<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 JUNE 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 August 11, 1997, there were 7,265,389 shares of the Registrant's Common
Stock outstanding.
<PAGE>
CORE, INC.
FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 1997
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION Page
----
Item 1. Financial Statements
Consolidated Condensed Balance Sheets 3
Consolidated Condensed Statements of Income 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 8
and Results of Operations
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 12
Item 5. Other Information N/A
Item 6. Exhibits and Reports on Form 8-K 12
Signatures 13
2
<PAGE>
CORE, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1996 1997
(NOTE 1) (UNAUDITED)
---------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 4,281,994 $ 3,353,844
Cash pledged as collateral 192,000 192,000
Investments available-for-sale 8,435,531 4,289,193
Accounts receivable, net of
allowance for doubtful
accounts of $221,925 in 1996 and
$166,656 at June 30,1997 4,545,738 5,045,638
Notes receivable from officers 106,926 104,907
Prepaid expenses and other current
assets 891,932 569,832
---------------------------
Total current assets 18,454,121 13,555,414
Property and equipment, net 6,445,420 6,692,024
Deposits and other assets 699,901 674,130
Goodwill, net of accumulated
amortization of $87,400
at December 31, 1996 and $133,200
at June 30, 1997 2,035,604 8,425,017
Other intangibles, net 208,693 666,595
---------------------------
Total assets $27,843,739 $30,013,180
===========================
</TABLE>
See accompanying notes.
3
<PAGE>
CORE, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS - CONTINUED
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1996 1997
(NOTE 1) (UNAUDITED)
----------------------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 743,143 $ 391,319
Accrued expenses 1,200,323 1,335,030
Accrued payroll 465,520 430,430
Accrued restructuring costs 41,636
Deferred income taxes 68,316 68,316
Obligation from acquisition 1,500,000
Notes payable 58,099 60,700
Current portion of obligations to
former shareholders 50,000 50,000
Current portion of capital lease
obligations 46,498 41,628
----------------------------
Total current liabilities 2,673,535 3,877,423
Long-term obligations to former
shareholders, net of current portion 50,000
Note payable 256,690 224,782
Capital lease obligations, net of
current portion 37,275 20,042
Deferred rent, net of current portion 220,539 193,796
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
7,250,081 at December 31, 1996 and June
30, 1997, respectively 717,271 725,008
Additional paid-in capital 34,465,146 34,757,428
Deferred compensation (38,640) (38,640)
Cumulative unrealized gain on
investments available-for-sale 31,983
Accumulated deficit (10,719,560) (9,896,159)
----------------------------
Total stockholders' equity 24,456,200 25,547,637
----------------------------
Total liabilities and stockholders'
equity $ 27,843,739 $30,013,180
============================
</TABLE>
See accompanying notes.
4
<PAGE>
CORE, INC.
CONSOLIDATED CONDENSED STATEMENTS OF INCOME (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
-----------------------------------------------------------
1996 1997 1996 1997
-----------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues $6,559,345 $8,971,573 $13,142,904 $17,098,622
Cost of services 3,847,994 5,447,286 7,786,976 10,690,909
-----------------------------------------------------------
Gross profit 2,711,351 3,524,287 5,355,928 6,407,713
Operating expenses:
General and administrative 1,495,449 1,983,392 2,899,103 3,865,554
Sales and marketing 430,981 531,554 898,323 1,127,281
Depreciation and amortization 289,656 452,974 567,567 890,372
-----------------------------------------------------------
Total operating expenses 2,216,086 2,967,920 4,364,993 5,883,207
-----------------------------------------------------------
Income from operations 495,265 556,367 990,935 524,506
Other income (expense):
Interest income 29,392 164,578 74,759 342,018
Interest expense (26,961) (6,615) (45,412) (12,123)
Realized gain on sale of
investments available-for-sale 1,386 16,003
Other income 481
-----------------------------------------------------------
3,817 157,963 45,831 329,895
-----------------------------------------------------------
Net income before income taxes 499,082 714,330 1,036,766 854,401
Provision for income taxes 31,000 31,000
-----------------------------------------------------------
Net income $ 499,082 $ 683,330 $ 1,036,766 $ 823,401
===========================================================
Net income per common share
Primary $0.09 $0.09 $0.18 $0.11
===========================================================
Fully diluted $0.09 $0.09 $0.18 $0.10
===========================================================
</TABLE>
See accompanying notes.
5
<PAGE>
CORE, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
----------------------------
1996 1997
----------------------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 1,036,766 $ 823,401
Adjustments to reconcile net income to
net cash provided by
operating activities:
Depreciation 611,857 809,250
Amortization 349,149
Realized gain on sale of
investments available-for-sale (16,003)
Decrease in obligations to (198,100)
former shareholders
Changes in operating assets and
liabilities:
Increase in accounts
receivable (2,325,859) (499,900)
(Increase) decrease in
prepaid expenses and other
current assets (327,179) 194,129
Increase in cash overdraft 173,834
Increase (decrease) in
accounts payable and accrued
expenses 1,046,566 (401,085)
--------------------------
Net cash provided by operating
activities 1,882 1,274,944
INVESTING ACTIVITIES:
Additions to property and equipment (2,183,174) (1,070,546)
Additions to goodwill (8,387)
Deferred acquisition costs (392,063)
Decrease in cash pledged as
collateral 60,500
Purchases of investments
available-for-sale (24,691,181)
Sales of investments
available-for-sale 1,516,638 28,805,536
(Increase) decrease to notes
receivable from officer (58,301) 2,019
Advances to affiliates (1,092,450)
Purchase of SSDC Corp., net of
cash acquired (4,973,778)
Purchase of other intangible assets (499,524)
Decrease in deposits and other
assets 20,640 25,771
--------------------------
Net cash used in investing activities (2,136,597) (2,401,703)
FINANCING ACTIVITIES:
Net borrowings under bank
revolving line of credit 1,411,978
Payments on notes payable (127,999) (29,307)
Payments on capital lease
obligations (24,897) (22,103)
Payments on obligations to former
shareholders (240,315) (50,000)
Issuance of common stock upon
exercise of stock options and
warrants 209,370 300,019
Deferred offering costs (99,229)
--------------------------
Net cash provided by financing
activities 1,128,908 198,609
Net decrease in cash and cash
equivalents (1,005,807) (928,150)
Cash and cash equivalents at beginning
of period 1,005,807 4,281,994
--------------------------
Cash and cash equivalents at end of
period $ - $ 3,353,844
==========================
Supplemental disclosure of cash flow
information:
Interest paid $ 45,603 $ 11,325
Noncash investing activities:
Obligations incurred in connection
with the purchase of SSDC $ 1,500,000
</TABLE>
See accompanying notes.
