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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934 For the fiscal year ended September 30, 1999
or
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ______ to _______
Commission File No. 0-22947
ADATOM.COM, INC.
(formerly HEALTHCORE MEDICAL SOLUTIONS, INC.)
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(Name of Small Business Issuer)
Delaware 43-1771999
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
920 Hillview Court, Suite 160, Milpitas, CA 95035
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (408) 935-7979
Securities registered pursuant to Section 12(b) of the Act: None.
Securities registered pursuant to Section 12(g) of the Act: Common Stock, $.01
Par value
Warrants
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Check whether the issuer (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
twelve (12) months (or for such shorter period that the registrant was required
to file such report(s)), and (2) has been subject to the filing requirements for
the past ninety (90) days. YES [X] NO [_]
Check if disclosure of delinquent filers pursuant to Item 405 of Regulation S-B
is not contained herein in this form, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB [X].
State issuer's revenues for its most recent fiscal year: $163,000.
State the aggregate market value of the voting stock held by non-affiliates
computed by reference to the price at which the stock was sold, or the average
bid and asked prices of such stock, as of December 7, 1999 $28,571,000.
State the number of shares outstanding of each of the issuer's common equity as
of December 7, 1999 14,456,519 shares of Common Stock, $.01 par value.
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PART I
Statements in this Form 10-KSB that are not statements or descriptions of
historical facts are forward-looking statements under the Private Securities
Litigation Reform Act of 1995 and are subject to numerous risks and
uncertainties. These forward looking statements and other forward looking
statements made by the Company or its representatives are based on a number of
assumptions and actual results could differ materially from those currently
anticipated due to a number of factors, such as history of operating losses;
anticipated future losses; limited operating history; unproven commercial
acceptance; need for market acceptance; limited marketing capabilities;
competition; government regulation; dependence on third parties; and other
risks.
ITEM 1. DESCRIPTION OF BUSINESS
RECENT EVENTS
Effective October 13, 1999 ("Effective Date"), Adatom, Inc., a California
corporation ("Adatom, Inc."), merged (the "Merger") with and into HealthCore
Medical Solutions, Inc., a Delaware corporation, with HealthCore Medical
Solutions, Inc. as the surviving corporation and being renamed "Adatom.com,
Inc." (the "Company"or the "Registrant"). The Merger will be accounted for as a
reverse Acquisition whereby Adatom, Inc. is deemed to have acquired the Company.
The Merger was consummated pursuant to an Agreement and Plan of Merger, dated as
of July 1, 1999, among Adatom, Inc. and the Registrant (the "Merger Agreement").
Pursuant to the Merger Agreement, the Registrant acquired all of the assets and
assumed all of the liabilities and obligations of Adatom, Inc. Pursuant to the
Merger Agreement, on the Effective Date, each share of Adatom, Inc. common
stock, no par value (the "Adatom, Inc. Common Stock") was converted into the
right to receive approximately 2.17 shares of the Registrant's common stock
("Registrant Common Stock"). As a result of the Merger, there are now 14,456
,519 shares of common stock of the Registrant outstanding. The Registrant's
Registration Statement on Form S-4 (Registration No. 333-87207), which was
declared effective by the Securities and Exchange Commission on September 21,
1999 (the "Registration Statement"), sets forth certain information regarding
the Merger, Adatom, Inc. and the Registrant.
Consummation of the Merger was subject to a number of conditions including,
the sale or liquidation of the healthcare discount benefits business operated by
the Company prior to the Merger. To satisfy this condition, on July 28, 1999 the
Company sold certain of its assets related to its discount healthcare business
to Randolph & Associates, Inc., a Texas corporation ("Randolph") and
discontinued the operation of its healthcare discount benefits business. The
assets sold included membership contracts, network access agreements, broker
contracts, a computer hardware lease, certain other miscellaneous contracts,
furniture and fixtures, software and trade names. Randolph agreed to assume
performance of HealthCore's obligations under the assigned contracts as of
August 1, 1999. The purchase price for the purchase of the assets was $4,090.64
in cash, the assumption of a computer hardware lease for $45,909.36 and the
assumption of HealthCore's obligations under the other assigned contracts
arising on or after August 1, 1999 together with all refund obligations due
Members requested on or after August 1, 1999 (regardless of the date(s) to which
such refunds relate).
Since the date of the Merger, the Company has been conducting the business
that Adatom, Inc. conducted prior thereto. This business consists of an Internet
E-tail System which has the capability to acquire, market, order, fulfill, ship
and install a broad range of goods on the Internet. This Internet E-tail System
is used to run its online business (www.adatom.com) and is intended to be used
in the future to launch and manage other web site e-commerce initiatives. This
system significantly reduces costs and expenses, removes intermediate
distribution layers, and integrates manufacturers with consumers.
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The Internet store (www.adatom.com) is one of the largest on the web, with
over 3 million Stock Keeping Units (SKUs) offered for sale. Products offered are
not limited solely to those products posted on the www.adatom.com site but can
also be sourced from virtually any brand.
In its business-to-business e-commerce enabler business, the Company
intends to leverage its e-commerce content, business architecture and processes
and technical know-how by providing end-to-end e-commerce solutions. This
consists of site development, infrastructure implementation, fulfillment and
customer service for others seeking an "instant" on-line retail capability. The
Company intends to serve as the gateway for e-commerce for a large number of web
sites and create new "e-tailers."
Products can be sold at low prices due to the completely scaleable, low
cost infrastructure and distribution system of the business. The goal is to
provide the customer with superior value by combining the best service with low
prices. By selling via the Internet and shipping, in most cases, directly from
the manufacturer or supplier, the costs of intermediaries, maintaining large
inventories and staffs, the requirement of significant physical space
fulfillment houses and resultant overhead expense have been reduced or
eliminated.
The new business of the Company, as well as the risk factors involved in
the business and other information regarding the business, are more fully
described in the Registration Statement.
GENERAL
Prior to the sale of its business as described above, the Company marketed
and administered a health care benefit services program which is designed to
enable participants("Members")to obtain discounts on purchases of health care
products and services through certain networks (the "Networks") of health care
providers (the"Providers"). For an annual fee of approximately $55 to $100,
individuals joined the Company's card membership program and used their
HealthCare Solutions Card to receive discounts of up to 5% to 60% off the retail
price of health care services and products including retail and mail-order eye
care, pharmaceutical and durable medical equipment ,retail dental, hearing,
physical and occupational therapy and chiropractic, and retail mail-order
vitamins and supplements. In addition to the HealthCare Solutions Card, the
Company marketed two other products: the Savings Solutions Card, which was
customized for an organization to offer discounted ancillary health care
services as well as non-medical consumer products to certain subscribers in the
New York metropolitan area, and the Medical Solutions Card, which provided
nationwide discounts to enrollees for hospital and physician services.
The Networks with which the Company maintained contracts as of August 1,
1999 comprised an aggregate of approximately 450,000 participating Providers of
eye care, dental, hearing, pharmacy, physical and occupational therapy,
chiropractic benefits, hospital and physician
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services and retail consumer purchases throughout the United States. Members can
access the Networks through the use of discount membership cards. These discount
membership cards have been marketed, directly and through independent brokers,
insurance agents and consumer marketing organizations, to individuals and to
employers, health maintenance organizations and businesses and other
associations who may either purchase the cards for, or offer it to, their
employees or members.
The Company's target market included uninsured individuals who, whether
because of their medical history, age or occupation, either do not have
insurance or have limited insurance coverage but who seek to access health care
products and services at discounted costs. Acceptance into the Company's
membership programs was unrestricted, and the Company's membership card products
could have been used by any member of the cardholder's household. The Company
primarily used brokers, insurance agents and consumer marketing organization to
sell its products to individuals or group enrollees such as employers, health
maintenance organizations ("HMOs") and other organizations (collectively,
"Sponsors") who purchased the Company's products for their employees or members.
