Registration Statement for Securities Offered Pursuant to a Transaction — Form S-3
Filing Table of Contents
Document/Exhibit Description Pages Size
1: S-3 Registration Statement for Securities Offered 25 108K
Pursuant to a Transaction
2: EX-4 Instrument Defining the Rights of Security Holders 13 52K
3: EX-5 Opinion re: Legality 2 9K
4: EX-10 Material Contract 37 156K
5: EX-23 Consent of Experts or Counsel 1 5K
S-3 — Registration Statement for Securities Offered Pursuant to a Transaction
Document Table of Contents
As filed with the Securities and Exchange Commission on October 29, 2001
Registration No. 333-________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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Form S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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HealthExtras, Inc.
(Exact name of registrant as specified in its charter)
DELAWARE 8999 52-2181356
(State or Other Juris- (Primary Standard Industrial (I.R.S. Employer
diction of Incorporation Classification Identification
or Organization) Code Number) Number)
2273 RESEARCH BOULEVARD
ROCKVILLE, MARYLAND 20850
(301) 548-2900
(Address, including Zip Code, and Telephone Number,
including Area Code, of Registrant's Principle Executive Offices)
--------------------------------
David T. Blair with a copies to:
Chief Executive Officer Douglas P. Faucette, Esq.
HealthExtras, Inc. Thomas J. Haggerty, Esq.
2273 Research Boulevard, Second Floor Muldoon Murphy & Faucette LLP
Rockville, Maryland 20850 5101 Wisconsin Avenue, N.W.
(301) 548-2900 Washington, D.C. 20016
(202) 362-0840
(Name, Address, including Zip Code,
and Telephone Number, including
Area Code, of Agent for Service)
--------------------------------
Approximate date of commencement of proposed sale to
the public: From Time To Time After The
Effective Date Of This Registration Statement.
--------------------------------
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box.[X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ] _________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registrations statement number of the earlier effective registration statement
for the same offering. [ ] ___________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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Calculation of Registration Fee
[Enlarge/Download Table]
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Proposed Maximum Proposed Maximum Amount of
Title of Each Class of Securities Amount To Be Offering Price Aggregate Offering Registration
To Be Registered Registered(1) Per Unit(2) Price (2) Fee
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Common Stock, par value $.01 3,866,598 $6.65 $25,712,877 $6,429
per share, previously issued or
issuable upon the exercise of
warrants(3)
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(1) This registration statement also covers an indeterminate number of shares that may be issued in connection with an
adjustment in the amount of shares to be issued upon exercise of the warrants as a result of any stock split, stock
dividend or similar transaction, as provided by rule 416 under the Securities Act.
(2) Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(c) under the Securities Act,
on the basis of the average of the high and low prices for shares of common stock as reported on the Nasdaq National
Market on October 24, 2001.
(3) To be offered by selling stockholders.
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The registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the registrant
shall file a further amendment that specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, as amended, or until the Registration Statement
shall become effective on such date as the Securities and Exchange Commission,
acting pursuant to said Section 8(a), may determine.
SUBJECT TO COMPLETION, DATED OCTOBER 29, 2001.
PRELIMINARY PROSPECTUS
HEALTHEXTRAS, INC.
3,866,598 SHARES
COMMON STOCK
This prospectus relates to 3,866,598 shares of our common stock,
including 845,816 shares issuable upon the exercise of outstanding warrants. The
shares may be sold from time to time by the selling stockholders identified in
this prospectus over the Nasdaq Stock Market or any other market or trading
facility on which the shares may be traded or in private transactions, at fixed
or negotiated prices.
We will not receive any of the proceeds from the sale of these shares,
although we have paid the expenses of preparing this prospectus and the related
registration statement. We will receive proceeds from the issuance of shares of
common stock upon the exercise for cash of the warrants.
Our common stock is quoted on the Nasdaq National Market under the
symbol "HLEX." On October 24, 2001, the last reported sale price for the common
stock on the Nasdaq was $6.90 per share.
Investing in the common stock involves a high degree of risk. You
should carefully read the "Risk Factors" section of this prospectus beginning on
page 1 of this prospectus.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities or determined whether
this prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
The date of this prospectus is October __, 2001
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED.
THE SELLING STOCKHOLDERS MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION
STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS
PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN
OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT
PERMITTED.
TABLE OF CONTENTS
RISK FACTORS..................................................................1
HEALTHEXTRAS, INC.............................................................8
FORWARD LOOKING STATEMENTS....................................................9
USE OF PROCEEDS...............................................................9
SELLING STOCKHOLDERS..........................................................9
PLAN OF DISTRIBUTION.........................................................11
LEGAL MATTERS................................................................12
EXPERTS......................................................................12
WHERE YOU CAN FIND MORE INFORMATION..........................................12
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE............................12
RISK FACTORS
YOU SHOULD CONSIDER CAREFULLY THE FOLLOWING RISK FACTORS AND ALL OTHER
INFORMATION CONTAINED IN THIS PROSPECTUS BEFORE PURCHASING OUR COMMON STOCK.
INVESTING IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. ANY OF THE
FOLLOWING RISKS COULD MATERIALLY HARM OUR BUSINESS, OPERATING RESULTS AND
FINANCIAL CONDITION AND COULD RESULT IN A COMPLETE LOSS OF YOUR INVESTMENT.
ADDITIONAL RISKS AND UNCERTAINTIES THAT ARE NOT YET IDENTIFIED OR THAT WE
CURRENTLY THINK ARE IMMATERIAL MAY ALSO HARM OUR BUSINESS, OPERATING RESULTS AND
FINANCIAL CONDITION IN THE FUTURE.
RISKS RELATED TO OUR BUSINESS
BECAUSE WE HAVE A LIMITED OPERATING HISTORY, OUR BUSINESS PROSPECTS ARE SUBJECT
TO A GREAT DEAL OF UNCERTAINTY
Our limited history of operating our business means that our business
prospects are subject to a great deal of uncertainty and risk.
WE HAVE NOT BEEN PROFITABLE AND MAY NOT BECOME PROFITABLE IN THE FUTURE
We have incurred operating losses since our inception. Even if we
achieve profitability, we may not be able to maintain profitability in the
future. In addition, as our business model evolves, we expect to introduce a
number of new products and services that may or may not be profitable for us.
OUR FUTURE PROFITABILITY IS DEPENDENT, TO A SIGNIFICANT EXTENT, UPON INCREASED
CONSUMER DEMAND FOR ADDITIONAL PRODUCTS, WHICH WE ARE IN THE PROCESS OF
DEVELOPING OR MAY DEVELOP IN THE FUTURE
Most of our revenue currently is derived from sales of our membership
programs, most of which include disability benefits, and sales of our pharmacy
benefit programs. We believe our future profitability is dependent upon
achieving substantial increases in sales of our existing programs and additional
products and services. If we do not diversify our product sales, we may never
achieve or sustain profitability.
