations for the nine months ended
September 30, 1996 and 1997, assuming consummation of the purchase as of January
1, 1996, are as follows:
<TABLE>
<CAPTION>
Nine months ended September 30,
--------------------------------------
1996 1997
--------------------------------------
<S> <C> <C>
Revenues $29,308,383 $31,022,879
Income before extraordinary item 771,631 3,422,615
Net income 771,631 4,466,765
Earnings per common share
Income before extraordinary item .12 .43
Net income .12 .56
</TABLE>
On July 31, 1997, a wholly-owned subsidiary of the Company purchased certain
assets and liabilities of Protocol Work Systems, Inc. ("PWS") for $75,000 cash,
assumption of $125,000 of PWS' liabilities and stock options. The acquisition
has been accounted for as a purchase. Pro forma results of operations have not
been presented because the effect of this acquisition was not significant.
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
- --------------------------------------------------------------------------
RESULTS OF OPERATIONS.
- ---------------------
OVERVIEW
The Company provides managed disability services (which consist of the
Company's WorkAbility/TM/ program, bill audit services, analytic consulting,
social security disability benefits advocacy and Medicare coordination of
benefits), specialty physician and behavioral health review services and health
care benefits utilization review and case management services. These services
are provided principally to self-insured employers, third-party administrators
and insurance carriers. The Company is typically compensated for these services
either on a per review (i.e., per case), hourly or per enrollee basis. The
managed disability service line also includes a limited amount of revenue (1%
for the nine months ended September 30, 1997) from licensing fees attributable
to license grants by the Company of the medical protocol portion of the
WorkAbility software program.
This Quarterly Report on Form 10-Q contains forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995 and
the Company's actual results could differ materially from those contemplated by
such statements. Such statements reflect management's current views, are based
on many assumptions and are subject to risks and uncertainties. Some important
factors the Company believes could cause such results to differ include the
company's reliance on its WorkAbility program, the Company's dependence on key
clients, risks associated with the Company's growth strategy, increases or
changes in government regulation and competition. The foregoing list of factors
are not intended to represent a complete list of the general or specific risks
that may affect the Company. It should be recognized that other risks may be
significant, presently or in the future.
CURRENT DEVELOPMENTS
On April 14, 1997, CORE announced that the Company formed a strategic
alliance with Reed Group, Ltd., to develop a new generation of products designed
to better help employers manage their disability and workers' compensation
costs. Reed Group, based in Denver, publishes disability duration guidelines.
The guidelines entitled The Medical Disability Advisor, Workplace Guidelines for
Disability Durations are marketed in text, software, and license forms and are
currently used by more than 7,000 companies.
On June 25, 1997, CORE announced that the Company purchased certain of the
assets of Social Security Disability Consultants and Disability Services, Inc.
(collectively, "SSDC"). SSDC, based in Novi, Michigan, is a disability
management services firm with two key areas of business: social security
disability benefits advocacy and Medicare coordination of benefits for Fortune
500 employers and others. The transaction was an asset purchase and has been
accounted for under purchase accounting rules. Consideration included cash
payments, future guaranteed payments, performance based payments and stock
options.
On July 31, 1997 the Company purchased the assets and certain liabilities
of Protocol Work Systems, Inc., a small Massachusetts based provider of job
analysis, employee physical abilities testing and other loss prevention services
to the workers' compensation market.
7
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth certain statement of operations data for the
periods indicated expressed as a percentage of revenues:
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
----------------------------------------------------------
1996 1997 1996 1997
----------------------------------------------------------
Percent Percent Percent Percent
----------------------------------------------------------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Revenue 100.0% 100.0% 100.0% 100.0%
Cost of services 60.8 58.4 59.8 61.0
Gross profit 39.2 41.6 40.2 39.0
General and administrative
expense 21.2 19.9 21.8 21.6
Sales and marketing expense 4.5 6.3 6.0 6.5
</TABLE>
The following table sets forth the contribution to total revenues of each of
the Company's principal service lines for the periods indicated:
<TABLE>
<CAPTION>
Three months ended September 30, Nine months ended September 30,
---------------------------------------------------------------------------------------
1996 1997 1996 1997
---------------------------------------------------------------------------------------
Amount Percent Amount Percent Amount Percent Amount Percent
---------------------------------------------------------------------------------------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Managed disability services $3,520 47% $ 6,345 60% $ 8,441 41% $15,018 55%
Specialty physician and behavioral
health review 2,226 30 2,479 24 6,770 33 7,522 27
Utilization review and case management 1,714 23 1,707 16 5,392 26 5,090 18
--------------------------------------------------------------------------------------
$7,460 100% $10,531 100% $20,603 100% $27,630 100%
======================================================================================
</TABLE>
Managed disability services include: CORE's WorkAbility services, analytic
consulting, social security disability benefits advocacy, Medicare coordination
of benefits, bill audit services, job analysis and loss prevention services and
license fees.
Three and nine months ended September 30, 1997 and 1996
Revenues. Revenues for the three months ended September 30, 1997
increased by $3,071,000 (41%) from $7,460,000 in 1996 to $10,531,000 in 1997.
For the nine months ended September 30, 1997 revenues increased $7,027,000 (34%)
from $20,603,000 in 1996 to $27,630,000 in 1997. Growth in managed disability
services contributed $2,825,000 (92%) of the Company's growth in revenue for the
three months ended September 30, 1997 and now includes revenues from the
recently completed acquisitions of SSDC and Protocol Work Systems. An increase
in the volume of referrals resulted in increased revenues realized from
specialty physician review services, growing 11% for the three and nine month
periods ended September 30, 1997, as compared to the prior year. Revenues from
utilization review and case management services remained constant for the three
month period ended September 30, 1997 and decreased 6% for the nine month period
ended September 30, 1997, as compared to the prior year, as a result of a
decline in enrollment in our clients' indemnity plan based group health
business. The Company expects utilization review and case management revenues
to continue to decline as compared to prior year levels.
For the nine months ended September 30, 1997, the Company's top five
clients represented 41% of revenues compared to 32% for the same period last
year. Bell Atlantic accounted for approximately 23% of revenues for the nine
months ended September 30, 1997. No other single client represented more than
10% of total revenues for the nine months ended September 30, 1997 or 1996.