The Company was established in October 1995 as MegaVision L.C., a Missouri
limited liability company ("MegaVision"). In February 1997, MegaVision merged
into HealthCore Medical Solutions, Inc. Except as otherwise required by the
context, all references to the Company and its operations include MegaVision and
its operations. The Company's executive offices prior to the merger were located
at 11904 Blue Ridge Boulevard, Grandview, Missouri 64030 and its telephone
number was (816) 763-4900.
PRODUCTS
The HealthCare Solutions Card. The HealthCare Solutions Card enabled
Members to obtain discounts of approximately 5% to 60% on purchases of ancillary
health care products and services through certain Networks of Providers.
The Medical Solutions Card. The Company contracted with a national network
of physicians and hospitals to provide discounts ranging from 15-60% on hospital
and physician visits, home health care, cardiovascular care and nursing home or
long-term care (the "Physicians and Hospital Plan"). The Company marketed this
product as the Medical Solutions Card. As of August 1, 1999, the Physician and
Hospital Plan was comprised of an aggregate of approximately 350,000 physicians
and 3,500 hospitals throughout the United States. The Company marketed the
Medical Solutions Card on a nationwide basis.
The Savings Solutions Card. The Company launched a Savings Solutions Card,
offering discounts on medical services and products, pharmacy products, vitamins
and supplements, veterinary services and pet products, long-term care and
assisted living, home health care, and certain consumer purchases including
jewelry, furniture and travel. This product was developed specifically for an
organization in the New York and
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New Jersey area. As of August 1, 1999, the network was comprised of providers in
the New York and New Jersey area.
SALES AND MARKETING
The Company relied primarily upon the services of independent sales
representatives, including brokers, agents, consumer marketing organizations and
associations, to market the Savings Cards. These arrangements generally provided
for commissions based upon a percentage of sales of the Savings Cards, which
commissions range from 20% to 50% of the aggregate sales price. As of August 1,
1999 the Company had entered into numerous agreements with individuals,
including individuals affiliated with American Family Life Assurance Company
("AFLAC"),who were expected to serve as independent brokers. In addition, prior
to March 12, 1999 the Company maintained an in-house sales force that consisted
of three persons.
COMPETITION
The Company believed that a critical element of its business was the
competition for a portion of the benefit dollars allocated by various
organizations for employee benefit programs. The Company competed for a portion
of those dollars with various other cost-containment marketing organizations,
pharmacy indemnity programs, retail pharmacies, mail-order prescription, and
vitamin and supplement companies, preferred provider organizations, HMOs, health
care membership programs and other health care insurance programs for Members
and Providers. With respect to its health care services, the Company competed
for potential Sponsors, Members and Providers, depending on the geographic area
or market, with various entities that have developed discount membership cards
which provide national coverage, including a number of companies with longer
operating histories and substantially greater financial and other resources than
the Company and entities that have developed discount membership cards which
provide only regional coverage. The Company also competed with various
organizations which provide services and products in specific areas of health
care such as eye care services, pharmacy indemnity programs, independent and
chain-operated retail pharmacy outlets, retail medical/surgical supply companies
and other mail order prescription and, vitamin and supplement companies, HMOs
and health care membership programs. Most of these competitors have longer
operating histories and have significantly greater financial, marketing and
administrative resources than the Company.
GOVERNMENT REGULATION
The delivery of health care products and services is subject to extensive
federal, state and local regulation, including but not limited to the
prohibition of business corporations from providing medical care, fraud and
abuse provisions of the Medicare and Medicaid statutes, state laws that prohibit
referral fees and fee splitting and certain regulations applicable to insurance
companies and certain organizations that provide
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or arrange for health care services. The Company believed that certain
registration and licensing laws and regulations in certain states in which the
Company intended to operate could have applied to the Company's operations.
EMPLOYEES
As of September 30, 1999, the Company currently had 2 full-time employees
and one part-time employee. None of the Company's employees is represented by a
labor union. The Company has not experienced any work stoppages and considers
its relations with its employees to be good. As of December 7, 1999, the Company
had 36 full-time employees and 11 part-time employees.
ITEM 2. DESCRIPTION OF PROPERTY
The Company currently leases approximately 8,000 square feet of office
space in Milpitas, California which was leased by Adatom, Inc. prior to the
merger for its offices pursuant to lease agreements that provide for aggregate
monthly rent of approximately $17,400. The rent is covered by two separate
leases that end January 31, 2000 and May 1, 2000. The Company believes that
additional office space will be needed for the future needs of the Company.
ITEM 3. LEGAL PROCEEDINGS
The Company is not currently involved in any material legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted during the fourth quarter of the fiscal year
covered by this report to a vote of the security-holders of the Company.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
(a) Since October 14, 1997, the date of the Company's initial public
offering (the "IPO"), the Company's Units, each Unit consisting of one share of
Common Stock and one Warrant, have traded on the Nasdaq SmallCap Market under
the symbol HMSIU. The Company's Class A Common Stock and Class A Warrants have
traded on the Nasdaq SmallCap Market under the symbols HMSI and HMSIW,
respectively, since February 10, 1998. The following sets forth the high and low
bid prices of the Class A Common Stock for the fiscal year ended September 30,
1999 as reported by The Nasdaq Stock Market, Inc.
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Bid Prices
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High Low
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Year ended September 30, 1999
First Quarter 1.31 0.69
Second Quarter 3.06 0.60
Third Quarter 3.88 1.00
Fourth Quarter 2.94 2.06
Second Quarter (commencing February 10, 1998)(1) 3.25 3.25
Third Quarter 2.00 .63
Fourth Quarter 1.13 .63
(b) The number of holders of record of the Company's Common Stock as of
December 7, 1999 was 63 holders.
During the quarter ended September 30, 1999, a portion of the net proceeds
from the Company's IPO were used (i) to make principal and interest payments in
the amount of approximately $7,000 on a capital lease entered into in April
1997; (ii) for working capital purposes in the amount of approximately $515,000.
The remaining portion of the net proceeds from the IPO and other available cash
in the amount of approximately $1,816,000 has been invested in short-term
interest-bearing, investment grade securities.
(c) The Company has never paid cash dividends on its Common Stock and does
not anticipate paying cash dividends in the foreseeable future. The Company
currently intends to retain all earnings, if any, for use in the expansion of
the Company's business. The declaration and payment of future dividends, if any,
will be at the sole discretion of the Board of Directors and will depend upon
the Company's profitability, financial condition, cash requirements, future
prospects and other factors deemed relevant by the Board of Directors.
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(1) The Company's Common Stock did not begin trading separately on the Nasdaq
Small Cap Market until February 10, 1998. Therefore, the average of the high and
low bid prices of the Class A Common Stock for the first quarter for the year
ended September 30, 1998 is not available.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS
GENERAL
The Company prior to the Merger marketed and administered a health care
benefit services program designed to enable Members to obtain
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discounts on purchases of health care products and services through Networks of
health care providers with which the Company had executed provider agreements.
The Company's revenues were derived principally from the receipt of annual or
monthly enrollment fees paid by or on behalf of Members for the right to obtain
discounts at the point of purchase from providers in the Networks. A significant
portion of the Company's revenue was received in the form of monthly bank drafts
and monthly payroll deductions made by employers on behalf of their employees.
Accordingly, all monthly payment sales and their corresponding expenses,
including sales commissions and provider fees, were recognized in the monthly
periods for which they were billed. However, since the initial cost of
delivering the cards to the Company's customers was incurred and expensed in the
first month, the gross profit associated with each new individual card issued
was lower in the month of issuance than in the remaining eleven months prior to
the card's expiration date. In addition, since all renewal cards were subject to
the same costs of issuance, this twelve month pattern of lower gross profits in
the first month continues for any renewal periods.