ECONOMIC UNCERTAINTY AND INCREASING CREDIT CARD DELINQUENCIES MAY NEGATIVELY
IMPACT OUR GROWTH AND PROSPECTS FOR PROFITABILITY
We receive the vast majority of payments for membership programs
through credit card billing. Several of the largest credit card issuers have
recently disclosed significant increases in delinquencies and charge offs in
their credit card receivables. To the extent that purchasers of our membership
programs experience problems paying their credit card bills and become
delinquent in their payments, we would likely experience billing failures and
higher rates of post program sale terminations. In addition, our ability to
project future collections would be adversely affected.
IF WE LOSE ONE OR MORE OF OUR MARKETING RELATIONSHIPS, OUR ACCESS TO POTENTIAL
CUSTOMERS WOULD DECLINE AND SALES AND REVENUES WOULD SUFFER
A significant majority of our membership program sales is attributable
to two marketing partner relationships. If we lose, or achieve less favorable
future results with, one or more of these marketing partners, our access to
potential customers would decline and sales and revenue would suffer. It is
unlikely that we could replace either of these partners on a basis which would
substitute for the growth and profitability expected from them.
OUR MEMBERSHIP GROWTH IS INCREASINGLY DEPENDENT ON TELEMARKETING
A significant percentage of our membership growth has been attributable
to telemarketing sales. These sales involve a much higher percentage of monthly
rather than annual payments than was our previous experience. The combination of
these factors is likely to result in higher cancellation rates and reduced
enrollment persistency.
1
WE FACE SIGNIFICANT COMPETITION
Our membership programs include various insurance benefits and,
therefore, may be considered to be in competition with similar insurance type
benefits provided by many large insurance companies. Competition in the offering
of these types of insurance benefits is intense.
In addition, the pharmacy benefit management industry is relatively
consolidated and dominated by large companies with significant resources. Many
of the large pharmacy benefit management companies are owned by large companies,
including pharmaceutical manufacturers, which can provide them with significant
purchasing power and other advantages, which we do not have. Competitors in this
industry include other pharmacy benefit management companies, drug retailers,
physician practice management companies, and insurance companies/health
maintenance organizations. We may also experience competition from other sources
in the future. Pharmacy benefit management companies compete primarily on the
basis of price, service, reporting capabilities and clinical services.
OUR PHARMACY BENEFIT MANAGEMENT BUSINESS RELIES ON REAL-TIME MANAGEMENT
INFORMATION SYSTEMS
Our subsidiary, HealthExtrasRx (International Pharmacy Management,
Inc.) operates an electronic network connecting approximately 50,000 retail
pharmacies to process third-party claims. HealthExtrasRx depends on third-party
proprietary software to perform all of its automated transaction processing.
Because claims are adjudicated in real time, systems availability and
reliability are key to meeting HealthExtrasRx customers' service expectations.
Any interruption in real time service, either through systems availability or
telecommunications disruptions can significantly damage the quality of service
we provide. While HealthExtrasRx has not experienced significant or detrimental
service interruptions, and has significant back-up database capability, there
can be no assurance that the business will not be harmed by these service
interruptions.
IF WE ARE NOT ABLE TO ACHIEVE A HIGH LEVEL OF BRAND RECOGNITION AND CONSUMER
DEMAND FOR OUR PROGRAMS, WE WILL NOT ACHIEVE THE LEVEL OF REVENUES WE NEED TO BE
PROFITABLE
There are a growing number of resources that offer consumers access to
information regarding insurance coverage alternatives and product pricing. Our
programs may be considered to compete with these and other distribution channels
for insurance products. We believe that broader recognition of the HealthExtras
brand and increased consumer demand for our programs are essential to our future
success. To attempt to achieve that recognition and demand, we intend to
continue to expend resources on our brand-enhancement strategy. If these
expenditures do not result in a sufficient increase in revenues, we may not
achieve profitability.
THE LOSS OF OUR RELATIONSHIP WITH CHRISTOPHER REEVE TO PROMOTE OUR PROGRAMS
COULD SIGNIFICANTLY IMPAIR OUR BRAND RECOGNITION AND, THUS, OUR ABILITY TO SELL
OUR PROGRAMS
Our agreement for Christopher Reeve to promote our membership programs
has been extended through June of 2005 with renewal provisions through 2010. The
loss of the Christopher Reeve identification with our programs, upon termination
of our contract or otherwise, could significantly reduce our ability to sell our
programs.
IF WE LOSE OUR RELATIONSHIPS WITH OUR BENEFIT PROVIDERS, WE COULD HAVE
DIFFICULTY MEETING DEMAND FOR THE PRODUCTS AND SERVICES INCLUDED IN THE PROGRAMS
WE SELL
We are dependent on the providers of benefits included in our programs.
These include benefits provided pursuant to arrangements with Unum Life
Insurance Company of America, The Chubb Group of Insurance Companies, Zurich
American Insurance Company and others that may be terminated on relatively short
notice. If we lose these relationships and are unable to replace them quickly
and cost effectively, we would not be able to satisfy consumer demand for our
programs.
RECENT TERRORIST ACTIVITIES AND RESULTING MILITARY AND OTHER ACTIONS COULD
ADVERSELY AFFECT OUR BUSINESS
Terrorist attacks in New York and Washington, D.C. in September of 2001
disrupted commerce throughout the United States. The continued threat of
terrorism within the United States and the military action and heightened
security measures in response to this threat may cause a significant disruption
to commerce throughout the world.
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We are unable to predict whether the business disruption, its continued
consequences, threats of terrorism or the responses thereto will have a
long-term adverse effect on us.
WE COULD BE INDIRECTLY EXPOSED TO ADVERSE CHANGES IN REINSURANCE CONTRACTS
The recent terrorist activities may result in significant increases in
premiums charged for a range of insurance products. In addition, certain
insurance carriers may exit lines of business or curtail benefit levels in
response to these circumstances. Consequently, it is possible that reinsurance
agreements, which have been an integral part of the pricing of our membership
programs, may become more expensive or may be cancelled. Any combination of
price increases, benefit limitations or cancellations with respect to our
products would narrow our margins and/or curtail revenue streams.
WE MAY EXPERIENCE SIGNIFICANT FLUCTUATIONS IN OUR QUARTERLY RESULTS OF
OPERATIONS, WHICH WILL MAKE IT DIFFICULT FOR INVESTORS TO MAKE RELIABLE
PERIOD-TO-PERIOD COMPARISONS AND MAY CONTRIBUTE TO VOLATILITY IN OUR STOCK PRICE
Our quarterly expenses have fluctuated significantly in the past, and
we expect our quarterly revenues and expenses to continue to fluctuate
significantly in the future. The causes for fluctuations could include, among
other factors:
o changes in acceptance levels for our benefit program by
consumers;
o our levels of marketing expenditures;
o renewal rate experience for our benefit programs;
o the initiation of new or increased distribution methods,
services and products by our competitors;
o price competition by insurance companies in their sale of
insurance products;
o the level of Internet use to purchase insurance or similar
type products; and
o charges for our obligations under our marketing contracts,
which can fluctuate significantly depending upon changing
assumptions used in our pricing models.