Cost of services. Cost of services for the Company include direct
expenses associated with the delivery of its review and managed care services,
including salaries for professional, clerical and license support staff, the
cost of physician reviewer consultants and telephone expense. Cost of services
for the three months ended September 30, 1997 increased $1,614,000 (36%) from
$4,539,000 in 1996 to $6,152,000 in 1997. Cost of services for the nine months
ended September 30, 1997 increased $4,517,000 (37%) from $12,326,000 in 1996 to
$16,843,000 in 1997. The increase is primarily the result of additional payroll
costs associated with business acquisitions completed in June and July, 1997 and
increased staffing levels required to service new and growing WorkAbility
clients and growth in the Company's specialty physician review services.
8
<PAGE>
CORE's gross profit performance of 39% for the nine months ended September 30,
1997 was relatively consistent with gross profit levels of 40% realized in the
prior year. The Company's gross profit performance during the three months ended
September 30, 1997 improved to 42% as compared to 39% for the quarter ended June
30, 1997. This improvement was due to continued growth in our managed disability
service line, which historically has generated a higher margin. A one-time
billing contributed to higher gross profit in the utilization review and case
management service line. The gross profit for the utilization review and case
management service line is typically lower than the Company's overall margin and
that trend is expected to continue.
General and administrative expenses. General and administrative expenses
include the cost of executive, administrative and information services
personnel, rent and other overhead items. General and administrative expenses
for the three months ended September 30, 1997 increased $507,000 (32%) from
$1,585,000 in 1996 to $2,091,000 in 1997. General and administrative expenses
for the nine months ended September 30, 1997 increased $1,473,000 (33%) from
$4,483,000 in 1996 to $5,956,000 in 1997. Expenses increased, in part, due to
additional staffing in the information services area to support the growth of
the Company. Higher costs in rent, insurance costs, equipment rental and other
general and administrative expenses relate primarily to the Company's Silver
Spring, Maryland operating center that opened in July 1996, the expansion of
space in the Company's Burlington, Massachusetts facility in early 1997, and
the acquisitions of SSDC and Protocol Work Systems in June and July, 1997.
Sales and marketing expenses. Sales and marketing expenses include, but
are not limited to, salaries for sales and account management personnel and
travel expenses. Sales and marketing expenses also include costs designed to
increase revenues, such as participation in and attendance at industry trade
shows and conferences. Sales and marketing expenses for the three months ended
September 30, 1997 increased $326,000 (97%) from $338,000 in 1996 to $664,000 in
1997. Sales and marketing expenses for the nine months ended September 30, 1997
increased $555,000 (45%) from $1,236,000 in 1996 to $1,791,000 in 1997. The
increase is primarily due to increased staffing to support the marketing and
product development departments. The Company's sales and marketing strategy has
historically focused the efforts of an industry known senior management team and
a smaller sales and marketing staff on fewer but significantly larger sales
prospects. The Company has maintained this approach, however the Company has
also has added staffing to increase its distribution sales effort which is aimed
at intermediaries, e.g., insurance companies and third party administrators
("TPAs"), who provide sales leverage and access to companies with 1,000-5,000
employees, thereby, broadening the Company's target market. Additionally, a
focused sales effort has been initiated during the third quarter to take
advantage of the recent acquisitions of SSDC and Protocol Work Systems. The
Company believes that a unique opportunity exists to cross sell each company's
products and services. The Company expects to invest an increased amount of
resources in sales and marketing in future periods.
Depreciation and amortization expense. Depreciation and amortization
expense for the three months ended September 30, 1997 increased $210,000 (65%)
from $324,000 in 1996 to $534,000 in 1997. Depreciation and amortization
expense for the nine months ended September 30, 1997 increased $533,000 (60%)
from $891,000 in 1996 to $1,424,000 in 1997. The increase is largely
attributable to increased depreciation expense on assets purchased for the
operating center in Silver Spring, Maryland to service the Bell Atlantic
Corporation contract as well as increased amortization expense on goodwill due
to the purchases of SSDC and Protocol Work Systems, Inc.
Other income. Other income consists primarily of interest income, which
represents amounts earned by the Company on investments held, as reduced by
interest expense. Other income for the three months ended September 30, 1997
increased $19,000 (20%) from $97,000 in 1996 to $116,000 in 1997. During the
nine months ended September 30, 1997, other income increased $303,000 (212%)
from $143,000 in 1996 to $446,000 in 1997. The increases are due to an increase
in funds available for investment following the public offering in August 1996
and the Company significantly reducing its use of its line of credit.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
For the nine months ended September 30, 1997, the Company's cash and cash
equivalents decreased by $815,000. For this period, operating activities
provided $2,655,000 due to net income of $1,931,000 and depreciation and
amortization of $1,857,000 as offset by an increase in accounts receivable of
$911,000. The Company's investing activities used $3,730,000 of cash due
primarily to the Company's funding of $5,000,000 for the purchase of SSDC
through the sale of investments held. The Company's financing activities
provided $260,000 for this period due primarily to the proceeds from the
exercise of common stock options.
The Company leases its facilities and certain office equipment. Lease
commitments, which relate substantially to
9
<PAGE>
space rental, for the quarter ended December 31, 1997 and the year ended
December 31, 1998 are approximately $550,000 and $2 million, respectively. All
obligations held by the Company under lease commitments expire on various dates
through April 2002 and total $5.5 million as of September 30, 1997.
The Company has net operating loss carryforwards for income tax purposes of
approximately $6 million as of December 31, 1996, which can be used to reduce
future obligations for federal and state income taxes. The amount of net
operating loss carryforwards that can be utilized in any future year are limited
due to "equity structure shifts" in 1995 involving "5% shareholders" (as these
terms are defined in Section 382 of the Internal Revenue Code), which resulted
in a more than 50 percentage point change in ownership. The utilization of
these net operating loss carryforwards may be subject to further limitation
provided by the Internal Revenue Code of 1986 and similar state provisions.
The Company plans to finance its operations and working capital
requirements with the proceeds from the August 1996 offering, earnings from
operations, investments on hand and other sources of available funds. The
Company presently believes that these resources will be sufficient to meet its
liquidity and funding requirements through at least the year 1998.