6
<PAGE>
CORE, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
JUNE 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 six month periods ended June 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 - Purchase of SSDC
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. An
initial cash payment of $5,000,000 was paid at close. Additional payments of
$1,500,000 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 six months ended June 30,
1996 and June 30, 1997, assuming consummation of the purchase as of January 1,
1996, are as follows:
<TABLE>
<CAPTION>
Six months ended June
30,
--------------------------
1996 1997
--------------------------
<S> <C> <C>
Revenues $17,884,492 $20,491,560
Income before extraordinary item $ 3,089,197 $ 2,314,210
Net income $ 3,089,197 $ 3,358,360
Earnings per common share:
Income before extraordinary item $ 0.51 $ 0.30
Net income $ 0.51 $ 0.43
</TABLE>
Note 4 - Subsequent Event
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.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
- -------------------------------------------------------------------------------
OF OPERATIONS.
-------------
OVERVIEW
CORE, INC. ("CORE" or the "Company") is a national provider of managed
disability and health care benefits management services. The Company was
incorporated in 1984 under the name Peer Review Analysis, Inc. ("PRA") to
provide physician-intensive utilization management services to commercial
insurance companies and self-insured employers. PRA became a publicly-held
entity in December 1991 with the completion of an initial public offering. In
March 1995, PRA completed the CMI/PRA Merger with Core Management, Inc. ("CMI").
CMI provides managed disability services, including benefits analysis and
consulting services and health care benefits utilization review and case
management services. CMI's utilization review and case management services with
respect to mental health and substance abuse cases were acquired in an
acquisition in March 1993. In July 1995, the Company changed its name to CORE,
INC. and in October 1995, the Company acquired Cost Review Services, Inc.
("CRS"), a provider of bill audit and case management services in the workers'
compensation market. In June 1997, the Company acquired certain assets of Social
Security Disability Consultants and Disability Services, Inc. (collectively
"SSDC"), a provider of disability management services. In July 1997, the Company
acquired the assets of Protocol Work Systems, Inc. ("PWS"). See "Current
Developments," below.
The Company provides managed disability services (which consist of the
Company's WorkAbility/R/ 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 six months ended June 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.
8
<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 June 30, Six months ended June 30,
-----------------------------------------------------------
1996 1997 1996 1997
-----------------------------------------------------------
Percent Percent Percent Percent
-----------------------------------------------------------
<S> <C> <C> <C> <C>
Revenue 100.0% 100.0% 100.0% 100.0%
Cost of services 58.7 60.7 59.2 62.5
Gross profit 41.3 39.3 40.8 37.5
General and administrative expense 22.8 22.1 22.0 22.6
Sales and marketing expense 6.6 5.9 6.8 6.6
</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 June 30, Six months ended June 30,
-------------------------------------------------------------------------
1996 1997 1996 1997
-------------------------------------------------------------------------
Amount Percent Amount Percent Amount Percent Amount Percent
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Managed disability services $2,571 39% $4,708 52% $ 4,921 37% $ 8,673 51%
Specialty physician and behavioral
health review 2,219 34 2,589 29 4,544 35 5,044 29
Utilization review and case management 1,769 27 1,675 19 3,678 28 3,382 20
-------------------------------------------------------------------------
$6,559 100% $8,972 100% $13,143 100% $17,099 100%
=========================================================================
</TABLE>
Managed disability services include: CORE's WorkAbility services, analytic
consulting, social security disability benfits advocacy, Medicare coordination
of benefits, bill audit services and license fees.
Three and six months ended June 30, 1997 and 1996
Revenues. Revenues for the three months ended June 30, 1997 increased by
$2,413,000 (37%) from $6,559,000 in 1996 to $8,972,000 in 1997. For the six
months ended June 30, 1997 revenues increased $3,956,000 (30%) from $13,143,000
in 1996 to $17,099,000 in 1997. Growth in managed disability services
contributed $2,140,000 (89%) of the Company's growth in revenue for the three
months ended June 30, 1997. During the quarter ended June 30, 1997 CORE added
Motorola and Apple Corporation to its list of WorkAbility clients. During the
quarter, CIGNA notified the Company that it would be terminating its
distribution relationship as of January 1, 1998. The Company expects to
continue providing services to certain employers outside of the distribution
agreement. The loss of the CIGNA distribution arrangement will not adversely
effect future growth in revenues. An increase in the volume of referrals
resulted in increased revenues realized from specialty physician review
services, growing 17% for the three month period ended June 30, 1997 and 11% for
the six month period ended June 30, 1997 as compared to the prior year.
Revenues from utilization review and case management services decreased 5% for
the three month period ended June 30, 1997 and 8% for the six month period ended
June 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 six months ended June 30, 1997, the Company's top five clients
represented 44% of revenues compared to 29% for the same period last year. Bell
Atlantic accounted for approximately 25% of revenues for the six months ended
June 30, 1997. No other single client represented more than 10% of total
revenues for the six months ended June 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 June 30, 1997 increased $1,599,000 (42%) from $3,848,000 in
1996 to $5,447,000 in 1997. Cost of services for the six months ended June 30,
1997 increased
9
<PAGE>
$2,904,000 (37%) from $7,787,000 in 1996 to $10,691,000 in 1997. The increase is
primarily the result of additional payroll and physician consultant costs
associated with increased staffing levels required to service new and growing
WorkAbility clients and growth in the Company's specialty physician review
services. CORE's gross profit performance for the six months ended June 30, 1997
declined to 38% in 1997 from 41% in 1996. The Company's gross profit performance
was impacted primarily by lower margins in its managed disability services.