We believe that quarter-to-quarter comparisons of our operating results
are not necessarily meaningful and not good indicators of our future
performance. Due to the above-mentioned and other factors, it is possible that
in one or more future quarters our operating results will fall below the
expectations of securities analysts and investors. If this happens, the trading
price of our common stock would likely decrease.
IF WE DO NOT MANAGE OUR GROWTH EFFECTIVELY, WE WILL NOT BE ABLE TO OPERATE
PROFITABLY
We only began offering our programs in 1999, and we have been expanding
our operations rapidly. Our growth strategy, if successful, will result in
further expansion. We can achieve profitable operation, however, only if we are
able to manage our growth effectively. Our growth in operations has placed
significant demands on our management and other resources, which is likely to
continue. Under these conditions, it is important for us to retain our existing
management and to attract, hire and retain additional highly skilled and
motivated officers, managers and employees and improve existing systems and/or
implement new systems.
We may not be successful in managing or expanding our operations or
maintaining adequate management, financial and operating systems and controls.
IF THE PROVIDERS OF THE BENEFITS INCLUDED IN OUR PROGRAMS FAIL TO PROVIDE THOSE
BENEFITS, WE COULD BECOME SUBJECT TO LIABILITY CLAIMS BY OUR PROGRAM MEMBERS
We arrange for the provision by others of the benefits included in our
member programs. If the firms with which we have contracted to provide those
benefits fail to provide them as required, or are negligent or otherwise
culpable in providing them, we could become involved in any resulting claim or
litigation.
3
RISKS RELATED TO REGULATION
IF WE FAIL TO COMPLY WITH ALL OF THE VARIOUS AND COMPLEX LAWS AND REGULATIONS
GOVERNING OUR PRODUCTS AND MARKETING TECHNIQUES, WE COULD BE SUBJECT TO FINES,
ADDITIONAL LICENSING REQUIREMENTS OR THE INABILITY TO MARKET IN PARTICULAR
JURISDICTIONS
Complex laws, rules and regulations of each of the 50 states and the
District of Columbia pertaining to insurance impose strict and substantial
requirements on insurance coverage sold to consumers and businesses. Compliance
with these laws, rules and regulations can be arduous and imposes significant
costs. The underwriters of the insurance benefits included in HealthExtras
programs are responsible for obtaining and maintaining regulatory approvals for
those benefits. If the appropriate regulatory approvals for the insurance
benefits included in our programs are not maintained, we would have to stop
including those benefits. In general, the solicitation of insurance benefits
must be made by an independent licensed insurance agency. Each jurisdiction's
insurance regulator typically has the power, among other things, to:
o administer and enforce the laws and promulgate rules and
regulations applicable to insurance, including the quotation
of insurance premiums;
o approve policy forms and regulate premium rates;
o regulate how, by which personnel and under what circumstances,
an insurance premium can be quoted and published; and
o regulate the solicitation of insurance and license insurance
companies, agents and brokers who solicit insurance.
State insurance laws and regulations are complex and broad in scope and
are subject to periodic modification as well as differing interpretations. There
can be no assurance that insurance regulatory authorities in one or more states
will not determine that the nature of our business requires us to be licensed
under applicable insurance laws. A determination to that effect or that we or
our business partners are not in compliance with applicable regulations could
result in fines, additional licensing requirements or inability to market our
programs in particular jurisdictions. Such penalties could significantly
increase our general operating expenses and harm our business. In addition, even
if the allegations in any regulatory or legal action against us turn out to be
false, negative publicity relating to any such allegation could result in a loss
of consumer confidence and significant damage to our brand. We believe that
because many consumers and insurance companies are not yet comfortable with the
concept of purchasing insurance online, the publicity relating to any such
regulatory or legal issues could significantly reduce sales of our programs.
One of the means by which we market our programs is telemarketing,
which is generally outsourced to third parties. Telemarketing has become subject
to an increasing amount of federal and state regulation as well as general
public scrutiny in the past several years. For example such regulation limits
the hours during which telemarketers may call consumers and prohibits the use of
automated telephone dialing equipment to call certain telephone numbers. The
Federal Telemarketing and Consumer Fraud and Abuse Prevention Act of 1994 and
Federal Trade Commission regulations prohibit deceptive, unfair or abusive
practices in telemarketing sales. Both the FTC and state attorneys general have
authority to prevent certain telemarketing activities deemed by them to violate
protection. Some states have enacted laws and others are considering enacting
laws targeted directly at regulating telemarketing practices, and there can be
no assurance that any such laws, if enacted, will not adversely affect or limit
our current or future operations. Compliance with these regulations is generally
the shared responsibility of HealthExtras, our sub-contractors and our marketing
partners. We maintain operational controls to ensure that our marketing
practices conform with applicable state and federal regulations.
OUR PHARMACY BENEFIT MANAGEMENT BUSINESS MUST COMPLY WITH A RANGE OF STATE AND
FEDERAL REGULATORY REQUIREMENTS
Various forms of legislation and government regulations affect or could
affect providers of pharmacy benefit management services. Among the most
prominent forms of such regulation are the following:
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o Open Network Legislation. Numerous states have adopted "any
willing provider" legislation, which requires pharmacy network
sponsors to admit for network participation any retail
pharmacy willing to meet a healthcare plan's price and other
terms.
o Anti-Remuneration Legislation. "Anti-kickback" statutes at
the federal and state level prohibit an entity from paying or
receiving any compensation to induce the referral of health-
care plan beneficiaries or the purchase of items or services
for which payment may be made under such healthcare plans.
Additionally, state and federal regulations have been the
basis for investigations and multi-state settlements relating
to financial incentives provided by pharmaceutical
manufacturers to retail pharmacies in connection with
pharmaceutical switching programs. To our knowledge, these
laws have not been applied to prohibit pharmacy benefit
management companies from receiving amounts from
pharmaceutical manufacturers in connection with pharmaceutical
purchasing and formulary management programs, to prohibit
therapeutic substitution programs conducted by independent
pharmacy benefit management companies, or to prohibit
contractual relationships such a we have regarding these types
of programs.
o Patient Choice. Some states have enacted legislation that
prohibits the plan sponsor from implementing certain
restrictive design features, and many states have introduced
legislation to regulate various aspects of managed care plans,
including provisions relating to the pharmacy benefit.