10
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
- ------- --------------------------------
(a) Exhibits. The following exhibits are included:
Exhibit
Number Description
- ------ -----------
10.1* CORE, INC. 1997 Stock Option Plan, including forms of stock option
agreements.
11* Statement re: Computation of Income (Loss) Per Share for the three and
nine months ended September 30, 1997 and 1996.
27* Financial Data Schedule
_______________________________
* Filed herewith
(b) Reports on Form 8-K.
-------------------
The Company filed a report on Form 8-K on July 15, 1997 and a related Form
8-K/A (Amendment No. 1) on September 3, 1997, which reported the acquisition by
a wholly-owned subsidiary of the Company of certain assets of Social Security
Disability Consultants Limited Partnership and Disability Services, Inc.
(collectively "SSDC"). SSDC, based in Novi Michigan, is a disability management
services firm with two key areas of business: social security disability
benefits advocacy and Medicare coordination of benefits for Fortune 500
employers and others.
The Report on Form 8-K/A (Amendment No. 1) included the audited combined balance
sheets of Social Security Disability Consultants Limited Partnership, Disability
Services, Inc., DSI-Medicare Consultants, Inc., and Diamond Entertainment, Inc.
as of December 31,1996, 1995, and 1994 and the related combined statements of
operations, retained earnings, partners' capital and cash flows for the years
then ended and the compiled combined balance sheets of Social Security
Disability Consultants Limited Partnership, Disability Services, Inc., DSI-
Medicare Consultants, Inc., and Diamond Entertainment, Inc. as of June 24, 1997
and June 30, 1996 and the related combined statements of operations, retained
earnings, partners' capital and cash flows for the six month periods then ended
and unaudited pro forma combined condensed statements of operations for the
twelve months ended December 31, 1996 and the six months ended June 30, 1997..
11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
CORE, INC.
Dated: November 14, 1997 By: /s/ William E. Nixon
-----------------------------
William E. Nixon
Chief Financial
Officer, Executive
Vice President and Treasurer
(Duly authorized officer and
Principal Financial Officer)
12
<PAGE>
CORE, INC.
1997 STOCK OPTION PLAN
SEPTEMBER 1997
<PAGE>
CORE, INC.
1997 STOCK OPTION PLAN
1. Purpose of the Plan. CORE, INC., a Massachusetts corporation ("the
-------------------
Company") wishes to advance its interests by encouraging and enabling eligible
employees of the Company (including the Company's subsidiaries) and other
persons affiliated with the Company to acquire stock in the Company, and
believes that the granting of stock options, including both "Incentive Stock
Options" and "non-ISOs" will stimulate the efforts of such persons, strengthen
their desire to remain with the Company, provide them with a more direct
interest in its welfare and assure a closer identification between them and the
Company. In order to provide for the granting of stock options over a longer
period of time, the Company has adopted this 1997 Stock Option Plan in
furtherance of its objectives with respect to its employees and other persons
affiliated with the Company. As used herein, an "Incentive Stock Option" shall
mean an option described in Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"); and, a "non-ISO" shall mean an option (i) in which the
fair market value of the stock which may be acquired upon exercise of such
option exceeds the limitation for Incentive Stock Options set forth in Section 6
hereof, (ii) which for some other reason does not satisfy the requirements of
the Code applicable to Incentive Stock Options; or (iii) contains terms that
provide that it will not be treated as an Incentive Stock Option. As used
herein, "Stock Options" shall include both Incentive Stock Options and non-ISOs.
2. Amount of Stock Subject to the Plan. The total number of shares of
-----------------------------------
Common Stock, par value $0.10 per share, of the Company which may be sold
pursuant to Stock Options granted under the Plan shall not exceed 600,000
shares. The shares sold under the Plan may be both authorized and unissued
shares or issued shares repurchased by the Company. In the event that any Stock
Options granted under the Plan shall terminate or expire for any reason without
having been exercised in full, the shares not purchased under such Stock Options
shall be again available for Stock Options which may be granted pursuant to the
Plan.
3. Administration. The Plan shall be administered by the Board of Directors
--------------
of the Company (the "Board"). The Board shall have the authority, in its
discretion, to grant an
1
<PAGE>
Incentive Stock Option to any eligible employee and a non-ISO to any person. All
Stock Options shall be evidenced by written instruments (which need not be
uniform). Forms of agreements evidencing ISOs and non-ISOs (which may be revised
and amended) are attached as Exhibits to this Plan.
The Board shall have authority in its discretion to determine the
individuals to whom Stock Options shall be granted, the times when they shall
receive them, the option price of each Stock Option, the period during which and
terms and conditions under which each Stock Option may be exercised, and the
number of shares to be subject to each Stock Option.
The Board shall also have authority to construe the respective Stock
Options and the Plan, to prescribe, amend and rescind rules and regulations
relating to the Plan, to determine the terms and provisions not specified in or
incorporated with the Plan to be included in the respective Stock Options (which
need not be uniform) and to make all other determinations necessary or advisable
for administering the Plan. The Board may correct any defect or supply any
omission or reconcile any inconsistency in the Plan or in any Stock Option in
the manner and to the extent that it shall deem expedient to carry into effect,
and it shall be the sole and final judge of such expediency. All actions or
determinations of the Board shall be by majority vote of its members and the
determination of the Board on the matters referred to in this section shall be
conclusive.
The Board may delegate any or all of its duties and responsibilities under
this Plan to the Compensation Committee of the Board.
Notwithstanding the foregoing, the Board's authority as set forth in this
Section 3 with respect to matters involving Incentive Stock Options is subject
to the express provisions and limitations of this Plan and subject to Section
422 of the Code.
4. Eligibility. Only employees of the Company (including the Company's
-----------
subsidiaries) shall be eligible to receive Incentive Stock Option hereunder. A
director of the Company who is not also an employee of the Company shall not be
eligible to receive Incentive Stock Options hereunder. Employees, directors,
consultants and other persons affiliated with the Company are eligible to
receive non-ISOs hereunder.