Gross margins within this service line decreased from 53% for the six months
ended June 30, 1996 to 39% for the six months ended June 30, 1997. This is due
primarily to increased costs associated with the implementation of new
WorkAbility clients and significantly lower revenues realized from the Company's
bill audit services. Gross margins ,however, have improved when compared to the
36% gross profit realized for the three months ended March 31, 1997.
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 June 30, 1997 increased $488,000 (33%) from
$1,495,000 in 1996 to $1,983,000 in 1997. General and administrative expense
for the six months ended June 30, 1997 increased $967,000 (33%) from $2,899,000
in 1996 to $3,866,000 in 1997. Expenses increased 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 new Silver Spring, Maryland operating
center that opened in July 1996 and the expansion of space in the Company's
Burlington, Massachusetts facility.
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
June 30, 1997 increased $101,000 (23%) from $431,000 in 1996 to $532,000 in
1997. Sales and marketing expenses for the six months ended June 30, 1997
increased $229,000 (26%) from $898,000 in 1996 to $1,127,000 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.
Depreciation and amortization expense. Depreciation and amortization
expense for the three months ended June 30, 1997 increased $163,000 (56%) from
$290,000 in 1996 to $453,000 in 1997. Depreciation and amortization expense for
the six months ended June 30, 1997 increased $323,000 (57%) from $568,000 in
1996 to $890,000 in 1997. The increase is largely attributable to increased
depreciation expense on assets purchased for the new operating center in Silver
Spring, Maryland to service the Bell Atlantic Corporation contract.
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 increased $154,000 to $158,000 in 1997 compared
to the same period last year. During the six months ended June 30, 1997, other
income increased $284,000 to $330,000 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 six months ended June 30, 1997, the Company's cash and cash
equivalents decreased by $928,000. For this period, operating activities
provided $1,275,000 due to net income of $823,000 and depreciation and
amortization of $1,158,000 as offset by an increase in accounts receivable of
$500,000 The Company's investing activities used $2,402,000 of cash. This was
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 $200,000 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 space rental, for the years ended
December 31, 1997 and December 31, 1998 are approximately $1 million and $1.7
million, respectively. All obligations held by the Company under lease
commitments expire on various dates through April 2002 and total $5.7 million as
of June 30, 1997.
10
<PAGE>
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.
11
<PAGE>
PART II
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
- ------------------------------------------------------------
The Annual Meeting of the Stockholders of CORE was held on June 25, 1997 in
Irvine, California.
The vote to elect two persons as Class III Directors of the Company
was as follows:
For Withheld Authority
--------- ------------------
George C. Carpenter IV 6,351,375 33,100
Craig C. Horton 6,351,675 32,800
Accordingly, Mr. Carpenter and Mr. Horton were re-elected as Class III Directors
to serve for a three year term until the 2000 annual stockholders meeting and
until their successors are duly elected and qualified. Class I Directors
(Leslie Alexandre and Stephen Caufield) whose terms are scheduled to expire at
the 1998 annual meeting of stockholders and Class II Directors (Richard H.
Egdahl and John Pappajohn) whose terms are scheduled to expire at the 1999
annual meeting of stockholders have terms as directors that continued after the
June 1997 Annual Meeting of Stockholders.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
- ------- --------------------------------
(a) Exhibits. The following exhibits are included:
Exhibit
Number Description
- ------ -----------
10.1* Services Agreement, dated as of August 1, 1996, between CORE, INC. and
Bell Atlantic Corporation (without schedules and appendices).
10.2 Asset Purchase Agreement dated June 14, 1997, by and among CORE, INC.,
SSDC Corp., Social Security Disability Consultants Limited Partnership,
Disability Services, Inc., DSI Medicare Consultants, Inc., R. Gary
Dolenga and Phylis M. Dolenga, including Amendment No. 1 to Asset
Purchase Agreement, dated June 25, 1997, and Exhibit A - Performance
Criteria (excluding other Exhibits and Schedules). Filed as exhibit 2.1
to Registrant's Current Report on Form 8-K, filed July 15, 1997, and
incorporated herein by reference.
10.3 Option Agreement, dated June 14, 1997, by and between CORE, INC. and R.
Gary Dolenga. Filed as exhibit 99.1 to Registrant's current Report on
Form 8-K, filed July 15, 1997, and incorporated herein by reference.
10.4 Employment Agreement, dated June 25, 1997, by and between SSDC Corp. and
R. Gary Dolenga. Filed as exhibit 99.2 to Registrant's Current Report on
Form 8-K, filed July 15, 1997, and incorporated herein by reference.
11* Statement re: Computation of Income Per Share for the three and six
months ended June 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 concerning the
acquisition of certain assets of SSDC. Pursuant to the Purchase Agreement,
certain assets of SSDC were acquired in exchange for an initial payment of
$5,000,000, future payments of $1,500,000, up to an additional $920,000 of
performance based payments and stock options. The purchase price, which CORE
funded through the sale of investments held, is subject to certain adjustments
as set forth in the Purchase Agreement.
12
<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: August 12, 1997 By /s/ William E. Nixon
-------------------------------------
William E. Nixon
Chief Financial Officer,
Executive Vice President and
Treasurer
(Duly authorized officer and
Principal Financial Officer)
13
<PAGE>
Exhibit 10.1
TABLE OF CONTENTS
ADMINISTRATIVE SERVICES AGREEMENT
BETWEEN
BELL ATLANTIC NETWORK SERVICES, INC.
AND
CORE INC.
PREAMBLE
ARTICLE 1 RESPONSIBILITIES OF ADMINISTRATOR
ARTICLE 2 COMPENSATION OF ADMINISTRATOR
ARTICLE 3 RESPONSIBILITIES OF COMPANY
ARTICLE 4 TERM, AMENDMENT AND TERMINATION
ARTICLE 5 INDEMNIFICATION AND DISPUTES
ARTICLE 6 COMMUNICATIONS
ARTICLE 7 ASSIGNMENTS
ARTICLE 8 MISCELLANEOUS PROVISIONS
APPENDIX A FEES
APPENDIX B WORKFLOW / ERISA CLAIMS AND APPEALS PROCESS
APPENDIX C PLAN DOCUMENTS
APPENDIX D STANDARDS OF PERFORMANCE
APPENDIX E MANAGEMENT REPORTS
APPENDIX F GOVERNMENT REQUIREMENTS
APPENDIX G CUSTOMER SATISFACTION SURVEY INSTRUMENT
APPENDIX H SAVINGS CALCULATION METHODOLOGY
<PAGE>
ADMINISTRATIVE SERVICES AGREEMENT
BETWEEN
BELL ATLANTIC NETWORK SERVICES, INC.