During the fiscal year ended September 30, 1999, the Company's primary
activities consisted of (i) completing the design and development of the DBIM
System, which the Company believed facilitated data processing and enhances its
customer service capabilities, (ii) expanding the Networks and the types of
services covered by the Providers, and (iii) seeking a potential buyer for the
core business in light of the pending merger with Adatom, Inc.
The following discussion and analysis should be read in conjunction with
the financial statements and notes thereto appearing elsewhere in this report.
RESULTS OF OPERATIONS:
FISCAL YEARS ENDED SEPTEMBER 30, 1998 AND 1999. Revenues of approximately
$163,000 were generated during the fiscal year ended September 30, 1999 ("Fiscal
1999") compared to revenues of approximately $84,000 during the fiscal year
ended September 30,1998("Fiscal 1998").
Selling, general and administrative expenses increased by approximately
11.8% from approximately $2,179,000 in Fiscal 1998 to approximately $2,437,000
in Fiscal 1999 primarily as a result of compensatory common stock and options
issued of approximately $446,000 to officers and employees. This increase was
partially offset by a decrease in sales, marketing and information systems
personnel expenses due to the sale of the core business to Randolph and
Associates.
Interest expense decreased by approximately 83% from approximately $71,000
in Fiscal 1998 to approximately $12,000 in Fiscal 1999. This decrease was due to
the completion of the bridge financing in Fiscal 1998. Interest income decreased
by approximately 46.2% from approximately $253,000 in Fiscal 1998 to
approximately $136,000 in Fiscal 1999 due to decreased investments effected by
corporate needs.
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Other expenses include the net loss of approximately $65,000 due to the
sale of the core business to Randolph and Associates and merger related expenses
of approximately $421,000 due to the merger with Adatom.
Net loss increased by approximately 38.8% from approximately $1,987,000 in
Fiscal 1998 to approximately $2,759,000 in Fiscal 1999 as a result of the
foregoing factors.
LIQUIDITY AND CAPITAL RESOURCES
The Company utilized capital resources primarily for general corporate
purposes and to support anticipated growth. At September 30, 1999, the Company
had working capital of approximately $1,929,000 including cash and cash
equivalents of approximately $1,816,000.
Net cash used in operating activities was approximately $1,936,000 for
Fiscal 1999. Net cash used in operating activities primarily consisted of the
Company's net loss of approximately $2,759,000.
Net cash used in investing activities was approximately $250,000 for Fiscal
1999. The Company's uses of cash in investing activities related exclusively to
the advance of $250,000 to affiliate (Adatom).
Net cash used in financing activities for the Fiscal 1999 was approximately
$38,000. The primary use of cash in financing activities was approximately
$46,000 used in principal payments under capital lease obligations.
POST MERGER SUBSEQUENT EVENTS
Since its inception, the business of Adatom, Inc. ("AI") has incurred
significant losses, and as of June 30, 1999, had an approximate accumulated
deficit of $2,821,000. As a result, there is an uncertainty about the Company's
ability to continue as a going concern. Additionally, because AI was a
development stage company prior to consummation of the merger, the acquisition
of AI through the consummation of the Merger may result in the Company being
classified as a development stage company. The Company is expected to incur
substantial operating losses for the foreseeable future due to a high level of
expenditures in the areas of operations, research and development and other
investments designed to enhance the Company's products and services and
establish Internet capabilities. The Company intends to substantially increase
marketing and promotional spending in an effort to increase revenues. However,
there can be no assurance that the Company will generate sufficient revenues to
ever achieve profitability or otherwise sustain its profitability in the future.
The operations of the Company are subject to all the risks inherent in the
establishment of a new business enterprise, including the absence of a
substantial operating history. The likelihood of the success of the Company must
be considered in light of the uncertainties, expenses, and
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delays frequently encountered in connection with the development of any new
business.
The Company is dependent upon raising additional capital to finance its
current operations and future plans for expansion. On December 3, 1999 Richard
Barton the President and CEO made a short-term non interest-bearing loan in the
amount of $200,000 to the Company for working capital purposes. The Company
further estimates that it will require a minimum of $16,000,000 to adequately
implement its business plan and sustain and expand its sales and marketing
activities through December 31, 2000. Additional funds will be needed,
particularly in light of the existence of a number of well financed competitors
and the possibility that there may be a shift in the type of internet services
that are developed and ultimately receive consumer acceptance. Adequate funds
for these and other purposes on terms acceptable to the Company, whether through
additional equity financing, debt financing or other sources, may not be
available when needed or may result in significant dilution to existing
stockholders. Furthermore, the Company's lack of tangible assets to pledge as
security for debt financing could prevent the Company from obtaining bank or
similar debt financing. Failure to obtain adequate financing would have a
material adverse effect on the Company and could result in cessation of the
Company's business.
The Company has retained Jesup & Lamont Securities Corporation to raise
between $3.5 to $5 million through private placement of the Company's equity
securities in order to satisfy the Company's short term capital needs. However,
there can be no assurance the Company will be successful in securing such
financing. Even if the Company succeeds in obtaining such funding the Company
anticipates that it will have to raise further capital in the first quarter of
2000. The Company can give no assurance that it will be able to raise such
capital.
ITEM 7. FINANCIAL STATEMENTS
Report of Independent Accountants
Balance Sheet as of September 30, 1999
Statements of Operations for the years ended September 30, 1999 and 1998
Statements of Stockholders' Equity for the years ended September 30, 1999
and 1998
Statements of Cash Flows for the years ended September 30, 1999 and 1998
This information appears in a separate section of this Report following Part
III.
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ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not Applicable.
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PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(a) OF THE EXCHANGE ACT.
The following table sets forth the names, ages and positions of the executive
officers and directors of the Company at September 30, 1999.
NAME AGE POSITION
Neal J. Polan 48 Chairman of the Board and Chief
Executive Officer
David L. Mullikin 44 President, Chief Operating Officer,
Acting Chief Financial
Officer and Director
Eli Levitin 35 Director
Norman H. Werthwein 56 Director
Neal J. Polan has served as the Chairman of the Board of the Company since
January 1997 and as Chief Executive Officer of the Company since April 1997. Mr.
Polan devotes approximately 50% of his business time to activities on behalf of
the Company. Mr. Polan has served as President and Chief Executive Officer of
Insight Management Corp., a consulting and investment company, since 1978. Mr.
Polan served as the Managing Director of National Financial Co., a middle market
merchant bank, from April 1996 to July 1998. From March 1992 to September 1994,
Mr. Polan served as the President and a director of Sterling Vision, Inc., one
of the largest optical retailers in the United States and a publicly traded
company.
David L. Mullikin has served as the President, Chief Operating Officer and
a director of the Company since May 1998 and as the acting Chief Financial
Officer of the Company since December 1998. Prior to joining the Company, Mr.
Mullikin served as Chief Executive Officer of the Blue Advantage + Plus division
and the Heartland Card Services division of Blue Cross and Blue Shield of Kansas
City from December 1996 to June 1998 and as Vice President-Member Services of
Blue Cross and Blue Shield of Kansas City from January 1995 to December
1996.Prior to joining Blue Cross and Blue Shield of Kansas City, Mr. Mullikin
served as a Vice President of Transamerica Insurance Finance Corporation from
May 1992 to January 1995. Mr. Mullikin also spent more than 15 years with
General Electric, where he directed finance and service businesses.
Eli Levitin has served as a director of the Company since July 1997. Since
December 1993, Mr. Levitin has served as the General Counsel of Acta Realty
Corp., a real estate investment and management company. Prior to joining Acta
Realty, Mr. Levitin was an associate at White & Case, a New York law firm, from
October 1991 to December 1993. Mr. Levitin received his J.D. from Columbia
University School of Law.
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Norman H. Werthwein has served as a director of the Company since July1997.