5. Restrictions on Incentive Stock Options. An Incentive Stock Option
---------------------------------------
shall not be granted to any employee, who, at the time the Incentive Stock
Option is granted, owns stock
2
<PAGE>
possessing more than ten percent (10%) of the total combined voting power of all
classes of stock of the Company or of its parent or subsidiary corporation,
provided, however, that the prohibition of granting Incentive Stock Options to
employees owning more than ten percent (10%) of the voting power of the Company
or its parent or subsidiary corporation shall not apply if at the time such
Incentive Stock Option is granted the price of Incentive Stock Option is at
least 110% of the fair market value of the stock subject to the Incentive Stock
Option and such Incentive Stock Option by its terms is not exercisable after the
expiration of five (5) years from the date such Incentive Stock Option is
granted. For the purposes of the preceding sentence, an individual is
considered to own the stock directly or indirectly by or for his brothers,
sisters, spouse, ancestors and lineal descendants.
Notwithstanding any provisions of this Plan, any Incentive Stock Option
granted hereunder shall contain all provisions required to be included in the
terms of an Incentive Stock Option under Section 422 of the Code.
6. Option Prices and Payment. The purchase price of Common Stock provided
-------------------------
under each Stock Option granted pursuant to the Plan shall be set by the Board
and in the case of Incentive Stock Options shall equal or exceed both the fair
market value of the stock on the date of the granting of the Incentive Stock
Option, as determined by the Board. The purchase price (plus the amount of any
applicable withholding taxes) shall be paid in full upon each exercise of a
Stock Option. The Board may, in its discretion, provide that the purchase price
of Common Stock provided under either an Incentive Stock Option (granted
pursuant to the Plan) or non-ISO may be payable with stock of the Company;
provided, however, that in any event the purchase price of the Common Stock
provided under each Incentive Stock Option shall equal or exceed the fair market
value of the stock on the date of granting of the Incentive Stock Option.
The proceeds of the sale of stock subject to the Stock Options are to be
added to the general funds of the Company and used for its corporate purposes.
As stated in Section 3, the Board may delegate any or all of its duties and
responsibilities to the Compensation Committee.
7. Period of Incentive Stock Options and Certain Limitations on Rights to
----------------------------------------------------------------------
Exercise Incentive Stock Options. Each Incentive Stock Option shall expire no
- --------------------------------
later than ten (10) years from the date of grant of the Incentive Stock
Option; provided, however, that except as provided
3
<PAGE>
in Sections 9 and 10 hereof, no holder of an Incentive Stock Option may exercise
his or her Incentive Stock Option unless at the time of exercise he or she has
been continuously in the employ of the Company since the grant of the Incentive
Stock Option.
Incentive Stock Options granted hereunder may also include provisions
(which need not be uniform) designed to prevent violations of the Securities Act
of 1933, and the rules and regulations thereunder, upon the exercise of an
Incentive Stock Option or the sale or other disposition of the shares of Common
Stock purchased on exercise of an Incentive Stock Option.
No holder of any Incentive Stock Option or his or her legal
representatives, legatees or distributees, as the case may be, will be or will
be deemed to be a holder of any shares covered by the Incentive Stock Option
unless and until he or she has exercised the Incentive Stock Option as to such
shares, paid for such shares in full and received certificates representing such
shares.
8. Non-transferability of Incentive Stock Options. No Incentive Stock
----------------------------------------------
Option granted under the Plan shall be transferable otherwise than by will or by
the laws of descent and distribution, and an Incentive Stock Option may be
exercised during the lifetime of the employee to whom its granted only by him or
her.
9. Termination of Employment. If the employment of an employee to whom an
-------------------------
Incentive Stock Option has been granted terminates for any reason other than by
death, the Incentive Stock Option holder may exercise his or her Incentive Stock
Option (to the extent he or she was entitled to do so at the termination or
employment) only at any time and from time to time within three (3) months after
such termination, but in no event after the expiration of the Incentive Stock
Option; provided, however, that if the employment of an employee to whom an
Incentive Stock Option has been granted terminates due to the permanent and
total disability of such employee, such employee may exercise his or her
Incentive Stock Option (to the extent he or she was entitled to do so at the
termination of employment) only at any time and from time to time within twelve
(12) months after such termination, but in no event after the expiration of the
Incentive Stock Option. Incentive Stock Options granted under the Plan shall not
be affected by any change of employment so long as the holder continues to be an
employee of the Company. Nothing in the Plan or in any Stock Option granted
under it shall confer any right to continue in the employ of the Company or
interfere in any way with the right of the Company to terminate any employment
at any time.
4
<PAGE>
10. Death of Holder of Incentive Stock Option. In the event of the death
-----------------------------------------
of the holder of an Incentive Stock Option under the Plan while he or she is
employed by the Company or a subsidiary of the Company, the Incentive Stock
Option theretofore granted to him or her may be exercised (to the extent the
deceased was entitled to do so at the date of his or her death) at any time and
from time to time within a period of three (3) months after death by the person
or persons to whom the right under said Incentive Stock Option shall pass by
will or the laws of descent and distribution, but in no event may such person or
persons exercise the Incentive Stock Option after its expiration.
11. Adjustments Upon Changes in Capitalization. Notwithstanding any other
------------------------------------------
provisions of the Plan, in the event of any change in the outstanding Common
Stock of the Company by reason of a stock dividend, recapitalization, merger,
consolidation, split-up, combination or exchange of shares, or the like, the
aggregate number and class of shares available under the Plan and the number and
class of shares subject to each outstanding Stock Option and the Stock Option
prices shall be appropriately adjusted by the Board, whose determination shall
be conclusive.
12. Amendment and Termination. Unless the Plan shall have been terminated
-------------------------
as hereinafter provided, the Plan shall terminate on September 22, 2007 (ten
years from adoption) and no Stock Option under it shall be granted thereafter.
The Board at any time prior to that date may terminate the Plan, or make such
changes in it and additions or amendments to it as the Board shall deem
advisable; provided, however, that any change in or addition or amendment to the
Plan which shall increase the aggregate number of shares of Common Stock of the
Company which may be issued and sold upon the exercise of Incentive Stock
Options granted pursuant to the Plan shall be subject to approval by the
stockholders of the Company within twelve (12) months after its adoption or the
same shall become null and void.