Legislation has been introduced in some states to prohibit or
restrict therapeutic substitution, or to require coverage of
all FDA approved drugs. Other states mandate coverage of
certain benefits or conditions. Such legislation does not
generally apply to us, but it may apply to certain of our
customers, such as HMOs and health insurers. If such
legislation were to become widespread and broad in scope, it
could have the effect of limiting the economic benefits
achievable through pharmacy benefit management and
consequently make our services less attractive.
o Consumer Protection Legislation. Most states have consumer
protection laws that have been the basis for investigations
and multi-state settlements relating to financial incentives
provided by drug manufacturers to retail pharmacies in
connection with drug switching programs. We believe that our
contractual relationships with drug manufacturers and retail
pharmacies do not include the features that were viewed by
adversely by enforcement authorities. However, no assurance
can be given that we will not be subject to scrutiny or
challenge under one or more of these laws.
o Licensure. Many states have licensure or registration laws
governing certain types of ancillary healthcare organizations,
including preferred provider organizations, third party
administrators and utilization review organizations. These
laws differ significantly from state to state, and the
application of such laws to the activities of pharmacy benefit
managers is often unclear. We have registered under such laws
in those states in which we have concluded such registration
is required.
o Confidential Information. Most of our activities involve the
receipt or use by us of confidential, medical information
concerning individual members, including the transfer of the
confidential information to the member's health benefit plan.
In addition, we use aggregated population data for research
and analysis purposes. Legislation has been proposed at the
federal level and in several states to restrict the use and
disclosure of confidential medical information. The enactment
of such legislation could require significant changes to a our
business operations.
o Other Regulation. Many of the states into which we deliver
pharmaceuticals have laws and regulations that require
out-of-state mail service pharmacies to register with the
board of pharmacy or similar regulatory body in the state.
These states generally permit the mail service pharmacy to
follow the laws of the state within which the mail service
pharmacy is located. We have registered in every state in
which, to our knowledge, such registration is required. Other
statutes and regulations impact our mail service operations.
Federal statutes and regulations govern the labeling,
packaging, transportation, delivery, advertising and
adulteration of prescription drugs and the dispensing of
controlled substances.
5
REGULATION OF THE SALE OF INSURANCE OVER THE INTERNET AND OF ELECTRONIC COMMERCE
GENERALLY IS UNSETTLED, AND FUTURE LAWS, REGULATIONS AND INTERPRETATIONS COULD
HINDER OUR ABILITY TO OFFER PROGRAMS OVER THE INTERNET
The distribution of our programs including an insurance component over
the Internet subjects us to additional risk as most insurance laws and
regulations have not been modified to clarify or amend their application to
Internet transactions. Currently, many state insurance regulators and
legislators are exploring the need for specific regulation of insurance sales
over the Internet. Such regulation could dampen the growth of the Internet as a
means of providing insurance services. Moreover, the application of laws
governing general commerce on the Internet remains largely unsettled, even in
areas where there has been some legislative action. It may take years to
determine whether and how existing laws such as those governing insurance,
intellectual property, privacy and taxation apply to the Internet. In addition,
the growth and development of the market for electronic commerce may prompt
calls for more stringent consumer protection laws and regulations that may
impose additional burdens on companies conducting business over the Internet.
Any new laws or regulations or new interpretations of existing laws or
regulations relating to the Internet could hinder our ability to offer programs
over the Internet.
WE COULD BE SUBJECT TO LEGAL LIABILITY BASED UPON THE INFORMATION ON OUR WEBSITE
Our members may rely upon the information published on our website
regarding insurance coverage, exclusions, limitations and ratings, and the other
benefits included in our programs. To the extent that the information we provide
is not accurate, we could be liable for damages. These types of claims could be
time-consuming and expensive to defend, divert management's attention, and could
cause consumers to lose confidence in our service. As a result, these types of
claims, whether or not successful, could harm our business.
RISKS RELATED TO THE INTERNET AND ELECTRONIC COMMERCE
IF WE EXPERIENCE FAILURES OF, OR CAPACITY CONSTRAINTS IN, OUR SYSTEMS OR THE
SYSTEMS OF THIRD PARTIES ON WHICH WE RELY, SALES OF OUR PROGRAMS LIKELY WOULD BE
REDUCED AND OUR REPUTATION COULD BE DAMAGED
We use both internally developed and third party systems to operate the
Internet aspects of our business. If the number of users of our service
increases substantially, we will need to significantly expand and upgrade our
technology, transaction processing systems and network infrastructure. We do not
know whether we will be able to accurately project the rate or timing of any
increases, or expand and upgrade our systems and infrastructure to accommodate
any increases in a timely manner. Our ability to facilitate transactions
successfully and provide high quality customer service also depends on the
efficient and uninterrupted operation of our computer and communications
hardware systems. Our service has experienced periodic system interruptions, and
it is likely that these interruptions will continue to occur from time to time.
Additionally, our systems and operations are vulnerable to damage or
interruption from human error, natural disasters, power loss, telecommunication
failures, break-ins, sabotage, computer viruses, acts of vandalism and similar
events. We may not carry sufficient business interruption insurance to
compensate for losses that could occur. Any system failure that causes an
interruption in service or decreases the responsiveness of our service would
impair our revenue-generating capabilities, and could damage our reputation and
our brand name.
IF WE ARE UNABLE TO SAFEGUARD THE SECURITY AND PRIVACY OF OUR PROGRAM MEMBERS'
INFORMATION, OUR REPUTATION WOULD BE DAMAGED AND WE COULD BE SUBJECT TO
LITIGATION AND LIABILITY
A significant barrier to electronic commerce and online communications
has been the need for secure transmission of confidential information over the
Internet. Our ability to secure the transmission of confidential information
over the Internet is essential in maintaining consumer confidence in our
service. In addition, because we handle confidential and sensitive information
about our program members, any security breaches would damage our reputation and
could expose us to litigation and liability. We cannot guarantee that our
systems will prevent security breaches.
6
RISKS RELATED TO THE OWNERSHIP OF OUR COMMON STOCK
OUR STOCK PRICE HAS BEEN AND MAY CONTINUE TO BE VOLATILE
The market price of our common stock has been highly volatile and could
continue to be subject to wide fluctuations. Recently, the stock market has
experienced significant price and volume fluctuations, and the market prices of
securities of Internet-related companies in particular have been highly
volatile. Market fluctuations, as well as general political and economic
conditions, such as a recession or interest rate or currency rate fluctuations,
could adversely affect the market price of our common stock. In addition, the
market prices for stocks of Internet-related companies have been known to reach
levels that bear no relationship to the operating performance of such companies.
Such market prices generally are not sustainable and are subject to wide
variations.
In the past, securities class action litigation has often been brought
against a company following periods of volatility in the market price of their
securities. We may in the future be the target of similar litigation. Securities
litigation could result in substantial costs, divert management's attention and
resources, and harm our financial condition and results of operations.