Mr. Werthwein is the Chief Financial Officer of Beech Street Corporation, a
preferred provider organization, a position he has held since August 1994.Prior
to joining Beech Street in August 1994, Mr. Werthwein served as the Chief
Financial Officer of Curaflex Health Services, an alternate site health care
service provider, from January 1992 until August 1994.
All directors hold office until the next annual meeting of stockholders or
until their successors are elected and qualified; vacancies and any additional
positions created by board action are filled by action of the existing Board of
Directors. All officers serve at the discretion of the Board of Directors.
Pursuant to the terms of the Underwriting Agreement executed in connection
with the Company's initial public offering, the Company agreed, if requested by
D.H. Blair Investment Banking Corp. ("Blair"), to nominate a designee of Blair
to the Company's Board of Directors until October 14, 2002. The Board of
Directors has established an Audit Committee and a Compensation Committee. The
Audit Committee consisted of Mr. Polan, Mr. Levitin and Mr. Werthwein. The Audit
Committee is responsible for reviewing, with the Company's independent
accountants, the results and scope of the audit and other accounting related
matters.
During the fiscal year ended September 30, 1999, the Compensation Committee
consisted of Mr. Polan, Mr. Levitin and Mr.Werthwein. The Compensation Committee
is responsible for (i) reviewing and recommending to the Board of Directors the
compensation and benefits of all officers of the Company and (ii) reviewing
general policy matters relating to compensation and benefits of employees of the
Company.
The following table sets forth the composition of the Board of Directors
and executive officers of Company following the Merger:
NAME AGE POSITION WITH HEALTHCORE
Richard S. Barton........ 50 Chairman, Chief Executive Officer and Director
Sridhar Jagannathan...... 42 Director
Ralph Kennedy Frasier.... 61 Director
Sylvia A. Dresner........ 52 Director
Neal J. Polan............ 48 Director
Richard S. Barton founded Adatom, Inc. in September 1996 after completing a
Sloan Fellowship at Stanford University in Palo Alto, California. From 1993 to
1995, Mr. Barton was President of the U.S. Customer Operations Division of Xerox
Corporation. From 1991 to 1993, Mr. Barton served as Chairman, CEO and President
of Xerox Canada, Inc. Mr. Barton serves on the boards of directors of Avon
Products, Inc., and the United States Chamber of Commerce. Mr. Barton holds a
Masters Degree in Business Management from Stanford University in Palo Alto,
California. He has also completed the Wharton International Forum's China,
Japan, Europe and United States segments at the University of Pennsylvania.
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Sridhar Jagannathan is a co-founder of Adatom and has had extensive
experience in information technology implementation, software development
coordination, project management and technology consulting. Dr. Jagannathan
serves as a Technical Director for the Advanced Technology Solutions Group of
Oracle Corporation. From 1996 to 1999, Dr. Jagannathan was Director of
Applications Technology at the Applications Center for Excellence at Oracle.
From 1985 to 1995, Dr. Jagannathan was Group Manager and Director at Glosten
Associates located in Seattle, Washington where he managed software development
and a consulting team. Dr. Jagannathan has a Ph.D. Degree in engineering from
the University of California, Berkeley (1985). He has a Masters Degree in
Management from the Stanford Business School (Sloan Fellow, 1996), where he
specialized in Internet technologies and implications for e-commerce.
Ralph Kennedy Frasier was appointed a director of Adatom in September
1999.Since July 1998, Mr. Frasier has been Of Counsel at Porter, Wright, Morris
& Arthur law firm. Prior to that, from November 1975 to June 1998, he was
General Counsel and Secretary at Huntington Bancshares Incorporated. Mr. Frasier
earned his law degree from North Carolina Central University, School of Law and
a Bachelor of Science in Business Administration from North Carolina Central
University.
Sylvia A. Dresner was appointed a director of Adatom, Inc. in September
1999. Since 1996 Mr. Dresner is a Senior Vice President of corporate
communications and investor relations at VMW, Inc. From 1994 to 1996 she was the
Director of Corporate Investor Relations from Uncpix Entertainment. Ms. Dresner
earned a masters degree from harvard University and a bachelors degree from
Barnard College.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's executive officers, directors and persons who beneficially own
more than 10% of a registered class of the Company's equity securities to file
with the Securities and Exchange Commission (the "SEC") initial reports of
ownership and reports of changes in ownership of common stock and other equity
securities of the Company. Such executive officers, directors, and greater
than10% beneficial owners are required by SEC regulation to furnish the Company
with copies of all Section 16(a) forms filed by such reporting persons. Based
solely on the Company's review of such forms furnished to the Company and
written representations from certain reporting persons, the Company believes
that all filing requirements applicable to the Company's executive officers,
directors and greater than 10% beneficial owners were complied with.
ITEM 10. EXECUTIVE COMPENSATION
The following summary compensation table sets forth the compensation paid
or accrued by the Company to Neal J. Polan, the Company's Chairman of the Board
and Chief Executive Officer until the merger, and to executive officers of the
Company whose annual compensation from the Company for
24
<PAGE>
services rendered in all capacities during such fiscal year exceeded $100,000
(the "Named Executive Officers").
SUMMARY COMPENSATION TABLE ANNUAL COMPENSATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Name and Principal Year Salary Bonus Other Annual Securities All Other
Position Compensation Underlying Options Compensation
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Neal J. Polan 1999 $191,667 (1) $28,833(2) $9,634(3)
Chairman and Chief 1998 $148,958(1) $22,458(2) $5,942(3)
Executive Officer 1997 $72,917 $663,902(4)
- ------------------------------------------------------------------------------------------------------------------------------------
David L. Mullikin, 1999 $166,141(5) $30,000 (5) $9,501(7)
Chief Operating 1998 $59,134(5) $8,650 (6) 100,000 $801(7)
officer and acting
Chief Financial
Officer
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Pursuant to an employment agreement effective as of September 30, 1998
between Mr. Polan and the Company, as of December 1, 1998, Mr. Polan is entitled
to an annual salary of $200,000, plus a bonus to be approved by the Board of
Directors.
(2) Represents amounts paid by the Company to Mr. Polan for certain expenses,
including $14,352 for automobile and related expenses in Fiscal 1999.
(3) Represents amounts paid by the Company for medical and disability insurance
premiums of $4,634 for 1999 and $3,781 in 1998 and contributions to a defined
contribution plan $5,000 for 1999 and $2,161 for 1998.
(4) Includes: (i) $20,000 paid as management consulting fees prior to becoming
an employee of the Company; (ii) non-cash compensation of $226,980 in November
1996 resulting from the estimated fair market value difference of the issuance
of 216,000 shares of Class B Common Stock for $6,300; and (iii) non-cash
compensation of $416,922 relating to the estimated fair market value of warrants
to purchase 284,000 shares of Class A Common Stock for $1.00 per share issued in
September 1997. See "Certain Relationships and Related Transactions."
(5) Mr. Mullikin joined the Company in May 1998 as its President and Chief
Operating Officer, and was also appointed as the acting Chief Financial Officer
of the Company upon the resignation of James H. Steinheider, the Company's
former Chief Financial Officer, in December 1998. Mr. Mullikin is entitled to an
annual salary of $150,000, plus a bonus to be approved by the Board of
Directors.
6) Represents non-cash compensation of $8,650 in June 1998 resulting from the
estimated fair market value difference of the issuance of 10,000 shares of Class
A Common Stock for $100. See "Certain Relationships and Related Transactions."
25
<PAGE>
7) Represents $4,501 paid by the Company for medical and disability insurance
premiums and contributions to a defined contribution plan $5,000 for Fiscal 1999
and $801 paid by the Company for medical and disability insurance premiums for
Fiscal 1998.