No termination or amendment of the Plan may, without the consent of the
holder of any Stock Option then outstanding, adversely affect the rights of such
holder under the Stock Option.
13. Stockholder Approval and Effectiveness of ISO Status. The Incentive
----------------------------------------------------
Stock Option status of any option granted pursuant to this Plan is subject to
approval of this Plan by the stockholders of the Company within one (1) year
after the date of adoption of this Plan by the
5
<PAGE>
Board of Directors of the Corporation. If such stockholder approval is not
obtained, such previously granted Stock Option may, by its terms, be a non-ISO.
14. Limitations on non-ISOs. At the discretion of the Board of Directors,
-----------------------
non-ISOs granted hereunder may contain some, all or none of the limitations
described in Sections 5, 7, 8, 9 and 10, or other limitations.
15. Intent and Interpretation. It is the intent of this Plan to conform
-------------------------
with the Section 16 Rules promulgated under Section 16 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). Accordingly, this Plan
shall be interpreted, to the maximum extent possible, so that options granted
under the Plan to directors and officers of the Company shall be exempt from
Section 16(b) of the Exchange Act and that grants of Incentive Stock Options
shall be issuable to eligible persons under the Plan.
CORE, INC.
[Corporate Seal] By: /s/ George C. Carpenter IV
--------------------------
George C. Carpenter IV
Chairman and Chief Executive Officer
Dated: September 22, 1997
Exhibits:
- --------
Form of ISO
Form of non-ISO
6
<PAGE>
CORE, INC.
INCENTIVE STOCK OPTION AGREEMENT
--------------------------------
THIS INCENTIVE STOCK OPTION AGREEMENT is entered into by and between CORE,
INC., a Massachusetts corporation (the "Company"), and )name( ("Optionee").
W I T N E S S E T H
- - - - - - - - - -
WHEREAS, the Board of Directors of the Company have adopted and approved
the 1997 Stock Option Plan (the "1977 Stock Option Plan"); and
WHEREAS, the Company and Optionee desire to enter into this Agreement
concerning the grant by the Company of Incentive Stock Options to Optionee,
pursuant to the 1997 Stock Option Plan and Section 422 of the Internal Revenue
Code of 1986, as amended;
NOW, THEREFORE, in consideration of the covenants herein set forth, the
parties agree as follows:
1. Shares; Price; Term.
-------------------
As of )date( (the "Grant Date"), the Company grants Optionee an option to
purchase )###( shares of its Common Stock, par value $0.10 per share (the
"Option Shares), at a price of )price( per share (which price is equal to the
closing sale price as quoted on NASDAQ-NNM on )date prior to grant date()
pursuant to the 1997 Stock Option Plan. Except for earlier termination events
set forth in Sections 4 (concerning termination or employment) and 5, this
option shall terminate entirely at the close of business on )date(.
2. Vesting.
-------
The Option Shares shall be 20% exercisable at grant and an additional 20%
of the Option Shares shall become exercisable for each additional year of
service Optionee renders to CORE, INC. or any of its affiliated corporations,
after the Grant Date. No vesting shall occur after Optionee's termination of
employment for any reason. Subject to earlier termination events and Optionee's
continued employment, the Option Shares shall be exercisable according to the
following schedule:
<TABLE>
<CAPTION>
Number First Date Last Date
of Shares of Exercise of Exercise
--------- ----------- -----------
<S> <C> <C> <C>
### 20% #/#/## #/#/##
### 20% #/#/## #/#/##
### 20% #/#/## #/#/##
### 20% #/#/## #/#/##
### 20% #/#/## #/#/##
--- ----
Total ### 100%
</TABLE>
1
<PAGE>
Notwithstanding the foregoing, this Option shall immediately become
exercisable as to all shares then subject hereto in the event of a "Change in
Control" (as hereinafter defined) of the Company.
As used herein, a "Change in Control" of the Company shall be deemed to
have occurred if:
(i) there is a merger or consolidation of the Company in which the
Company is not the continuing or surviving corporation;
(ii) the Company sells substantially all its assets to a single purchaser
or to a group of associated purchasers;
(iii) at least two-thirds of the outstanding common stock of the Company
is sold, exchanged or otherwise disposed of in one transaction or in
a series of related transactions;
(iv) any person or entity becomes directly or indirectly the owner or
beneficial owner of 50% or more of the Company's outstanding stock;
(v) individuals who at the date hereof constitute the Board of Directors
of the Company cease to constitute a majority thereof, provided that
-------------
such change in the direct or indirect result of a proxy fight and
contested election for positions on the Board; or
(vi) the Board of Directors of the Company determines in its sole and
absolute discretion that there has been a change in control of the
Company.
3. Exercise.
--------
Optionee may exercise this Incentive Stock Option from time to time as
herein provided, by delivery to the Company, as to each such exercise, at its
principal office of (a) written notice of exercise of this Incentive Stock
Option, stating the number of shares then being purchased hereunder; (b) a check
or cash in the amount of the full purchase price of such shares; (c) a check or
cash in the amount of federal, state and local withholding taxes, if any,
required to be withheld and paid by the Company as a result of such exercise;
and (d) such other documents or instruments as may be required by any then
applicable federal or state laws or regulations, or regulatory agencies
pertaining to this Incentive Stock Option, any exercise thereof and/or any
offer, issue, sale or purchase of any shares covered by this Incentive Stock
Option. Not less than one share may be purchased at one time. After the
Company shall have received all of the foregoing, the Company shall proceed with
reasonable promptness to issue the shares so purchased upon such exercise of the
Incentive Stock Option; provided, however, that Optionee or any person or
persons entitled to exercise this Option under Section 5 hereof shall not be or
be deemed to be the record or beneficial
2
<PAGE>
owner of any such shares purchased upon any exercise of this Incentive Stock
Option until and unless the stock certificate or certificates evidencing such
shares actually shall have been issued. Except as provided in Sections 4 and 5
hereof, Optionee may exercise this Incentive Stock Option only if, on the date
of exercise, he has been continuously in the employ of the Company since the
Grant Date.