WE HAVE OUTSTANDING OPTIONS AND WARRANTS TO PURCHASE SHARES OF OUR STOCK, WHICH
IF EXERCISED, MAY DILUTE YOUR PERCENTAGE OWNERSHIP IN US OR CAUSE OUR STOCK
PRICE TO DROP
As of October 24, 2001, we have a total of 5,797,316 shares of common
stock reserved for issuance upon the exercise of outstanding stock options and
warrants. In addition, we have reserved 3,200,000 shares of common stock for
issuance upon the exercise of warrants which a marketing partner has the right
to receive upon satisfaction of contracted performance requirements. If the
shares underlying the exercisable options and warrants were exercised and sold
in the public market, the value of your current holdings in us may decline as a
result of dilution to your percentage ownership in us or as a result of a
reduction in the per share value of our stock resulting from the increase in the
number of our shares available on the market, if such availability were to
exceed the demand for our stock.
TWO OF OUR STOCKHOLDERS BENEFICIALLY OWN A MAJORITY OF OUR OUTSTANDING STOCK AND
MAY BE CONSIDERED TO CONTROL US; THEIR INTERESTS MAY NOT BE THE SAME AS THAT OF
OUR PUBLIC STOCKHOLDERS
Principal Mutual Holding Company and Thomas L. Blair control, in the
aggregate, approximately 51% of our outstanding common stock. As a result, if
these stockholders act together, they will be able to take any of the following
actions without the approval of our public stockholders:
o elect our directors;
o amend certain provisions of our certificate of incorporation;
o approve a merger, sale of assets or other major corporate
transaction;
o defeat any takeover attempt, even if it would be beneficial to
our public stockholders; and
o otherwise control the outcome of all matters submitted for a
stockholder vote.
This control could discourage others from initiating a merger, takeover
or another change of control transaction that could be beneficial to our public
stockholders. As a result, the market price of our common stock could be harmed.
In addition, Principal Mutual controls a large insurance company. Our
business operations could conflict or compete with the business operations of
Principal Mutual and its affiliates. Thus, Principal Mutual could have an
incentive to act contrary to the best interests of our stockholders.
OUR CHARTER DOCUMENTS AND DELAWARE LAW CONTAIN PROVISIONS THAT MAY DISCOURAGE
TAKEOVER ATTEMPTS WHICH COULD PRECLUDE OUR STOCKHOLDERS FROM RECEIVING A CHANGE
OF CONTROL PREMIUM
7
Our certificate of incorporation, bylaws and Delaware law contain
anti-takeover provisions that could have the effect of delaying or preventing
changes in control that a stockholder may consider favorable. The provisions in
our charter documents include the following:
o a classified board of directors with staggered three-year
terms;
o the ability of our board of directors to issue shares of
preferred stock and to determine the price and other terms,
including preferences and voting rights, of those shares
without stockholder approval; and
o advance notice procedures for nominating candidates to our
board of directors.
The foregoing could have the effect of delaying, deferring or
preventing a change in control, discourage bids for our common stock at a
premium over the market price, or harm the market price of, and the voting and
other rights of the holders of, our common stock. We also are subject to certain
Delaware laws that could have similar effects. One of these laws prohibits us
from engaging in a business combination with any significant stockholder for a
period of three years from the date the person became a significant stockholder
unless certain conditions are met.
HEALTHEXTRAS, INC.
HealthExtras, Inc. is a leading provider of health and disability
membership programs, that utilizes a variety of direct marketing channels to
offer individuals, small businesses and employer groups customizable and
affordable health and disability insurance programs. We have strategic
relationships with nationally recognized insurance underwriters, and our
marketing partners include many of the nation's largest financial institutions,
along with leading affinity groups, associations, and Internet companies.
Additionally, we have a relationship with actor and advocate Christopher Reeve
to promote our programs.
We have contracted with insurance companies to underwrite the insurance
components of our membership programs. As a result, we do not assume insurance
underwriting risk. The financial responsibility for the payment of claims
resulting from a qualifying disability, or other events covered by the insurance
features of our programs, is borne by third-party insurers. All of the insurance
and service features included in our membership programs are supplied by outside
vendors. As of June 30, 2001, we have enrolled over 640,000 program members.
Through our subsidiary, HealthExtrasRx, we provide pharmacy benefit
management services which we market to health plan sponsors, including
self-insured employers. HealthExtrasRx's pharmacy benefit management products
include a network of over 50,000 retail pharmacies, electronic point-of-sale
claims processing, mail order pharmacy services and administration and
management services.
Our address is 2273 Research Boulevard, Rockville, Maryland 20850, and
our telephone number is (301) 548-2900.
8
FORWARD LOOKING STATEMENTS
We make certain "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended, throughout this prospectus and in
the documents we incorporate by reference into this prospectus. The words
"anticipates," "believes," "estimates," "expects," "intends," "plans," "seeks,"
variations of such words, and similar expressions are intended to identify
forward-looking statements. We have based these forward-looking statements on
our current expectations, estimates and projections about our business and
industry, our beliefs and certain assumptions made by our management. Investors
are cautioned that matters subject to forward-looking statements involve risks
and uncertainties including economic, competitive, governmental, technological
and other factors which may affect our business and prospects.
These statements are not guarantees of future performance and are
subject to certain risks, uncertainties and assumptions that are difficult to
predict. Important factors which could cause our actual results to differ
materially from the forward-looking statements in this prospectus include, but
are not limited to, those identified in this prospectus under "Risk Factors" and
those described in Management's Discussion and Analysis of Financial Condition
and Results of Operations in our Form 10-K for the fiscal year ended December
31, 2000, our Form 10-Q for the quarter ended March 31, 2001, our Form 10-Q for
the quarter ended June 30, 2001 and in any other filings which are incorporated
by reference in this prospectus.
You should read this prospectus and the documents that we incorporate
by reference into this prospectus completely and with the understanding that our
actual future results may be materially different from what we expect.
Forward-looking statements in this prospectus speak only as of the date of this
prospectus. We have ongoing disclosure obligations under the federal securities
laws to file periodic quarterly and annual reports as well as current reports
that cover events that are material to our business, results of operations and
financial condition. These reports could contain information that reflect
subsequent developments relating to forward-looking statements in this
prospectus. All forward-looking statements attributable to us are expressly
qualified by these cautionary statements.
USE OF PROCEEDS
All of the shares of common stock offered hereby are being offered for
the account of the selling stockholders. We will not receive any proceeds from
the sale by the selling stockholders of the common stock made pursuant to this
registration statement.
SELLING STOCKHOLDERS
This prospectus covers the resale by the selling stockholders of an
aggregate of 3,020,782 outstanding shares of common stock and 845,816 shares of
common stock which may be acquired by the selling stockholders upon the exercise
of warrants. These shares and the warrants were acquired by the selling
stockholders as of September 26, 2001 in connection with a private placement of
the shares and warrants and, with respect to the warrants acquired by SG Cowen
Securities Corporation, as partial payment for acting as placement agent in that
private placement. As part of the conditions of the purchase by the selling
stockholders, we agreed to register for resale by the selling stockholders the
shares, including the shares subject to the warrants. None of the selling
stockholders has had any material relationship with us in the past three years.