AND
CORE INC.
This Administrative Services Agreement (the "Agreement"), effective
the first day of August, 1996 (the "Effective Date") is made by and between Bell
Atlantic Network Services, Inc.( "BANSI")acting in its capacity as the services
purchasing and contracting agent for the sponsor of the benefit plans as
described in Appendix C hereof, and as they may be amended from time to time
(the "Plans"), and CORE INC.(the "Administrator"). The sponsor of the Plans,
Bell Atlantic Corporation (the "Company") has delegated its authority to enter
into contracts for plan administration services to BANSI.
The Plans provide short-term disability benefits to eligible employees
of the Company and its subsidiaries that have adopted the Plans (the
"Participants").
BANSI desires the Administrator to perform, and the Administrator is
willing to perform certain services and fiduciary responsibilities in connection
with the administration of the Plans and the determination of benefits payable
under the Plans.
In Consideration of the premises and mutual considerations provided in
this Agreement, and intending to be legally bound, BANSI and the Administrator
hereby agree as follows:
<PAGE>
ARTICLE I
RESPONSIBILITIES OF ADMINISTRATOR
Section 1.1. Scope of Agreement. The Administrator's obligation
under the Agreement shall be performance of those benefit administration
services under the Plans with respect to the Participants and the Company
described in Appendix B in conformance with the terms and conditions of this
Agreement. All provisions of the Plans are incorporated by reference herein.
Section 1.2. Named Fiduciary for Benefits Administration. During the
term of this Agreement, the Administrator shall be a "named fiduciary" under the
Plans (as the term "named fiduciary" is defined in ERISA) and shall have the
fiduciary duty and discretion to (i) administer claims for benefits under the
Plans and appeals from denied claims; and (ii) establish eligibility and quality
standards for medical examiners, select, appoint and terminate medical examiners
and monitor whether or not each of the medical examiners continues to meet such
eligibility and quality standards, in accordance with the documents and
instruments governing the Plans, Sections 404 (a) and 503 of
ERISA, and other applicable sections of ERISA pertaining to fiduciary duties, as
amended and supplemented.
The Company grants full and exclusive discretionary authority to the
Administrator to interpret the Plans, to determine whether a claimant is
eligible for benefits in accordance with the terms of the Plans, to decide the
amount and timing of benefits pursuant to the terms of the Plans, and to resolve
any other matter under the Plans which is raised by the claimant or identified
by the Administrator. The decisions of the Administrator shall be final and
binding to the full extent permitted under applicable law.
The Company shall not direct the Administrator regarding the
consideration of any claim or review of any appeal. The Administrator shall use
claims and appeals procedures that comply with the requirements of ERISA and
regulations promulgated thereunder. The Administrator is sometimes referred to
herein and in the Plan Documents as the "Claims Fiduciary". Nothing in this
Agreement shall limit the right of the Company to amend any Plan at any time,
for any reason.
Section 1.3. Claim Forms. The Administrator shall provide the
Participants all forms and explanatory materials necessary or appropriate for
the Participants to claim benefits under the Plan. The Administrator may
provide these forms and explanatory materials directly to Participants,
indirectly to such persons through the Company with the Company's cooperation,
or both. All
<PAGE>
forms and other explanatory materials distributed by the Administrator shall be
approved by the Company before being distributed by the Administrator. If the
forms are standard Administrator forms the Administrator shall bear the costs.
If the Company requires Company specific forms, the Company shall bear the cost
and the responsibility for management of the creation and printing of the forms.
Section 1.4. Toll-Free Number. The Administrator shall make
available a toll-free telephone number to Participants who have questions about
the manner in which claims for benefits under the Plans shall be filed, and
shall cooperate with such persons in the submission and processing of claims as
well as any questions regarding benefits. The Administrator shall provide TDY
equipment to assist the hearing impaired.
Section 1.5. The Standards of Performance. The standards of
administrative performance to be met by the Administrator and the associated
administrative fee reductions for non-compliance shall be as stated in Appendix
D.
Section 1.6. Management Reports. The Administrator shall provide the
Company at no additional charge the management reports listed in Appendix E, as
well as those specified below:
(a) The Administrator shall provide monthly claims processing and
service performance reports which summarize the volume of claims processed and
the performance of the customer service department using the calculations where
appropriate, as described in Appendix D.
(b) The Administrator shall provide the Company with all information
in the Administrator's possession necessary or appropriate for the Company to
comply with its reporting and disclosure obligations under Subtitle B, Part 1 of
ERISA and the Internal Revenue Code of 1986 (the "Code"), and for the Company to
perform any testing of benefits which may be required under any applicable law.
The Administrator will determine, and the Company will agree to pay, any
additional administrative costs the Administrator may incur by providing this
information to the Company. The Company and the Administrator shall agree in
writing to these costs before they are incurred.
(c) At the Company's request, the Administrator shall provide the
Company with all appropriate information, data, and calculations, including
actuarial determinations, that are used to produce the information set forth in
any report furnished by the Administrator under this Agreement.
<PAGE>
(d) The Administrator shall promptly provide the Company a copy of
any written notice of the filing of a dispute or lawsuit by any Participant with
respect to any benefit under the Plans.
(e) The Administrator shall provide quarterly reports which document
benefits approved under the Plans in a form mutually agreed upon by the Company
and the Administrator. Each quarterly report shall be delivered to the Company
no later than the twenty-fifth day of the month following the end of the
quarter.
(f) The Administrator shall provide annual reports that (1) summarize
the information contained in the quarterly reports under paragraph (e) and (2)
contain other statistical data in the form mutually agreed upon by the Company
and the Administrator. Each annual report shall be delivered to the Company by
the ninetieth day of the following year.