4. Termination of Employment.
-------------------------
Notwithstanding the provisions of Sections 1 and 3 hereof, if Optionee
shall cease to be employed by CORE, INC. (including its subsidiaries) for any
reason other than his or her death, Optionee may exercise this Incentive Stock
Option (to the extent he or she was entitled to do so at the termination of his
or her employment) at any time and from time to time within three (3) months
after such termination, but in no event after the expiration of this Incentive
Stock Option; provided, however, that if the employment of Optionee terminates
due to the permanent and total disability of Optionee, Optionee may exercise
this Incentive Stock Option (to the extent he or she was entitled to do so at
the termination of his or her employment) only at any time and from time to time
within twelve (12) months after such termination, but in no event after the
expiration of this Incentive Stock Option. No provision of the 1997 Stock Option
Plan or this Incentive Stock Option shall confer any right to continue in the
employ of CORE, INC. or interfere in any way with the right of CORE, INC. to
terminate any employment at any time.
5. Death of Optionee; No Assignment.
--------------------------------
This Incentive Stock Option shall not be assignable or transferable except
by will or by the laws of descent and distribution and shall be exercisable
during his or her lifetime only by Optionee. If Optionee shall die while in the
employ of CORE, INC., his or her personal representative or the person entitled
to succeed to Optionee's rights hereunder shall have the right, at any time and
from time to time within three (3) months after the date of Optionee's death,
and prior to the expiration or termination of this Incentive Stock Option
pursuant to Section 1 hereof, to exercise this Incentive Stock Option to the
extent that Optionee was entitled to exercise this Incentive Stock Option at the
date of his or her death.
6. No Rights as Stockholder.
------------------------
Optionee shall have no rights as stockholder with respect to the Common
Stock covered by this Incentive Stock Option until the date of the issuance of a
stock certificate or stock certificates. No adjustment will be made for
dividends or other rights for which the record date (or if there is no record
date established, then the date established for the distribution of such
dividend or right) is prior to the date such stock certificates are issued.
3
<PAGE>
7. Conditions of Resale.
--------------------
Optionee agrees to comply with all applicable federal and state securities
laws and rules and regulations thereunder in connection with the resale by
Optionee of any shares of Common Stock which shall have been received by
Optionee upon exercise of this Option, and Optionee further agrees to comply
with all requirements of the Company which may be reasonably imposed by the
Company as conditions of such resale. The Company may, in its discretion, place
a legend on stock certificates issued in connection with the exercise of this
Incentive Stock Option in order to insure compliance with the Securities Act of
1933, as amended.
The Company has no obligation to register the Option Shares on a
registration statement with the Securities and Exchange Commission. Accordingly,
notwithstanding the Company's status as a publicly-held corporation, the Option
Shares may be restricted shares and not subject to resale without compliance
with Rule 144 or other exemption. In general, Rule 144 requires a one-year
holding period prior to sale of the shares of stock.
8. Certain Adjustments Upon Changes in Capitalization.
--------------------------------------------------
In the event of any change in the outstanding Common Stock of the Company
by reason of a stock dividend, consolidation, split-up, combination or exchange
of shares, or the like, the aggregate number and class of shares available under
this Incentive Stock Option Agreement shall be appropriately adjusted by the
Board of Directors whose determination shall be conclusive.
9. This Agreement Subject to 1997 Stock Option Plan.
------------------------------------------------
This Agreement is made pursuant to all of the provisions of the 1997 Stock
Option Plan (including the Rules and Regulations promulgated thereunder), and is
intended, and shall be interpreted in a manner, to comply therewith. Any
provision hereof inconsistent with the 1997 Stock Option Plan shall be
superseded and governed by the 1997 Stock Option Plan. A copy of the 1997 Stock
Option Plan is available from the Company upon Optionee's written request.
10. Miscellaneous.
-------------
(a) Sections; Headings. Sections and other headings are included herein
------------------
for reference purposes only and shall not be construed or interpreted as part of
this Agreement.
(b) Gender; Plural. Wherever and whenever the context of this Agreement
--------------
shall so require, the masculine, feminine and neuter gender of any noun or
pronoun shall include any or all of the other genders and the singular shall
include the plural and the plural shall include the singular.
4
<PAGE>
(c) Counterparts. This Agreement may be executed in several
------------
counterparts, all of which shall constitute one and the same instrument.
(d) Incentive Stock Option Treatment. Optionee understands that in order
--------------------------------
to receive "Incentive Stock Option" treatment pursuant to Section 422 of the
Internal Revenue Code of 1986, as amended, Optionee nay not dispose of the
Common Stock which may be purchased hereunder within two years after the Grant
Date, and must hold said Common Stock for at least one year after the date of
exercise of the Incentive Stock Option described herein. For Incentive Stock
Option treatment, the aggregate fair market value of the shares of Common Stock
(determined as of the respective date or dates of grant) for which one or more
options granted to Optionee under the Plan (or any other option Plan of the
Company) may for the first time become exercisable as Incentive Options during
any one calendar year shall not exceed the sum of One Hundred Thousand Dollars
($100,000). To the extent the Employee holds two or more such options which
become exercisable for the first time in the same calendar year, the foregoing
limitation on the exercisability of such options as Incentive Options shall be
applied on the basis of the order in which such options are granted.
(e) Section 16 Rules. It is the intent of this Option Agreement to
----------------
conform to the Section 16 Rules under the Securities and Exchange Act of 1934,
without affecting the exempt status of the 1997 Stock Option Plan. Accordingly,
this Option Agreement shall, to the maximum extent possible, be interpreted so
that options granted under this Agreement shall be exempt from Section 16(b) of
the Act.
(f) Stockholder Approval and Effectiveness of ISO Status.
----------------------------------------------------
Notwithstanding any other term or provision of this agreement, the Incentive
Stock Options status of the options described in this agreement is subject to
approval of the 1997 Stock Option Plan by the stockholders of the Company on or
before September 22, 1998. If such stockholder approval is not obtained, the
options granted under this Agreement shall be non-ISOs.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the _____________ day of ____________, )year(, to be effective )date(.
CORE, INC.
By:
------------------------------------
George C. Carpenter IV
Chairman and Chief Executive Officer
Optionee:
------------------------------------
5
<PAGE>
THIS OPTION IS NOT, AND SHALL NOT BE TREATED AS AN INCENTIVE STOCK
OPTION, AS DEFINED IN SECTION 422 OF THE INTERNAL REVENUE CODE OF
1986, AS AMENDED.