OPTION GRANTS IN THE LAST FISCAL YEAR
No stock options were granted to the Named Executive Officers during fiscal
1998.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION
VALUES
The following table sets forth certain information with respect to the
exercise of stock options during fiscal 1999 by the Named Executive Officers and
the number and value of unexercised options held by each of the Named Executive
Officers as of September 30, 1999:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Name Shares Acquired Value Realized Number of Number of Value of Value of
on Exercise Securities Securities Unexercised In Unexercised In the
Underlying Underlying the Money Money Options at
Unexercised Unexercised Options at Fiscal year-End -
Options at Fiscal Options at Fiscal Fiscal year-End Unexercisable (1)
Year-End -- Year-End -- - Exercisable(1)
Exercisable Unexercisable
Neal J.
Polan
David L.
Mullikin 40,000 60,000 70,000 $105,000
</TABLE>
(1) Calculated by multiplying the number of unexercised in-the-money options
outstanding at September 30, 1999 by the difference between the fair market
value of the Class A Common Stock at September 30, 1999 ($2.625) and the
option exercise price ($.875).
DIRECTOR COMPENSATION
During fiscal 1999, non-employee directors were entitled to receive $500
for each Board and committee meeting attended and were reimbursed for their
expenses in attending such meetings. Directors were not precluded from serving
the Company in any other capacity and receiving compensation therefor. In
addition, directors could also receive stock option grants under the Company's
1997 Stock Option Plan. In October 1997, the Company granted warrants to
purchase 15,000 shares of Class A Common Stock to Mr. Levitin as compensation
for performing investor relations services for the Company. The warrants are
currently exercisable at a price of$5.00 per share and expire in October 2007.
EMPLOYMENT AGREEMENTS
In September 1998, the Company entered into an employment agreement with
Neal J. Polan, the Chairman and Chief Executive Officer of the Company. The
initial term of the agreement expires on November 30, 2000
26
<PAGE>
and is automatically renewable for successive one year terms unless terminated
by either party. Pursuant to the agreement, Mr. Polan is not required to devote
more than 50% of his working time to his responsibilities at the Company. The
employment agreement with Mr. Polan provides for an annual base salary of
$200,000 plus an annual bonus to be approved by the Board of Directors. The
agreement also provides that Mr. Polan is entitled to certain expenses,
including an automobile and the costs related thereto and the costs of the
yearly premium on a term life insurance policy in the amount of
$2,000,000.During the initial term, Mr. Polan's employment can only be
terminated for cause or in the event of Mr. Polan's death or incapacity. In
connection with the Merger, Mr. Polan's existing employment agreement was
amended. The amended employment agreement reduces the amount of severance upon
termination of employment and provides that HealthCore would only have to pay
Mr. Polan the lesser of $150,000 or 60% of the remaining value of the contract
at the time of termination. In consideration for agreeing to the amended
employment agreement, Mr. Polan received 165,000 shares of Class A common stock.
Mr. Polan received registration rights covering these shares. This agreement was
terminated at the time of the merger.
In May 1998, the Company and David L. Mullikin, the President, Chief
Operating Officer and acting Chief Financial Officer, entered into a letter
agreement. The letter agreement provides for an annual base salary of $150,000,
plus a performance related bonus at the discretion of the Board of Directors. In
addition, as part of Mr. Mullikin's compensation, Mr. Mullikin received 10,000
shares of Class A Common Stock at a purchase price of $.01 per share. Pursuant
to the agreement, Mr. Mullikin has the right to receive certain medical,
retirement and other benefits. In connection with the Merger, Mr. Mullikin
amended his existing employment agreement with HealthCore to provide that he may
be terminated without cause. As consideration for such amendment, Mr. Mullikin
received lump sum cash payment of $100,000 and options to purchase 100,000
shares of common stock at $.10 per share. At the time of the Merger, HealthCore
terminated this agreement. In addition, Mr. Mullikin will receive registration
rights covering the shares underlying these options.
Upon consummation of the Merger, Richard Barton became the President and
CEO of the Company. Under an employment agreement to be effective at the time of
the merger, he will receive a salary of $200,000 per year and will be eligible
for a bonus of up to $100,000 per year based on attainment of performance
criteria to be established by the Board of Directors. If there is a change of
control of the combined company, under certain circumstances, Mr. Barton may
resign and will be entitled to up to three years of severance pay. The other two
executive officers of the company, Sridhar Jagannathan and, Michael Wheeler,
will not have employment agreements. Their annual salaries are $150,000 and
$100,000 respectively.
The Company has entered into indemnification agreements with each of its
directors and executive officers. Each such agreement provides that the Company
will indemnify the indemnitee against expenses, including reasonable attorney's
fees, judgments, penalties, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with
27
<PAGE>
any civil or criminal action or administrative proceeding arising out of the
performance of his duties as an officer, director, employee or agent of the
Company. Such indemnification will be available if the acts of the indemnitee
were in good faith, if the indemnitee acted in a manner he reasonably believes
to be in or not opposed to the best interests of the Company and, with respect
to any criminal proceeding, the indemnitee had no reasonable cause to believe
his conduct was unlawful.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of December 7, 1999,
based on information obtained from the persons named below, with respect to the
beneficial ownership of shares of common stock by (i) each person known by the
Company to beneficially own more than 5% of the outstanding shares of the
Company common stock (ii) each executive officer and director of the Company,
and (iii) all officers and directors of the Company as a group.
Beneficial ownership is defined in accordance with the rules of the SEC and
generally means the power to vote and/or to dispose of the securities regardless
of any economic interest therein. In computing the number and percentage
ownership of shares of common stock beneficially owned by a person, shares of
common stock subject to options or warrants held by that person that are
exercisable within 60 days are deemed outstanding. Such shares of common stock,
however, are not deemed outstanding for purposes of computing the percentage
ownership of stockholders other than such person.
- --------------------------------------------------------------------------------
NAME AND ADDRESS AMOUNT AND NATURE PERCENT
OF BENEFICIAL OWNER(1) OF BENEFICIAL OWNER OF CLASS
- --------------------------------------------------------------------------------
Richard Barton 7,765,982 53.7
- --------------------------------------------------------------------------------
Neal Polan 926,400(2) 6.3
- --------------------------------------------------------------------------------
Sridhar Jagannathan 458,438 3.2
- --------------------------------------------------------------------------------
Ralph Kennedy Frasier 52,920 0.4
- --------------------------------------------------------------------------------
Sylvia Dresner 2,117 0
- --------------------------------------------------------------------------------
Michael Wheeler 0 0
- --------------------------------------------------------------------------------
Michael Vetterli 0 0
- --------------------------------------------------------------------------------
All directors and officers 63.6
as a group (7 persons) 9,205,856
- --------------------------------------------------------------------------------
28
<PAGE>
(1) The address of each such individual is c/o Adatom.com, Inc., 920 Hillview
Court, Suite 160, Milpitas, California 95035.
(2) Includes (i)118,800 shares of stock held by Mr. Polan's wife as trustee for
their children, (ii)142,000 shares of common stock issuable upon exercise of
warrants held by Mr. Polan that are exercisable within 60 days, and (iii) 25,000
shares of common stock issuable upon exercise of warrants held jointly by Mr.
Polan and his wife that are exercisable within 60 days. Includes 129,600 shares
of common stock subject to the Escrow Agreement described below. Does not
include 894,000 shares of common stock for which Mr. Polan holds a proxy, and as
to all of which shares Mr. Polan disclaims beneficial ownership.
ESCROW AGREEMENT
In connection with the Company's IPO in 1997, the pre-IPO stockholders
placed, on a pro rata basis, a portion of their shares into escrow pending the
Company's attainment of certain earnings thresholds or per share stock price
thresholds. If these thresholds are not met, the shares subject to the escrow
agreement will be cancelled. The Company's management believed that while
operating the healthcare benefits business, it was unlikely that the conditions
of the escrow agreement would be met. In connection with the Merger, and subject
to stockholder approval, it was agreed that the escrow agreement would be
terminated. At the time of termination, the escrow stockholders would receive
20% of their shares free of the escrow agreement trading restrictions and the
remaining 80% of the shares would be cancelled.