Section 1.7. Audits. During the term of this Agreement and for three
years after the Administrator has completed performance of all obligations
hereunder , the Administrator shall upon reasonable advance notice (1) allow
representatives of the Company to examine all of the Administrator's books and
records that relate to the Plans; (2) allow representatives of the Company to
perform part of the audit of such books and records at the claims processing and
accounting locations of the Administrator; (3) furnish reasonable work space and
assistance for representatives of the Company in their evaluation of claims
processing, accounting practices, and other areas of question; (4) furnish a
reasonable amount of computer time and programming assistance; (5) furnish
copies of a statistically valid random sample of claims for examination; (6)
furnish data concerning claims for benefits under the Plans that are denied; (7)
not impose any internal rules, regulations or procedures not required by law
that will hinder representatives of the Company; (8) generally assist
representatives of the Company in any reasonable manner in their audits; and (9)
allow the Company to audit any and all aspects of the Administrator's
performance of services under this Agreement by reviewing any records and/or
documentation related to such performance. The Company agrees that any such
examination, or part thereof, shall be conducted in a manner reasonably designed
to protect the confidentiality of information relating to any individual.
Section 1.8. Consultation. The Administrator shall cooperate with
the Company in matters relating to Plan design, documentation, and
administrative procedures. Such cooperation shall include the Administrator's
periodic review and comment on
<PAGE>
plan design and operation in light of the purposes of the Plan and changes in
the law or practice relating to the Plans. The Administrator shall, at the
Company's request, provide comments and assistance on the implementation of any
proposed changes to the Plans. The Administrator's assistance shall include
estimating the cost of proposed changes in the Plans.
Section 1.9. Cost Containment and Related Activities. The
Administrator shall seek out and recover for the Plans duplicate improper or
erroneous payments of benefits and develop methods of containing the cost of
providing benefits under the Plans, consistent with the Plan documents.
The Administrator shall undertake the following in addition to such other acts
as the Company may request:
(a) The Administrator shall provide and actively pursue appropriate
case management programs as outlined in the Plans and Appendix B.
(b) The Administrator shall make available to the Company's Benefits
Planning and Administration managers a current list of medical examiners upon
request.
(c) The Administrator shall provide annual reports that summarize the
Administrator's activities in support of its cost containment objectives. Such
reports shall be delivered to the Company not later than the last business day
of February following the calendar year to which such report relates.
(d) The Administrator, at the request of the Company, shall provide
claims information to the Company or its authorized representative as requested
by the Company.
Section 1.10. Acknowledgment as Fiduciary. The Administrator
acknowledges that it is a fiduciary for the purposes specified in Section 1.2
hereof (as defined in clauses (I) and (iii) of Section 3 (21) (A) of ERISA) with
respect to the Plans, and in accordance with the Plan Documents described in
Appendix C hereof, and that it will continue to be a fiduciary for such purposes
as long as the requirements of this Agreement are in effect.
Section 1.11. Compliance with Laws. The Administrator shall comply
with all applicable federal, state, county, and local laws, ordinances,
regulations and codes in its performance hereunder.
<PAGE>
ARTICLE II
COMPENSATION OF ADMINISTRATOR
Section 2.1. Fees. The Company shall pay the Administrator, as
compensation for its services under this Agreement, the fees determined in
accordance with Appendix A.
Section 2.2. Extraordinary Events. (a) If the Company (1) amends
any of the Plans so that the Administrator's cost of discharging its obligations
under this Agreement is materially increased or (2) initiates any corporate
action (including, but not limited to, acquisition or disposition of
subsidiaries or assets, layoffs or voluntary reduction in force plans) that
increases or decreases the number of Participants in the Plan in the aggregate
by more than 10 percent, then the Company shall negotiate with the
Administrator, in the manner specified in Section 2.2(b) below, for any
additional or reduced services, including but not limited to, any corresponding
increase or reduction in fees owed to the Administrator under this Agreement.
(b) Within 60 days of receipt of notice from the Company of the
occurrence of an event specified in Section 2.2(a), the Administrator shall
deliver to the Company the Administrator's determination of the reasonable fee
to which it is entitled under Section 2.2.(a) because of the occurrence of such
event and the performance of additional or reduced services. Within 30 days of
the Company's receipt of the Administrator's determination of such reasonable
fee, the Company shall notify the Administrator if the Company accepts such
determination, in which case such reasonable fee shall be paid by the Company.
In the event the Company disagrees with the reasonableness of the fee determined
by the Administrator it shall promptly advise the Administrator of such
disagreement in writing with reasons therefore. Upon receipt of such notice,
and using their best efforts, the Company and Administrator agree to work
together to determine the reasonable fees for such additional or reduced
services to the satisfaction of both parties.
<PAGE>
ARTICLE III
RESPONSIBILITIES OF COMPANY
Section 3.1. Plan Documents. The Company shall provide to the
Administrator copies of the documents and instruments governing the Plans,
including the Plans, the Summary Plan descriptions, ("SPDs"), communications to
employees regarding these plans, and all amendments to these documents
(collectively the "Plan Documents", Appendix C). In the event of any conflict
among the terms of the Plan Documents, the most recent update of the Plan shall
be controlling. In interpreting the Plans, the Administrator shall also refer
to the most recent restatement of the SPD distributed by the Company, and any
subsequent bulletins or notices distributed to Participants by the Company. The
Administrator shall immediately notify the Company in the event that it
perceives any inconsistency among the Plan Documents delivered by the Company.
Section 3.2. Eligibility of Employees. The Company shall provide to
the Administrator current information on the identity of Participants in the
Plans.
Section 3.3. Reporting and Disclosure. The Company shall be
responsible for complying with all reporting and disclosure requirements of
Title I of ERISA and the Code, including, but not limited to, distributing SPDs
to Participants, summary annual reports, making available to Participants copies
of the documents and instruments governing the Plans, and filing annual reports
with the Internal Revenue Service and Department of Labor.
Section 3.4. Payment of Benefits. The Company shall pay all benefits
that the Administrator determines are payable under the Plans.
Section 3.5. Plan Amendment and Termination. The Company has the
exclusive right and responsibility to amend or terminate any Plan at any time,
for any reason.
<PAGE>
ARTICLE IV
TERM, AMENDMENT AND TERMINATION
Section 4.1. Term. The term of this Agreement shall run from the
Effective Date through July 31, 1999, unless earlier terminated in accordance
with the provisions of this Article IV.