CORE, INC.
STOCK OPTION AGREEMENT
----------------------
THIS STOCK OPTION AGREEMENT, is entered into by and between CORE, INC., a
Massachusetts corporation (the "Company"), and )name( ("Optionee").
W I T N E S S E T H
- - - - - - - - - -
WHEREAS, the Company and Optionee desire to enter into this Agreement
concerning the grant by the Company of Stock Options to Optionee.
NOW, THEREFORE, in consideration of the covenants herein set forth, the
parties agree as follows:
1. Shares; Price; Term.
-------------------
As of )date(, (the "Grant Date"), the Company grants Optionee an option to
purchase )###( shares of its Common Stock, par value $0.10 per share (the
"Option Shares"), at a price of )price( per share (which price is equal to the
closing sale price as quoted on NASDAQ-NNM on )date prior to grant date().
Except for earlier termination events set forth in Sections 4 (concerning
termination of services) and 5, this option shall terminate entirely at the
close of business on )date(.
2. Vesting.
-------
The Option Shares shall be 20% exercisable at grant and an additional 20%
of the Option Shares shall become exercisable for each additional year of
service Optionee renders to CORE, INC. or any of its affiliated corporations,
after the Grant Date. No vesting shall occur after Optionee's termination of
service for any reason. Subject to earlier termination events and Optionee's
continued service the Option Shares shall be exercisable according to the
following schedule:
<TABLE>
<CAPTION>
Number First Date Last Date
of Shares of Exercise of Exercise
--------- ----------- -----------
<S> <C> <C> <C>
### 20% #/#/## #/#/##
### 20% #/#/## #/#/##
### 20% #/#/## #/#/##
### 20% #/#/## #/#/##
### 20% #/#/## #/#/##
--- ----
Total ### 100%
</TABLE>
1
<PAGE>
Notwithstanding the foregoing, this Option shall immediately become
exercisable as to all shares then subject hereto in the event of a "Change in
Control" (as hereinafter defined) of the Company.
As used herein, a "Change in Control" of the Company shall be deemed to
have occurred if:
(i) there is a merger or consolidation of the Company in which the
Company is not the continuing or surviving corporation;
(ii) the Company sells substantially all its assets to a single purchaser
or to a group of associated purchasers;
(iii) at least two-thirds of the outstanding common stock of the Company is
sold, exchanged or otherwise disposed of in one transaction or in a
series of related transactions;
(iv) any person or entity becomes directly or indirectly the owner or
beneficial owner of 50% or more of the Company's outstanding stock;
(v) individuals who at the date hereof constitute the Board of Directors
of the Company cease to constitute a majority thereof, provided that
-------------
such change is the direct or indirect result of a proxy fight and
contested election for positions on the Board; or
(vi) the Board of Directors of the Company determines in its sole and
absolute discretion that there has been a change in control of the
Company.
3. Exercise.
---------
Optionee may exercise this Stock Option from time to time as hereinabove
provided, by delivery to the Company, as to each such exercise, at its principal
office of (a) written notice of exercise of this Stock Option, stating the
number of shares then being purchased hereunder; (b) a check or cash in the
amount of the full purchase price of such shares; (c) a check or cash in the
amount of federal, state and local withholding taxes, if any, required to be
withheld and paid by the Company as a result of such exercise; and (d) such
other documents or instruments as may be required by any then applicable federal
or state laws or regulations, or regulatory agencies pertaining to this Stock
Option, any exercise thereof and/or any offer, issue, sale or purchase of any
shares covered by this Stock Option. Not less than one share may be purchased at
one time. After the Company shall have received all of the foregoing, the
Company shall proceed with reasonable promptness to issue the shares so
purchased upon such exercise of the Stock Option; provided, however, that
Optionee or any person or persons entitled to exercise this Option under Section
5 hereof shall not be or be deemed to be the record or beneficial owner of any
such shares purchased upon any exercise of this Stock Option until and unless
the stock certificate or certificates
2
<PAGE>
evidencing such shares actually shall have been issued. Except as provided in
Sections 4 and 5 hereof, Optionee may exercise this Stock Option only if, on the
date of exercise, he has been continuously rendering services to the Company
since the Grant Date.
4. Termination of Employment.
-------------------------
Notwithstanding the provisions of Sections 1 and 3 hereof, if Optionee
shall cease to render services to CORE, INC. for any reason other than his or
her death, Optionee may exercise this Stock Option (to the extent he or she was
entitled to do so at the termination of his or her services) at any time and
from time to time within three (3) months after such termination, but in no
event after the expiration of this Stock Option; provided, however, that if the
termination of Optionee's services is due to the permanent and total disability
of Optionee, Optionee may exercise this Stock Option (to the extent he or she
was entitled to do so at the termination of his or her services) only at any
time and from time to time within twelve (12) months after such termination, but
in no event after expiration of this Stock Option. No provision of this Stock
Option shall confer any right to continue to render services to CORE, INC. or
interfere in any way with the right of CORE, INC. to terminate any services of
Optionee at any time.
5. Death of Optionee; No Assignment.
--------------------------------
This Stock Option shall not be assignable or transferable except by will or
by the laws of descent and distribution and shall be exercisable during his or
her lifetime only by Optionee. If Optionee shall die while rendering services to
CORE, INC., his or her personal representative or the person entitled to succeed
to Optionee's rights hereunder shall have the right, at any time and from time
to time within three (3) months after the date of Optionee's death, and prior to
the expiration or termination of this Stock Option pursuant to Section 1 hereof,
to exercise this Stock Option to the extent that Optionee was entitled to
exercise this Stock Option at the date of death.
6. No Rights as Stockholder.
------------------------
Optionee shall have no rights as stockholder with respect to the Common
Stock covered by this Stock Option until the date of the issuance of a stock
certificate or stock certificates. No adjustment will be made for dividends or
other rights for which the record date (or if there is no record date
established, then the date established for the distribution of such dividend or
right) is prior to the date such stock certificates are issued.