Approval of the termination of the escrow agreement requires the approval
of at least two-thirds of the shares of common stock outstanding on the record
date excluding all shares of common stock held by escrow stockholders, whether
or not those shares are subject to the escrow agreement. Stockholders owning the
required number of shares are in the process of approving the termination of the
escrow agreement and it is currently believed that the escrow agreement will be
terminated in January 2000.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Between January and February 1997, Mr. Polan loaned an aggregate of
approximately $67,000 to the Company for working capital purposes. Such loans
were repaid together with interest at 10% per annum in March 1997 with a portion
of the proceeds of the Bridge Financing.
Mr. Polan and his wife, jointly, and Eli Levitin, a director of the
Company, invested $50,000 and $25,000, respectively, in the Bridge Financing in
March 1997 (on the same terms as non-affiliated investors) and, accordingly,
each received a Bridge Note in such amount, which was
29
<PAGE>
repaid from the proceeds of the Company's initial public offering, and 25,000
and 12,500 bridge warrants, respectively, which were exchanged for 25,000 and
12,500 Class A Warrants to purchase Class A Common Stock, respectively, upon the
completion of the Company's initial public offering.
In June 1997, Mr. Polan and Theodore White, Jr., a former employee of the
Company, entered into a voting agreement pursuant to which Mr. Polan was
entitled to vote all of the shares of Common Stock held by Mr. White. The voting
proxy expired on December 31, 1998 as a result of the Company's Minimum Pretax
Income being less than $1,000,000.
For the period from January 1997 until July 1998, the Company paid an
entity currently affiliated with Mr. Polan approximately $1,000 per month as
rent for the use of certain space in New York, New York. In addition, for the
period from August 1998 until April 1999, the Company paid an entity formerly
affiliated with Mr. Polan approximately $3,000 per month as rent for the use of
certain space in New York, New York.
In September 1997, the Company granted warrants to purchase 284,000 shares
of Class A Common Stock to Mr. Polan. The warrants are exercisable at a price
of$1.00 per share and expire in September 2007. At the time of the Merger, Mr.
Polan converted 142,000 of such warrants into 28,400 shares of stock. Warrants
to purchase the balance of 142,000 of such shares of Common Stock are currently
exercisable.
In October 1997, the Company granted warrants to purchase 15,000 shares of
Class A Common Stock to Mr. Levitin as compensation for performing investor
relations services for the Company. The warrants are immediately exercisable at
a price of $5.00 per share and expire in October 2007.
Mr. Polan devoted approximately 50% of his business time to our business
activities. Mr. Polan devoted approximately 50% of his business and investments
outside of the Company, some of which are or may be in the health care services
field. In the course of his activities, Mr. Polan may have occasionally been
presented with various business opportunities in the health care services
industry. Mr. Polan presented certain of these opportunities to our business,
although Mr. Polan had no agreement to do so. In addition, in 1998, we entered
into a one-year consulting agreement with Practice Management, Inc., whereby
Practice Management, Inc. agreed to market our business to labor groups, managed
care entities, preferred provider organizations and third party administrators
for an annual fee of $50,000. Mr. Polan entered into a separate agreement with
Practice Management, Inc. whereby Practice Management, Inc. agreed in exchange
for a one-time payment of $50,000 from Mr. Polan to present to Mr. Polan, in
preference to others certain business opportunities; provided, that the
agreement between Practice Management, Inc. and Mr. Polan provided that Practice
Management, Inc. shall be obligated to first present to the Company prior to Mr.
Polan, in his individual capacity, any business opportunities that may be
appropriate for our business. These arrangements and agreements might give rise
to certain conflicts of interest.
30
<PAGE>
In connection with the employment of David L. Mullikin, the Company's
President, Chief Operating Officer and acting Chief Financial Officer, in May
1998, the Company sold 10,000 shares of Class A Common Stock to Mr. Mullikin for
$100 in cash.
Prior to the closing of the Merger, Neal Polan entered into a two-year
employment agreement with the Adatom which provides for an annual salary of
$50,000, reimbursement of business expenses, health insurance and related
benefits. Mr. Polan will be required to work up to 60 hours per month as an
advisor for Company in mergers, acquisitions and strategic alliances. In
connection with the employment agreement, Mr. Polan will receive the right to
purchase stock in Adatom, Inc. in an amount equal to that number of Adatom
shares convertible into 350,000 shares of Common Stock in the Merger in exchange
for a promissory note in the amount of $320,760. As partial consideration for
his services rendered under the employment agreement, the promissory note will
be forgiven six months after the closing date of the merger.
In connection with the Merger, Mr. Polan received registration rights
covering 367,800 shares, including 142,000 shares underlying warrants.
In September 1997, in connection with his employment with HealthCore, Mr.
Polan received a warrant to purchase 142,000 shares of Common stock at $1.00 per
share. The warrant becomes exercisable if certain market price thresholds or
operating performance-based criteria of HealthCore are met. In connection with
the Merger, Mr. Polan entered into an agreement with HealthCore to exchange that
warrant for 28,400 shares of HealthCore common stock at the closing of the
merger.
On July 8, 1999 Eli Levitin, a director of the Company, purchased $50,000
of convertible debt of Adatom, Inc. through Jesup & Lamont Acquisition
Corporation, a company in which Mr. Levitin has a 10% interest. These securities
were converted into shares of Adatom, Inc. common stock immediately prior to the
Merger and were then exchanged for 50,661 shares of Common Stock pursuant to the
merger.
In connection with the merger, all holders of stock of Adatom, Inc., Neal
Polan and David Mullikin have entered into lock-up agreements that prohibit
transfer of some or all of their respective shares of Adatom.com, Inc.'s common
stock for up to a period of six months. The holders of Adatom, Inc. securities
have agreed to a lock-up covering all of their shares of Common Stock. Mr. Polan
has agreed to lock-up 796,800 shares, including 167,000 shares issuable upon
exercise of warrants and Mr. Mullikin has agreed to lock up the 100,000 shares
underlying the options being issued to him upon termination of employment. Mr.
Polan's lock-up agreement differs slightly from those of the other parties to
lock-up agreements in that it provides that 125,000 of his shares, which
represents a portion of the shares he owned prior to the Merger, will be
31
<PAGE>
subject to the lock-up agreement for a period of two months following the
closing and the remaining 671,800 shares will be subject to the lock-up
agreement for a period of six months following the closing.
At June 30, 1999, Adatom, Inc. owed Mr. Barton approximately $1,800,000 for
working capital loans made by Mr. Barton to Adatom, inc. Prior to the Merger,
Mr. Barton purchased shares of stock of Adatom, Inc. and the proceeds of this
purchase were used to repay the loan to him. In late August and early September
1999, Mr. Barton loaned Adatom, Inc. an aggregate principal amount of $225,000,
which was repaid in October after the consummation of the Merger. The interest
rate on these loans was 7 percent per annum. On December 3, 1999, Mr. Barton
loaned the Company $200,000 at no interest. This loan is payable on demand.
The Company believes that all of the transactions set forth above were made
on terms no less favorable to the Company than could have been obtained from
unaffiliated third parties. The Company has adopted a policy that all future
transactions between the Company and its officers, directors, principal
stockholders and their affiliates will be approved by a majority of the Board of
Directors, including a majority of the independent and disinterested outside
directors on the Board of Directors, and will continue to be on terms no less
favorable to the Company than could be obtained from unaffiliated third parties.