Section 4.2. Amendment. This Agreement may be amended only by a
written instrument executed on behalf of the Company and the Administrator by
their authorized representatives. No employee or agent of the Company or the
Administrator may waive the application of any provision of this Agreement or
the Plans.
Section 4.3. Termination.
a) For Default. Time is of the essence to this Agreement. In the
event the Administrator fails to complete the performance of services
identified hereunder within the time specified or in accordance with agreed upon
schedules, or in the event the Administrator is in breach or default of any
other term, condition or provision of this Agreement and if such breach or
default shall continue for twenty days after the Company notifies the
Administrator in writing thereof, then, in addition to all other rights and
remedies provided hereunder or at law or equity, the Company shall have the
right to terminate this Agreement in whole or in part without any liability to
the Company therefor whatsoever.
b) For Convenience. The Company may for its convenience and without
cause, following the first anniversary of the effective date of this Agreement,
terminate all or part of this Agreement by giving the Administrator 180 days
prior written notice. There shall be no termination by Plan Administrator
during the first twelve months of service under this Agreement without cause.
Section 4.4. Transfer of Records Upon Termination. Upon the
termination of this Agreement the Administrator shall, at the request of the
Company, transfer all of its records and files related to the Plans to the
Company or to another person designated by the Company. The Company shall
reimburse the Administrator for its reasonable costs associated with such
transfer.
Section 4.5. Services After Termination. Following termination of
this Agreement the Administrator shall, if requested by the Company, continue to
administer claims for Plan benefits incurred prior to termination, including
deciding
<PAGE>
appeals of any such denied claims. The rights and obligations of the Company and
the Administrator under this Agreement shall continue to apply with respect to
such services provided by the Administrator following termination.
<PAGE>
ARTICLE V
INDEMNIFICATION AND DISPUTES
Section 5.1. Indemnification. The Administrator shall release,
indemnify and hold harmless the Company, its subsidiaries and their directors,
officers and employees (acting in the course of their employment and not as
claimants under the Plans) from and against any and all liabilities,
obligations, losses, damages, claims, penalties, fines, taxes, judgments,
settlements, costs and expenses (including attorney's fees) arising from or
related to the breach of any of the representations or warranties made by the
Administrator in this Agreement or the performance or nonperformance of any
obligation required to be performed by the Administrator hereunder. The Company
shall have the right to choose any attorney or attorneys to represent it with
respect to any such claims or suits brought against it, and the Company shall
have full discretion to settle or compromise, or refuse to settle or compromise
any such claims or suit.
Section 5.2. Dispute Resolution Provision. Any claim or controversy
between the parties arising out of or relating to this Agreement, or breach of
the Agreement, shall be settled in accordance with the dispute resolution
procedure set forth below:
(a) The disputing party shall give the other party written notice promptly
after such dispute arises. Within twenty days after receipt of said notice,
the receiving party shall submit to the other party a written response. The
notice and response shall include (1) a general statement of each party's
position, and (2) the name and title of the executive who will represent
that party. The executives shall meet at a mutually acceptable time and
place within thirty days of the date of the disputing party's notice and
thereafter as often as they reasonably deem necessary to exchange relevant
information and to attempt to resolve the dispute.
(b) At any time after the receiving party submits its written response, either
party may propose mediation, and if the parties mutually agree to such
mediation the claim or controversy shall be mediated in accordance with the
Center for Public Resources Model Procedure for Mediation of Business
Disputes.
(c) If either party will not participate in mediation or if the matter has not
been resolved pursuant to the aforementioned mediation procedure within
sixty days of the initiation of such procedure, except where such time has
been extended by mutual consent of the parties in writing, and provided that
the parties are no longer engaged in mediation, then the
<PAGE>
controversy shall be settled by arbitration in accordance with the Center
for Public Resources Rules for Non-Administered Arbitration of Business
Disputes, by a sole arbitrator. The arbitrator shall be selected by
agreement of the parties in accordance with Rule 6.4 of such Rules. The
arbitration shall be governed by the United States Arbitration Act, 9 U.S.C.
1-16, and judgment upon the award rendered by the arbitrator may be entered
by any court having jurisdiction thereof. The place of arbitration shall be
Arlington, Virginia.
<PAGE>
ARTICLE VI
COMMUNICATIONS
Section 6.1. Communications. All notices, from the Company to the
Administrator, or vice versa, shall be made in writing (or in another manner
reasonable under the circumstances and promptly confirmed in writing). Until
the Company notifies the Administrator, in writing, of a different address,
communications to the Company shall be mailed or otherwise delivered to both the
following addresses:
Bell Atlantic Network Services, Inc.
1320 North Court House Road
4th Floor
Arlington, Virginia 22201
Attention: Vice President - Purchasing
Bell Atlantic Network Services, Inc.
1310 North Court House Road
9th Floor
Arlington, Virginia 22201
Attention: Assistant Vice President - Compensation and Benefits
Until the Administrator notifies the Company, in writing of a
different address, communications to the Administrator shall be mailed or
otherwise delivered to:
President
CORE INC.
6601 Center Drive West
4th Floor
Los Angeles, CA 90045
<PAGE>
ARTICLE VII
ASSIGNMENTS
Section 7.1. Assignment/Subcontracting. The Administrator may not
assign, delegate or subcontract any of its rights or responsibilities under this
Agreement without the prior written consent of the Company. Any of the Company's
rights under this Agreement may be enforced by any entity in the Bell Atlantic
group of businesses, and any of the Company's responsibilities under this
Agreement may be discharged by any entity in the Bell Atlantic group of
businesses.
Section 7.2. Change in Control of Administrator. The Administrator
shall immediately notify the Company of any material change in the control or
ownership of the Administrator or any material reorganization of the
Administrator.
<PAGE>
ARTICLE VIII
MISCELLANEOUS PROVISIONS
Section 8.1. No Contract of Insurance. Nothing in this Agreement shall
be construed as a contract of insurance. The Administrator shall be under no
obligation to pay from its own funds or insure any benefits properly payable
under the Plans.