The warrants acquired by the selling stockholders entitle the holder to
purchase the shares of common stock subject to the warrant, at an exercise price
of $5.37 per share and subject to the terms, conditions and adjustments set
forth in the warrant, at any time prior to 5:00 p.m. on September 26, 2005. The
warrants provide for adjustment of the exercise price and number of shares for
which the warrant is exercisable in the event of stock dividends, distributions,
stock splits or reverse stock splits, and also for adjustment in the event of
reclassifications, exchanges, reorganizations, mergers and similar events.
9
The following table sets forth as of October 24, 2001 the names of each
selling stockholder, the number of shares of common stock owned beneficially by
the selling stockholder, the number of shares which may be offered pursuant to
this prospectus and the number of shares and percentage of class to be owned by
each of the selling stockholders after this offering, assuming the sale of all
of the shares offered by the selling stockholder pursuant to this prospectus.
The selling stockholders may sell all, some or none of its shares in
this offering. See "Plan of Distribution."
[Enlarge/Download Table]
Shares Shares
Beneficially Shares Offered Beneficially
Owned Prior to By This Owned After
Selling Stockholder The Offering Prospectus The Offering*
------------------------------------- ------------------- ----------------- -------------------
AIG SoundShore Strategic Holding
Fund Ltd. 62,500(1) 62,500(1) 0
AIG SoundShore Opportunity
Holding Fund Ltd. 62,500(1) 62,500(1) 0
AIG SoundShore Holdings Ltd. 125,000(2) 125,000(2) 0
AIG SoundShore Private Investors
Holding Fund Ltd. 62,500(1) 62,500(1) 0
Amaranth Trading LLC 314,861(3) 314,861(3) 0
Deutsche Bank AG, London Branch 317,505(3) 314,861(3) 2,644
Gryphon Master Fund 157,431(4) 157,431(4) 0
Langley Partners, L.P. 157,431(4) 157,431(4) 0
Pine Ridge Financial Inc. 472,292(5) 472,292(5) 0
Peconic Fund, LTD. 157,431(4) 157,431(4) 0
SG Cowen Securities Corporation 90,623(6) 90,623(6) 0
Societe Generale 629,723(7) 629,723(7) 0
Steelhead Investments, Ltd. 472,292(5) 472,292(5) 0
Vertical Ventures Investments, LLC 472,292(5) 472,292(5) 0
ZLP Master Technology Fund, Ltd. 314,861(3) 314,861(3) 0
--------------------------------
*Assumes the sale of all shares offered.
(1) Includes 12,500 shares issuable within 60 days of the date of this prospectus upon exercise of
warrants.
(2) Includes 25,000 shares issuable within 60 days of the date of this prospectus upon exercise of
warrants.
(3) Includes 62,972 shares issuable within 60 days of the date of this prospectus upon exercise of
warrants.
(4) Includes 31,486 shares issuable within 60 days of the date of this prospectus upon exercise of
warrants.
(5) Includes 94,458 shares issuable within 60 days of the date of this prospectus upon exercise of
warrants.
(6) These shares are issuable within 60 days of the date of this prospectus upon the exercise of
warrants.
(7) Includes 125,945 shares issuable within 60 days of the date of this prospectus upon exercise of
warrants.
10
PLAN OF DISTRIBUTION
The selling stockholders and any of their pledgees, assignees and
successors-in-interest may, from time to time, sell any or all of their shares
of common stock on any stock exchange, market or trading facility on which
shares are traded or in private transactions. These sales may be fixed or
negotiated prices. The selling stockholders may use any one or more of the
following methods, which may involve crosses or block transactions, when selling
shares:
o ordinary brokerage transactions and transactions in which the
broker-dealer solicits purchasers;
o block trades in which the broker-dealer will attempt to sell the shares
as agent but may position and resell a portion of the block as
principal to facilitate the transaction;
o purchases by a broker-dealer as principal and resale by the
broker-dealer for its account;
o an exchange distribution in accordance with the rules of the applicable
exchange;
o privately negotiated transactions;
o writing of options, whether such options are listed on an options
exchange or otherwise;
o short sales;
o broker-dealers may agree with the selling stockholders to sell a
specified number of such shares at a stipulated price per share;
o a combination of any such methods of sale; and
o any other method permitted pursuant to applicable law.
The selling stockholders may also sell shares under Rule 144 under the
Securities Act, if available, rather than under this prospectus.
The selling stockholders may also engage in short sales against the
box, puts and calls and other transactions in securities of HealthExtras or
derivatives of HealthExtras securities and may sell or deliver shares in
connection with these trades. The selling stockholders may pledge their shares
to their brokers under the margin provisions of customer agreements. If a
selling stockholder defaults on a margin loan, the broker may, from time to
time, offer and sell the pledged shares.
Broker-dealers engaged by the selling stockholders may arrange for
other broker-dealers to participate in sales. Broker-dealers may receive
commissions or discounts from the selling stockholders (or, if any broker-dealer
acts as agent for the purchaser of shares, from the purchaser) in amounts to be
negotiated. The selling stockholders do not expect these commissions and
discounts to exceed what is customary in the types of transactions involved.
The selling stockholders and any broker-dealers or agents that are
involved in selling the shares may be deemed "underwriters" within the meaning
of the Securities Act in connection with such sales. In such event, any
commissions received by such broker-dealers or agents and any profit on the
resale of the shares purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act.
11
HealthExtras is required to pay all fees and expenses incident to the
registration of the shares, including fees and disbursements of one counsel to
the selling stockholders. HealthExtras has agreed to indemnify the selling
stockholders against certain losses, claims, damages and liabilities, including
liabilities under the Securities Act.
Once sold under the registration statement, of which this prospectus
forms a part, the shares of common stock will be freely tradable in the hands of
persons other than our affiliates.
LEGAL MATTERS
Legal matters with respect to our common stock being offered hereby
have been passed upon for us by our counsel, Muldoon Murphy & Faucette LLP,
Washington, D.C.
EXPERTS
The consolidated financial statements of HealthExtras incorporated in
this prospectus and registration statement by reference to the Annual Report on
Form 10-K for the year ended December 31, 2000 have been so incorporated in
reliance upon the report of PricewaterhouseCoopers LLP, independent accountants,
given on the authority of said firm as experts in auditing and accounting.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and periodic reports, proxy statements and
other information with the Securities and Exchange Commission using the
Commission's EDGAR system. You may inspect these documents and copy information
from them at the Commission's public reference facilities at 450 Fifth Street,
N.W., Washington, D.C. 20549 or at the regional offices of the Commission at
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
Copies of such material can be obtained at prescribed rates from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549. The Commission maintains a Web site that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the Commission. The address of such site is
http://www.sec.gov.