Other payments and transactions in connection with the Merger that would be
reported under Item 12, are described under Item 11, Executive Compensation.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
2 ____ Merger Agreement and Plan of Merger dated as of July 1, 1999
between Registrant and Adatom, Inc. (1)
2.1 ____ Asset Purchase Agreement dated July 28, 1999 between
Registrant and Randolph & Associates, Inc. (2)
3.1 ____ Amended and Restated Certificate of Incorporation of
Registrant
3.2 ____ By-laws of Registrant (3)
4.1 ____ Form of Bridge Note (3)
4.2 ____ Bridge Warrant Agreement (3)
4.3 ____ Form of Warrant Agreement (3)
4.4 ____ Form of Representative's Unit Purchase Option (3)
4.5 ____ Warrant Agreement with Neal J. Polan (4)
4.6 ____ Warrant Agreement with Eli Levitin (5)
4.7 ____ Warrant (restated) to purchase shares of Common Stock issued
to Jesup & Lamont Securities Corporation dated July 8, 1999
4.8 ____ Secured Convertible Promissory Note issued to Jesup & Lamont
Acquisition Company, LLC on July 8, 1999 (6)
32
<PAGE>
4.9 ____ Warrant (restated) to purchase shares of Common Stock issued
to Jesup & Lamont Securities Corporation dated September 15,
1999
4.10 ____ Warrant to purchase shares of Common Stock issued to Jesup &
Lamont Securities dated October 12, 1999
10.2 ____ Amended and Restated Escrow Agreement dated as of July 31,
1997 by and between Registrant, American Stock Transfer &
Company and certain stockholders of Registrant (3)
10.4 ____ Form of Indemnification Agreement (3)
10.5 ____ Lease Agreement for office space in Grandview, Missouri
between Registrant and J.C. Nichols Company, as amended by
Assignment and First Amendment of Lease dated July 18,1997 (3)
10.9 ____ Employment Agreement dated as of September 30, 1998 between
Registrant and Neal J. Polan (7)
10.10(a) __ 1997 Stock Option Plan, as amended (8)
10.11 ____ Letter Amendment dated April 27, 1999 between Registrant and
Neal J. Polan (9)
10.12 ____ Engagement Letter dated April 27, 1999 among Registrant,
Adatom, Inc. and Jesup & Lamont (9)
10.13 ____ Negotiable Promissory Note for $250,000 dated April 28, 1999
from Adatom, Inc. to Registrant (6)
10.14 ____ Security Agreement between Registrant and Adatom, Inc. dated
April 28, 1999 (6)
10.15 ____ Form of Escrow Termination Agreement between Registrant and
escrow shareholders acknowledged by Adatom, Inc. (6)
10.16 ____ Form of Irrevocable Proxy granted by escrow shareholders to
Neal J. Polan (6)
10.17 ____ Engagement Letter between Registrant and Kaufman Bros., L.P.
dated July 26, 1999 (6)
10.18 ____ 1999 Incentive and Non-Qualified Stock Option Plan (6)
10.19 ____ Employment Agreement dated as of October 11, 1999 between
Registrant and Neal J. Polan.
10.20 ____ Form of Employment Agreement for Richard Barton
23 ____ Consent of Richard A. Eisner & Company, LLP, Registrant's
Independent Public Auditors
24 ____ Power of Attorney (Included as part of Signature Page)
27.1 ____ Financial Data Schedule
33
<PAGE>
- ------------------
(1) Incorporated by reference to exhibit of same number filed with Registrant's
Current Report on Form 8-K filed with the Securities and Exchange
Commission on July 9, 1999.
(2) Incorporated by reference to exhibit of same number filed with Registrant's
Current Report on Form 8-K filed with the Securities and Exchange
Commission on August 11, 1999.
(3) Incorporated by reference to exhibit of same number filed with Registrant's
Registration Statement on Form SB-2 (File No. 333-28233) declared effective
by the Securities and Exchange Commission on October 14, 1997.
(4) Incorporated by reference to exhibit number 4.1 filed with Registrant's
Registration Statement Form S-3 (File No. 333-68557) filed with the
Securities and Exchange Commission on December 8, 1998.
(5) Incorporated by reference to exhibit number 4.2 filed with Registrant's
Registration Statement Form S-3 (File No. 33-68557) filed with the
Securities and Exchange Commission on December 8, 1998.
(6) Incorporated by reference to exhibit of same number filed with Registrant's
Registration Statement on Form S-4 (File No. 33-87207) declared effective
by the Securities and Exchange Commission on September 20, 1999.
(7) Incorporated by reference to exhibit of same number filed with Registrant's
Annual Report on Form 10KSB for the year ended September 30, 1998.
(8) Incorporated by reference to exhibit of same number filed with Registrant's
Quarterly Report on Form 10QSB for the quarter ended March 31, 1999.
(9) Incorporated by reference to exhibit of same number filed with Registrant's
Current Report on Form 8-K filed with the Securities and Exchange
Commission on May 3, 1999.
34
<PAGE>
(b) REPORTS ON FORM 8-K.
(1) A report on From 8-K was filed on July 9, 1999 reporting information under
Item 5 of that report.
(2) A report on Form 8-K was filed on August 12, 1999 reporting information
under Item 2 of that report. An amendment to said report was filed on
September 1, 1999 reporting pro forma financial information under Item 7 of
that report for the matters covered in the original filing on August 12,
1999.
35
<PAGE>
INDEX TO FINANCIAL STATEMENTS
PAGE
----
Report of Independent Auditors............................................. F-1
Balance Sheet as of September 30, 1999..................................... F-2
Statements of Operations for the years ended September 30, 1999 and 1998 .. F-3
Statements of Changes in Stockholders' Equity for the years ended
September 30, 1999 and 1998.............................................. F-4
Statements of Cash Flows for the years ended September 30, 1999 and 1998... F-5
Notes to Financial Statements.............................................. F-6
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders
HealthCore Medical Solutions, Inc.
Grandview, Missouri
We have audited the accompanying balance sheet of HealthCore Medical Solutions,
Inc. as of September 30, 1999 and the related statements of operations, changes
in stockholders' equity/(capital deficiency) and cash flows for the years ended
September 30, 1999 and 1998. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements enumerated above present fairly, in all
material respects, the financial position of HealthCore Medical Solutions, Inc.
as of September 30, 1999 and the results of its operations and its cash flows
for the years ended September 30, 1999 and 1998, in conformity with generally
accepted accounting principles.
As described more fully in Note A to the financial statements, in July 1999, the
Company sold its discount healthcare business and in October 1999, the Company
was deemed to be acquired by Adatom, Inc. in a transaction being accounted for
as a reverse acquisition.
Richard A. Eisner & Company, LLP
Florham Park, New Jersey
November 19, 1999
F-1
<PAGE>
HEALTHCORE MEDICAL SOLUTIONS, INC.