Section 8.2. Definitions. Capitalized words and phrases used in
this Agreement shall have the meaning assigned to them under the Plans, unless
the content clearly indicates otherwise, or unless they are specifically defined
in this Agreement.
Section 8.3. Severability. If any provision of this Agreement is or
becomes invalid or unenforceable in whole or in part because the provision is
contrary to law or against public policy or for any other reason, then the
provision shall be enforced to the extent valid and enforceable, and the
validity and enforceability of the remaining provisions of this Agreement shall
be unaffected.
Section 8.4. Governing Law. This Agreement shall be construed and
enforced in accordance with the laws of the Commonwealth of Virginia (without
regard to the legislative or judicial conflicts of laws/rules of any state),
except to the extent superseded or preempted by federal law including, but not
limited to, ERISA.
Section 8.5. Company Information. All claims data and reports,
utilization data and reports and payment data generated by the Administrator
with respect to the Plans, and all specifications, technical information,
confidential business information or data, written, oral or otherwise obtained
by the Administrator hereunder or in contemplation hereof (hereinafter
designated "Information") are and shall remain the property of the Company.
All copies of such Information in written, graphic or other tangible form shall
be returned to the Company upon request. Unless such Information was previously
known to the Administrator free of any obligation to keep it confidential or has
been or is subsequently made public by the Company or a third party, it shall be
kept confidential by the Administrator, shall be used only in the administration
of the Plans, or in performing otherwise hereunder, and may be used for other
purposes only upon such terms as may be agreed upon in writing by the Company.
Section 8.6. Administrator's Information. No specifications, computer
programs, technical information or data, written, oral or otherwise, furnished
by the Administrator to the
<PAGE>
Company hereunder or in contemplation hereof shall be considered by the
Administrator to be confidential or proprietary unless the item or program is
specifically labeled as confidential or proprietary by the Administrator. Any
specification, computer program, technical information or data labeled by the
Administrator as confidential or proprietary are to remain the property of the
Administrator and are not, at any time to be utilized, distributed, copied or
otherwise employed or acquired by the Company, except as expressly authorized in
writing by the Administrator. The Company agrees not to disclose confidential or
proprietary information except to its own employees and agents as necessary to
carry out this Agreement. The Company agrees that its employees and agents will
abide by this Agreement and will act (by instructions, agreement or otherwise)
to satisfy its obligations with respect to confidentiality. Upon termination of
the Agreement, the Company shall return to Administrator all materials labeled
as confidential or proprietary information given to the Company, unless
otherwise agreed in writing.
Section 8.7. Non-Waiver. The Company's failure at anytime to enforce any
of the provisions of this Agreement or any right or remedy available hereunder
or at law or equity, or to exercise any option herein provided will in no way be
construed to be a waiver of such provisions, rights, remedies or options or in
any way to affect the validity of this Agreement. The exercise by the Company
of any rights, remedies or options provided hereunder or at law or equity shall
not preclude or prejudice the exercising thereafter of the same or any other
rights, remedies or options.
Section 8.8. Entire Agreement. This Agreement, including all
Appendices which are incorporated herein by this reference, shall constitute the
entire agreement between the parties. Whenever any Appendix to this Agreement
conflicts with the written body of the Agreement, the written body of the
Agreement shall control.
Section 8.9. Publicity. Except for the purposes of client listing, the
Administrator shall not advertise, market or otherwise disclose to others any
information relating to the making of this Agreement, nor commercially use the
Company's name, without the Company's express written consent.
Section 8.10. Impleader. The Administrator agrees that it will not
implead or bring any action against the Company or its employees (acting in the
course of their employment) based on any claim by any person for personal injury
or death that occurs in the course or scope of employment of such person by the
<PAGE>
Administrator and that arises out of services furnished under this Agreement.
Section 8.11. Infringement. The Administrator shall defend, indemnify
and save the Company harmless, at the Administrator's own expense, against any
action or suit brought for any loss, damage, expense or liability that may
result by reason of any infringement of any patent, trademark, copyright or
trade secret or other proprietary interest based upon the normal use of any
information furnished to the Company hereunder. Should any of the information
furnished to the Company hereunder or the use thereof, become the subject of a
claim of any infringement of a patent, trademark, copyright or trade secret, the
Administrator shall, at its expense, either procure for the Company the right to
continue using the information, replace or modify the same so that it becomes
non-infringing, or refund to the Company the full purchase price of the
infringing information.
Section 8.12. Changes. The Company shall have the right from time to
time by written notice to propose changes in or additions to the services to be
supplied under this Agreement and the Administrator agrees to comply, to the
extent feasible, with such change notices, which shall become a part of the
Agreement. If such changes cause an increase or a decrease in the cost of or
time required for performance, the parties will attempt to agree in writing on
the revised price and delivery schedule before the changes are initiated. If
time does not allow for such negotiation before the changes are initiated, the
Company will direct the Administrator in writing to begin working on the
changes. In the latter case, an equitable adjustment in the price and delivery
schedule shall be made and the Agreement shall be amended accordingly in
writing, provided, however, that any claim by the Administrator for such
adjustment must be made within thirty (30) days of the receipt of such change
notice and be adequately documented by the Administrator. The Administrator may
also propose changes in writing and may carry them out with the written consent
of the Company.
Section 8.13. Delays. The Company shall not be liable to the
Administrator for additional expenses or damages, direct, indirect,
consequential or otherwise, caused by or arising out of delays or the
Administrator's inability to proceed with the services, however caused. This is
subject only to the Company's Agreement to pay the Administrator for its
performance of the services hereunder in accordance with the payment provisions
set forth in Appendix A.
<PAGE>
Section 8.14. Insurance. All persons furnished by the Administrator,
including subcontractors, shall be considered solely the Administrator's
employees or agents; and the Administrator shall be responsible for compliance
with all laws, rules, and regulations involving, but not limited to, employment
of labor, hours of labor, working conditions, payment of wages and payment of
taxes, such as unemployment, social security and other payroll taxes, including
applicable contributions from such persons when required by law.
The Administrator shall maintain, during the term hereof, all insurance and/or
bonds required by law, including but not limited to:
(1) Worker's Compensation insurance as required by the State(s) in which
the service is to be performed.
(2) Employer's Liability insurance with limits of not less than $500,000
per occurrence.