We have filed a registration statement with the Commission relating to
this offering of the common stock. The registration statement contains
information which is not included in this prospectus. You may inspect or copy
the registration statement at the Commission's public reference facilities or
its web site.
We furnish our stockholders with annual reports containing audited
financial statements and with such other periodic reports as we from time to
time deem appropriate or as may be required by law.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
We have filed the following documents with the Commission. We are
incorporating these documents in this prospectus, and they are a part of this
prospectus.
(1) Our annual report on Form 10-K for the fiscal year ended
December 31, 2000;
(2) Our Form 10-K/A amendment to our Annual Report on Form 10-K
for the fiscal year ended December 31, 2000;
12
(3) Our quarterly reports on Form 10-Q for the quarters ended
March 31, 2001 and June 30, 2001;
(4) Our current report on Form 8-K dated October 5, 2001; and
(5) The description of our common stock, par value $.01 per share,
contained in our registration statement on form 8A filed under
the Securities Exchange Act of 1934, No. 0-31014, as declared
effective on December 17, 1999.
We are also incorporating by reference in this prospectus all documents
which we file pursuant to Section 13(a), 13(c), 14 or 15 of the Securities
Exchange Act of 1934, as amended, after the date of this prospectus. Such
documents are incorporated by reference in this prospectus and are a part of
this prospectus from the date we file the documents with the Commission.
If we file with the Commission any document that contains information
that is different from the information contained in this prospectus, you may
rely only on the most recent information which we have filed with the
Commission.
We will provide a copy of the documents referred to above without
charge if you request the information from us. Requests for such copies should
be directed to us at our principal executive offices at HealthExtras, Inc., 2273
Research Boulevard, Rockville, Maryland 20850, attention: Secretary or phone
(301) 548-2900.
You should only rely on the information incorporated by reference or
provided in this prospectus or any supplement. We have not authorized any person
to provide you with any different information. If anyone provides you with
different or inconsistent information you should not rely on it. The common
stock is not being offered in any state where the offer is not permitted. You
should not assume that the information in this prospectus or any supplement is
accurate as of any date other than the date on the front of this prospectus.
The information in this prospectus may not contain all of the
information that may be important to you. You should read the entire prospectus,
as well as the documents incorporated by reference in the prospectus, before
making an investment decision.
No dealer, salesman, or any other person has been authorized to give
any information or to make any representations other than those contained in
this prospectus in connection with the offering herein contained and, if given
or made, such information or representations must not be relied upon as having
been authorized by us or the selling stockholders. This prospectus does not
constitute an offer to sell, or a solicitation of an offer to buy, the
securities offered hereby in any jurisdiction to any person to whom it is
unlawful to make an offer or solicitation.
13
3,866,598 Shares
HealthExtras, Inc.
Common Stock
------------------------------------
PROSPECTUS
------------------------------------
October __, 2001
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
Registration Fee - Securities and Exchange Commission $ 6,500
Nasdaq Listing Fee 22,500
Legal Fees and Expenses* 25,000
Accounting Fees and Expenses* 25,000
Miscellaneous* 1,000
-------
Total $ 80,000
---------------------
*Estimated.
II-1
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
As permitted by Section 145 of the Delaware General Corporation Law,
Articles 8 and 9 of the Registrant's certificate of incorporation provide, as
follows, the Corporation shall, to the fullest extent permitted by Delaware law,
as amended from time to time, indemnify its directors and officers:
EIGHTH:
A. Each person who was or is made a party or is threatened to be made a
party to or is otherwise involved in any action, suit or proceeding, whether
civil, criminal, administrative or investigative (hereinafter a "proceeding"),
by reason of the fact that he or she is or was a Director or an Officer of the
Corporation or is or was serving at the request of the Corporation as a
Director, Officer, employee or agent of another corporation or of a partnership,
joint venture, trust or other enterprise, including service with respect to an
employee benefit plan (hereinafter an "indemnitee"), whether the basis of such
proceeding is alleged action in an official capacity as a Director, Officer,
employee or agent or in any other capacity while serving as a Director, Officer,
employee or agent, shall be indemnified and held harmless by the Corporation to
the fullest extent authorized by the Delaware General Corporation Law, as the
same exists or may hereafter be amended (but, in the case of any such amendment,
only to the extent that such amendment permits the Corporation to provide
broader indemnification rights than such law permitted the Corporation to
provide prior to such amendment), against all expense, liability and loss
(including attorneys' fees, judgments, fines, ERISA excise taxes or penalties
and amounts paid in settlement) reasonably incurred or suffered by such
indemnitee in connection therewith; provided, however, that, except as provided
in Section C hereof with respect to proceedings to enforce rights to
indemnification, the Corporation shall indemnify any such indemnitee in
connection with a proceeding (or part thereof) initiated by such indemnitee only
if such proceeding (or part thereof) was authorized by the Board of Directors of
the Corporation.
B. The right to indemnification conferred in Section A of this Article
EIGHTH shall include the right to be paid by the Corporation the expenses
incurred in defending any such proceeding in advance of its final disposition
(hereinafter an "advancement of expenses"); provided, however, that, if the
Delaware General Corporation Law requires, an advancement of expenses incurred
by an indemnitee
15
in his or her capacity as a Director or Officer (and not in any other capacity
in which service was or is rendered by such indemnitee, including, without
limitation, services to an employee benefit plan) shall be made only upon
delivery to the Corporation of an undertaking (hereinafter an "undertaking"), by
or on behalf of such indemnitee, to repay all amounts so advanced if it shall
ultimately be determined by final judicial decision from which there is no
further right to appeal (hereinafter a "final adjudication") that such
indemnitee is not entitled to be indemnified for such expenses under this
Section or otherwise. The rights to indemnification and to the advancement of
expenses conferred in Sections A and B of this Article EIGHTH shall be contract
rights and such rights shall continue as to an indemnitee who has ceased to be a
Director, Officer, employee or agent and shall inure to the benefit of the
indemnitee's heirs, executors and administrators.