7. Conditions of Resale.
--------------------
Optionee agrees to comply with all applicable federal and state securities
laws and rules and regulations thereunder in connection with the resale by
Optionee of any shares of Common Stock which have been received by Optionee upon
exercise of this Option, and Optionee further agrees to comply with all
requirements of the
3
<PAGE>
Company which may be reasonably imposed by the Company as conditions of such
resale. The Company may, in its discretion, place a legend on stock
certificates issued in connection with the exercise of this Secok Option in
order to insure compliance with the Securities Act of 1933, as amended.
The Company has no obligation to register the Option Shares on a
registration statement with the Securities and Exchange Commission.
Accordingly, notwithstanding the Company's status as a publicly-held
corporation, the Option Shares may be restricted shares and not subject to
resale without compliance with Rule 144 or other exemption. In general, Rule
144 requires a one-year holding period prior to sale of the restricted shares of
stock.
8. Certain Adjustments Upon Changes in Capitalization.
--------------------------------------------------
In the event of any change in the outstanding Common Stock of the Company
by reason of a stock dividend, consolidation, split-up, combination or exchange
of shares, or the like, the aggregate number and class of shares available under
this Stock Option Agreement shall be appropriately adjusted by the Board of
Directors whose determination shall be conclusive.
9. This Agreement Subject to 1997 Stock Option Plan.
------------------------------------------------
This Agreement is made pursuant to all of the provisions of the 1997 Stock
Option Plan (including the Rules and Regulations promulgated thereunder), and is
intended, and shall be interpreted in a manner, to comply therewith. Any
provision hereof inconsistent with the 1997 Stock Option Plan shall be
superseded and governed by the 1997 Stock Option Plan. A copy of the 1997 Stock
Option Plan is available from the Company upon Optionee's written request.
10. Miscellaneous.
-------------
(a) Sections; Headings. Sections and other headings are included herein
------------------
for reference purposes only and shall not be construed or interpreted as part of
this Agreement.
(b) Gender; Plural. Wherever and whenever the context of this Agreement
--------------
shall so require, the masculine, feminine and neuter gender of any noun or
pronoun shall include any or all of the other genders and the singular shall
include the plural and the plural shall include the singular.
(c) Counterparts. This Agreement may be executed in several counterparts,
------------
all of which shall constitute one and the same instrument.
4
<PAGE>
(d) Not an Incentive Stock Option. Optionee understands that this Stock
-----------------------------
Option will not be treated as an "Incentive Stock Option" pursuant to Section
422 of the Internal Revenue Code of 1986.
(e) Section 16 Rules. It is the intent of this Option Agreement to
----------------
conform with the Section 16 Rules under the Securities and Exchange Act of
1934, without affecting the exempt status of the CORE, INC. 1997 Stock Option
Plan. Accordingly, this Option Agreement shall, to the maximum extent possible,
be interpreted so that options granted under this Agreement shall be exempt from
Section 16(b) of the Act.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the _________ day of _____, (year), to be effective (date).
CORE, INC.
By:
------------------------------------
George C. Carpenter IV
Chairman and Chief Executive Officer
Optionee:
------------------------------------
5
<PAGE>
Exhibit 11
CORE, INC.
COMPUTATION OF INCOME (LOSS) PER COMMON SHARE
<TABLE>
<CAPTION>
FOR THREE MONTHS ENDED FOR NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-----------------------------------------------------------------
1996 1997 1996 1997
-----------------------------------------------------------------
<S> <C> <C> <C> <C>
PRIMARY:
Average shares outstanding 6,072,000 7,265,000 6,072,000 7,231,000
Shares issuable on assumed exercise of
dilutive options and warrants - based on
treasury stock method using average market
price 705,000 624,000
---------------------------------------------------------------
Totals 6,072,000 7,970,000 6,072,000 7,855,000
===============================================================
Net income (loss) $(1,257,138) $1,108,405 $(220,346) $1,931,815
===============================================================
Net income (loss) per common share $(0.21) $0.14 $(0.04) $0.25
===============================================================
<CAPTION>
FOR THREE MONTHS ENDED FOR NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-----------------------------------------------------------------
1996 1997 1996 1997
-----------------------------------------------------------------
<S> <C> <C> <C> <C>
FULLY DILUTED:
Average shares outstanding 6,072,000 7,265,000 6,072,000 7,231,000
Shares issuable on assumed exercise of
dilutive options and warrants - based on the
treasury stock method using the ending
market price 851,000 708,000
---------------------------------------------------------------
Totals 6,072,000 8,116,000 6,072,000 7,939,000
===============================================================
Net income (loss) $(1,257,138) $1,108,405 $(220,346) $1,931,815
===============================================================
Net income (loss) per common share $(0.21) $0.14 $(0.04) $0.24
===============================================================
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1997
<PERIOD-START> JUL-01-1997 JAN-01-1997
<PERIOD-END> SEP-30-1997 SEP-30-1997
<CASH> 3,647,129 3,647,129
<SECURITIES> 4,856,723 4,856,723
<RECEIVABLES> 5,616,892 5,616,892
<ALLOWANCES> (160,433) (160,433)
<INVENTORY> 0 0
<CURRENT-ASSETS> 14,450,211 14,450,211
<PP&E> 12,989,803 12,989,803
<DEPRECIATION> (6,447,477) (6,447,447)
<TOTAL-ASSETS> 30,885,769 30,885,769
<CURRENT-LIABILITIES> 3,576,022 3,576,022
<BONDS> 0 0
0 0
0 0
<COMMON> 727,597 727,597
<OTHER-SE> 26,027,232 26,027,232
<TOTAL-LIABILITY-AND-EQUITY> 30,885,769 30,885,769
<SALES> 0 0
<TOTAL-REVENUES> 10,531,319 27,629,939
<CGS> 0 0
<TOTAL-COSTS> (6,152,346) (16,843,247)
<OTHER-EXPENSES> (3,288,843) (9,172,046)
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> (6,538) (6,538)
<INCOME-PRETAX> 1,206,549 2,060,959
<INCOME-TAX> (98,144) (129,144)
<INCOME-CONTINUING> 1,108,405 1,931,815
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 1,108,405 1,931,815
<EPS-PRIMARY> 0.14 0.25
<EPS-DILUTED> 0.14 0.24
</TABLE>