(3) Comprehensive or Commercial General Liability Insurance, on an
occurrence basis, including but not limited to (premises-operations,
broad form property damage, contractual liability, independent
contractors, personal injury) with limits of at least $500,000
combined single limit for each occurrence.
(4) Professional Liability, Errors and Omissions, with limits of not less
than $10,000,000 per occurrence.
(5) Excess Liability, in the Umbrella Form and on an occurrence basis,
with limits of at least $1,000,000 combined single limit for each
occurrence.
(6) Crime and Fidelity Coverage on an occurrence basis, with limits of at
least $1,000,000 per occurrence.
The Administrator agrees that the Administrator, Administrator's insurer(s) and
anyone claiming by, through, under or on behalf of the Administrator shall have
no claim, right of action or right of subrogation against the Company or the
Company's customers based on any loss or liability insurable under the foregoing
insurance.
The Administrator shall be prepared, prior to the start of work, to furnish
certificates or adequate proof of the foregoing insurance.
<PAGE>
The Administrator shall also require its subcontractors, if any, to maintain
similar insurance and to agree to furnish the Company, if requested,
certificates of adequate proof of such insurance. Certificates furnished by
Administrator or its subcontractors shall contain a clause stating that "the
Company is to be notified in writing at least thirty (30) days prior to
cancellation of, or any material change in, the Policy."
Section 8.15. Rights Of Entry. If the Administrator or its
subcontractors, agents or employees are required to enter the Company premises
in connection with activities related to this Agreement, their rights of entry
shall be subject to applicable governmental security laws and the Company's
security standards and procedures.
Section 8.16. Government Requirements. Appendix F, "GOVERNMENT
REQUIREMENTS", shall form a part of this Agreement and any amendment hereto.
The term "Seller" therein refers to the Administrator.
Section 8.l7. Survival. All obligations hereunder on the Administrator's
part incurred prior to the termination or expiration of this Agreement shall
survive such termination, or expiration.
Section 8.18. Quality Commitment. Quality is a process of assuring
conformance to each and every term, condition and specification of this
Agreement. The Administrator agrees that its commitment to Quality and the
processes it has in place support the fulfillment of this commitment with
respect to each service and material requirement of this Agreement. In addition
to any other right or remedy available to the Company under this Agreement, the
Company reserves the right to assure, throughout the term of this Agreement, the
Administrator's continued commitment to Quality and the Administrator agrees to
take appropriate steps, as noted by the Company, to improve the Administrator's
commitment to Quality.
The Administrator will demonstrate commitment to a Quality Improvement Process
by providing:
1. A published statement of its quality policy signed by an officer of
the company;
2. An established means of measuring the reporting customer satisfaction;
3. A quality training and awareness program;
<PAGE>
4. A continuous Quality Improvement Process;
5. An established means of monitoring conformance to requirements for
services.
IN WITNESS WHEREOF, the Company and the Administrator have executed this
Agreement.
BELL ATLANTIC
NETWORK SERVICES INC. CORE INC.
- -------------------------------- ---------------------------------
Signature Signature
- -------------------------------- ---------------------------------
W. J. Doherty Jr. Craig Horton
Vice President - Purchasing President
- -------------------------------- ---------------------------------
Date Date
<PAGE>
Exhibit 11
CORE, INC.
COMPUTATION OF INCOME PER COMMON SHARE
<TABLE>
<CAPTION>
FOR THREE MONTHS ENDED JUNE 30, FOR THE SIX MONTHS ENDED JUNE 30,
1996 1997 1996 1997
------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PRIMARY:
Average shares outstanding 4,840,000 7,231,000 4,840,000 7,214,000
Shares issuable on assumed
exercise of dilutive
options and warrants -
based on treasury stock
method using average
market price 901,000 550,000 901,000 583,000
------------------------------------------------------------------------
Totals 5,741,000 7,781,000 5,741,000 7,797,000
========================================================================
Net income $ 499,082 $ 683,330 $1,036,766 $ 823,401
========================================================================
Net income per common share $ 0.09 $ 0.09 $ 0.18 $ 0.11
========================================================================
<CAPTION>
FOR THREE MONTHS ENDED JUNE 30, FOR THE SIX MONTHS ENDED JUNE 30,
1996 1997 1996 1997
------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FULLY DILUTED:
Average shares outstanding 4,840,000 7,231,000 4,840,000 7,214,000
Shares issuable on assumed
exercise of dilutive
options and warrants -
based on the treasury
stock method using the
ending market price 901,000 656,000 901,000 636,000
------------------------------------------------------------------------
Totals 5,741,000 7,887,000 5,741,000 7,850,000
========================================================================
Net income $ 499,082 $ 683,330 $1,036,766 $ 823,401
========================================================================
Net income per common share $ 0.09 $ 0.09 $ 0.18 $ 0.10
========================================================================
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1997
<PERIOD-START> APR-01-1997 JAN-01-1997
<PERIOD-END> JUN-30-1997 JUN-30-1997
<CASH> 0 3,353,844
<SECURITIES> 0 4,289,193
<RECEIVABLES> 0 5,212,294
<ALLOWANCES> 0 (166,656)
<INVENTORY> 0 0
<CURRENT-ASSETS> 0 13,555,414
<PP&E> 0 12,200,883
<DEPRECIATION> 0 (5,508,859)
<TOTAL-ASSETS> 0 30,013,180
<CURRENT-LIABILITIES> 0 3,877,423
<BONDS> 0 0
0 0
0 0
<COMMON> 0 725,008
<OTHER-SE> 0 24,822,629
<TOTAL-LIABILITY-AND-EQUITY> 0 30,013,180
<SALES> 0 0
<TOTAL-REVENUES> 8,971,573 17,098,622
<CGS> 0 0
<TOTAL-COSTS> 5,447,286 10,690,909
<OTHER-EXPENSES> 2,967,920 5,883,207
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 6,615 12,123
<INCOME-PRETAX> 714,330 854,401
<INCOME-TAX> 31,000 31,000
<INCOME-CONTINUING> 683,330 823,401
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 683,330 823,401
<EPS-PRIMARY> 0.09 0.11
<EPS-DILUTED> 0.09 0.10
</TABLE>