C. If a claim under Section A or B of this Article EIGHTH is not paid
in full by the Corporation within sixty days after a written claim has been
received by the Corporation, except in the case of a claim for an advancement of
expenses, in which case the applicable period shall be twenty days, the
indemnitee may at any time thereafter bring suit against the Corporation to
recover the unpaid amount of the claim. If successful in whole or in part in any
such suit, or in a suit brought by the Corporation to recover an advancement of
expenses pursuant to the terms of an undertaking, the indemnitee shall be
entitled to be paid also the expenses of prosecuting or defending such suit. In
(1) any suit brought by the indemnitee to enforce a right to indemnification
hereunder (but not in a suit brought by the indemnitee to enforce a right to an
advancement of expenses) it shall be a defense that, and (2) in any suit by the
Corporation to recover an advancement of expenses pursuant to the terms of an
undertaking, the Corporation shall be entitled to recover such expenses upon a
final adjudication that, the indemnitee has not met any applicable standard for
indemnification set forth in the Delaware General Corporation Law. Neither the
failure of the Corporation (including its Board of Directors, independent legal
counsel, or its stockholders) to have made a determination prior to the
commencement of such suit that indemnification of the indemnitee is proper in
the circumstances because the indemnitee has met the applicable standard of
conduct set forth in the Delaware General Corporation Law, nor an actual
determination by the Corporation (including its Board of Directors, independent
legal counsel, or its stockholders) that the indemnitee has not met such
applicable standard of conduct, shall create a presumption that the indemnitee
has not met the applicable standard of conduct or, in the case of such a suit
brought by the indemnitee, be a defense to such suit. In any suit brought by the
indemnitee to enforce a right to indemnification or to an advancement of
expenses hereunder, or by the Corporation to recover an advancement of expenses
pursuant to the terms of an undertaking, the burden of proving that the
indemnitee is not entitled to be indemnified, or to such advancement of
expenses, under this Article EIGHTH or otherwise shall be on the Corporation.
D. The rights to indemnification and to the advancement of expenses
conferred in this Article EIGHTH shall not be exclusive of any other right which
any person may have or hereafter acquire under any statute, the Corporation's
Certificate of Incorporation, Bylaws, agreement, vote of stockholders or
Disinterested Directors or otherwise.
E. The Corporation may maintain insurance, at its expense, to protect
itself and any Director, Officer, employee or agent of the Corporation or
subsidiary or Affiliate or another corporation, partnership, joint venture,
trust or other enterprise against any expense, liability or loss, whether or not
the Corporation would have the power to indemnify such person against such
expense, liability or loss under the Delaware General Corporation Law.
F. The Corporation may, to the extent authorized from time to time by
the Board of Directors, grant rights to indemnification and to the advancement
of expenses to any employee or agent of the Corporation to the fullest extent of
the provisions of this Article EIGHTH with respect to the indemnification and
advancement of expenses of Directors and Officers of the Corporation.
16
NINTH:
A Director of this Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a Director, except for liability (1) for any breach of the Director's
duty of loyalty to the Corporation or its stockholders; (2) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law; (3) under Section 174 of the Delaware General Corporation Law;
or (4) for any transaction from which the Director derived an improper personal
benefit. If the Delaware General Corporation Law is amended to authorize
corporate action further eliminating or limiting the personal liability of
Directors, then the liability of a Director of the Corporation shall be
eliminated or limited to the fullest extent permitted by the Delaware General
Corporation Law, as so amended.
Any repeal or modification of the foregoing paragraph by the
stockholders of the Corporation shall not adversely affect any right or
protection of a Director of the Corporation existing at the time of such repeal
or modification.
ITEM 16. EXHIBITS.
A. Exhibits
Exhibit
Number Description
4.3 Form of Warrant to Purchase Common Stock of the Registrant
5.1 Opinion of Counsel
10.16 Securities Purchase Agreement, dated September 25, 2001 by
and between the Registrant and Investors Signatory thereto.
23.1 Consent of Independent Public Accountants
23.2 Consent of Counsel (contained in Exhibit 5.1)
-----------------------------
B. FINANCIAL STATEMENTS & Schedules
All schedules for which provision is made in Regulation S-X of the
Securities and Exchange Commission either are not required under the related
instructions or the information required to be included therein has been
included in the financial statements of HealthExtras.
17
ITEM 17. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration
statement:
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration
statement (or the most recent post-effective
amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the
information set forth in the registration statement.
Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the
total dollar value of securities offered would not
exceed that which was registered) and any deviation
from the low or high end of the estimated maximum
offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule
424(b), if, in the aggregate, the changes in volume
and price represent no more than 20 percent change
in the maximum aggregate offering price set forth in
the "Calculation of Registration Fee" table in the
effective registration statement;
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in
the registration statement or any material change to
such information in the registration statement;
provided, however, that paragraphs (a)(1)(i) and
(a)(1)(ii) do not apply if the information required
to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed
with or furnished to the Securities and Exchange
Commission by the registrant pursuant to Section 13
or Section 15(d) of the Securities Exchange Act of
1934 that are incorporated by reference in this
registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment
shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial
bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing
of the registrant's annual report pursuant to Section 13(a) or Section
15(d) of the Securities Exchange Act of 1934 that is incorporated by
reference in the registration statement shall be deemed to be a new
registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing
18
provisions, or otherwise, the registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Securities Act of 1933 and
is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered,
the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question of whether such indemnification
by it is against public policy as expressed in the Securities Act of
1933 and will be governed by the final adjudication of such issue.
19
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Rockville, State of Maryland on the 25th day of
October, 2001.
HEALTHEXTRAS, INC.
By: /s/ David T. Blair
------------------------------------------
David T. Blair
Chief Executive Officer and Director
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints, David T. Blair and Michael P. Donovan,
his true and lawful attorneys-in-fact and agents, each acting alone, with full
powers of substitution and resubstitution, for him and in his name, place and
stead, in any and all capacities, to sign any or all amendments to this
registration statement, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, each acting alone,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, each acting alone, or his
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below by the following persons in the
capacities and on the dates indicated.
/s/ David T. Blair Chief Executive
_________________________ Officer and Director October 25, 2001
David T. Blair
Chief Financial Officer,
/s/ Michael P. Donovan Secretary and Chief
_________________________ Accounting Officer October 25, 2001
Michael P. Donovan
/s/ Thomas L. Blair
_________________________ Chairman of the Board October 25, 2001
Thomas L. Blair
/s/ Bette B. Anderson
_________________________ Director October 25, 2001
Bette B. Anderson
/s/ William E. Brock
_________________________ Director October 25, 2001
William E. Brock
/s/ Edward S. Civera
_________________________ Director October 25, 2001
Edward S. Civera
20
/s/ Frederick H. Graefe, Esq.
_____________________________ Director October 25, 2001
Frederick H. Graefe, Esq.
/s/ Thomas J. Graf
_____________________________ Director October 25, 2001
Thomas J. Graf
/s/ Julia M. Lawler
_____________________________ Director October 25, 2001
Julia M. Lawler
/s/ Karen E. Shaff
_____________________________ Director October 25, 2001
Karen E. Shaff
21
EXHIBIT INDEX
Exhibit
Number Description
4.3 Form of Warrant to Purchase Common Stock of the Registrant
5.1 Opinion of Counsel
10.16 Securities Purchase Agreement, dated September 25, 2001 by
and between the Registrant and Investors Signatory thereto
23.1 Consent of Independent Public Accountants
23.2 Consent of Counsel (contained in Exhibit 5.1)
-----------------------------
Dates Referenced Herein and Documents Incorporated by Reference
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