BALANCE SHEET
SEPTEMBER 30, 1999
ASSETS
Current assets:
Cash and cash equivalents $ 1,816,000
Prepaid expenses and other current assets 96,000
Note receivable from Adatom, Inc. 250,000
------------
$ 2,162,000
============
LIABILITIES
Current liabilities:
Accounts payable and accrued expenses $ 233,000
------------
Commitment and contingency
STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value;
authorized 5,000,000 shares;
issued and outstanding - none
Common stock, $.01 par value:
Class A, authorized, 19,784,000 shares;
issued and outstanding 3,190,750 shares 32,000
Class B, authorized, 216,000 shares;
issued and outstanding 216,000 shares 2,000
Additional paid-in capital 11,209,000
Accumulated deficit (9,314,000)
------------
Total stockholders' equity 1,929,000
------------
$ 2,162,000
============
SEE NOTES TO FINANCIAL STATEMENTS
F-2
<PAGE>
STATEMENTS OF OPERATIONS
YEAR ENDED SEPTEMBER 30,
------------------------
1999 1998
---- ----
Revenues:
Membership revenues $ 163,000 $ 84,000
----------- -----------
Costs and expenses:
Costs of membership 123,000 74,000
General and administrative 1,973,000 1,794,000
Selling and marketing 464,000 385,000
Interest expense 12,000 71,000
----------- -----------
Total 2,572,000 2,324,000
----------- -----------
Loss before other income (expense) (2,409,000) (2,240,000)
----------- -----------
Other income (expense):
Interest income 136,000 253,000
Loss on sale of business (65,000)
Merger expenses (421,000)
----------- -----------
Total (350,000) 253,000
----------- -----------
NET LOSS $(2,759,000) $(1,987,000)
=========== ===========
Basic and diluted net
loss per common share $(1.15) $ (.89)
====== ======
Weighted average number of
common shares outstanding 2,404,994 2,220,466
=========== ===========
SEE NOTES TO FINANCIAL STATEMENTS
F-3
<PAGE>
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY\CAPITAL DEFICIENCY (NOTE A)
<TABLE>
<CAPTION>
COMMON STOCK
---------------------------------------------------
CLASS A CLASS B ADDITIONAL
---------------------- ------------------------ PAID-IN ACCUMULATED
SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT TOTAL
------ ------ ------ ------ ------- ------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE - SEPTEMBER 30, 1997 984,000 10,000 216,000 2,000 2,393,000 (4,568,000) (2,163,000)
Compensatory common
stock issued 10,000 9,000 9,000
Common stock issued 2,024,000 20,000 8,355,000 8,375,000
Net loss (1,987,000) (1,987,000)
---------- ----------- ------- ----------- ----------- ----------- -----------
BALANCE, SEPTEMBER 30, 1998 3,018,000 30,000 216,000 2,000 10,757,000 (6,555,000) 4,234,000
Compensatory common
stock issued 165,000 2,000 431,000 433,000
Issuance of warrants in
connection with
litigation settlement 13,000 13,000
Exercise of options` 7,750 8,000 8,000
Net loss (2,759,000) (2,759,000)
---------- ----------- ------- ----------- ----------- ----------- -----------
BALANCE, SEPTEMBER 30, 1999 3,190,750 $ 32,000 216,000 $ 2,000 $11,209,000 $(9,314,000) $ 1,929,000
---------- ----------- ------- ----------- ----------- ----------- -----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
F-4
<PAGE>
HEALTHCORE MEDICAL SOLUTIONS, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
------------------------
1999 1998
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net loss $(2,759,000) $(1,987,000)
Adjustments to reconcile net loss to net cash (used in) operating
activities:
Depreciation and amortization 45,000 52,000
Amortization of discount on notes payable - bridge units 32,000
Common stock and warrants issued for services 433,000 9,000
Warrants issued for litigation settlement 13,000
Loss on sale of the business 65,000
Write-down of worthless equipment 32,000
Changes in:
Prepaid expenses and other assets 82,000 (69,000)
Accounts payable and accrued expenses 119,000 (432,000)
Other assets 2,000
Deferred revenue 32,000
----------- -----------
Net cash used in operating activities (1,936,000) (2,395,000)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of assets 4,000
Acquisition of property and equipment (4,000) (87,000)
Advances to affiliate (250,000)
----------- -----------
Net cash used in investing activities (250,000) (87,000)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Decrease in restricted cash 85,000
Repayment of notes payable - bridge units (2,300,000)
Repayment of notes payable (104,000)
Principal payments on obligation under capital lease (46,000) (54,000)
Net proceeds from issuance of common stock 8,748,000
Proceeds from exercise of options 8,000
----------- -----------
Net cash (used in) provided by financing activities (38,000) 6,375,000
----------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (2,224,000) 3,893,000
Cash and cash equivalents - beginning of year 4,040,000 147,000
----------- -----------
CASH AND CASH EQUIVALENTS - END OF YEAR $ 1,816,000 $ 4,040,000
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for:
Interest $ 12,000 $ 178,000
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
F-5
<PAGE>
NOTE A - SALE OF BUSINESS AND REVERSE ACQUISITION
HealthCore Medical Solutions, Inc. (the "Company") was organized as a Delaware
corporation in February 1997 and prior to July 1999, it marketed and
administered health care service discount programs which are designed to enable
participants (members), who are enrolled through various organizations such as
insurance carriers, corporations, and unions to realize savings on purchases of
products and services.
In July 1999, the Company sold certain of its assets relating to its discount
healthcare business and became a non-operating public company. The selling price
amounted to $4,000 plus assumption of obligations under a capital lease and
assumption of all obligations under the assigned contracts, including refund
obligations for membership fees. The Company recognized a loss of $65,000 on
this disposition.
On October 13, 1999, the Company issued 11,036,369 shares to the Adatom, Inc.
("Adatom") shareholders in connection with the merger of Adatom with and into
the Company (the "Adatom Transaction"). The transaction will be accounted for as
a reverse acquisition whereby Adatom is treated as the acquirer for accounting
purposes. Concurrently, the Company changed its name to Adatom.com, Inc. and the
Class B common stock was converted to Class A common stock. Expenses of $421,000
incurred in connection with the Adatom transaction have been charged to
operations in the year ended September 30, 1999.
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
[1] CASH AND CASH EQUIVALENTS:
Cash and cash equivalents include cash on hand, demand deposits and all
highly liquid investments with a maturity of three months or less at the time of
purchase. As of September 30, 1999, $1,804,000 was held in a money market mutual
fund.
[3] MANAGEMENT ESTIMATES:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
[6] REVENUE RECOGNITION:
Membership revenues are recognized ratably over the life of the membership
for the period subsequent to the expiration of the money back guarantee, if any.
[7] NET LOSS PER COMMON SHARE:
Basic and diluted net loss per common share has been computed on the basis
of the net loss for the year divided by the weighted average shares of the
Class A and Class B common stock outstanding during the year excluding
900,000 shares placed in escrow (see Note D[1]). All warrants and stock
options which are potentially dilutive securities have been excluded from
the calculation since they would be anti-dilutive.
F-6
<PAGE>
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
[8] STOCK-BASED COMPENSATION:
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation" ("FAS 123") allows companies to either expense
the estimated fair value of employee stock options or to continue to
follow the intrinsic value method set forth in Accounting Principles Board
Opinion 25, "Accounting for Stock Issued to Employees" ("APB 25") but
disclose the pro forma effects on net loss had the fair value of the
options been expensed. The Company has elected to apply APB 25 in
accounting for its employee stock options incentive plans.
NOTE C - RELATED PARTY TRANSACTIONS
Beginning in November 1996, the Company rented office space from an affiliate of
the Chairman of the Board. Rent expense related to this office space amounted to
$37,000 and $21,500 for the years ended September 30, 1999 and 1998,
respectively.
From April through June 1997, the Company loaned $37,200 to a former officer
bearing interest from 8% to 10% per annum, collateralized by 15,000 shares of
the Company's Class A common stock. Principal payments were payable through
March 1999. During the year ended September 30, 1998, principal payments
aggregated $400. As of September 30, 1998, the outstanding principal balance of
$36,800 was in default and, during 1998, the Company established an allowance of
$22,000. In October 1999, the Company acquired the 15,000 shares of common stock
with a market value of $39,000.
NOTE D - STOCKHOLDERS' EQUITY
[5] INITIAL PUBLIC OFFERING:
On October 17 1997, the Company, in its initial public offering ("IPO"),
sold 1,760,000 units. Each unit consists of one share of Class A common
stock and one redeemable warrant to purchase a share of Class A common
stock at $6.50, expiring October 2002. On November 10, 1997, the
underwriter executed its option to sell an additional 264,000 shares of
the Company's common stock. Proceeds from the IPO, net of expenses of
$1,745,000, approximated $8,375,000. In connection with the IPO, the
underwriter was granted an option to purchase up to 176,000 units at $6.00
per unit and a director was granted a warrant to purchase 15,000 shares at
$5.00 per share.
Upon consummation of the Company's IPO, certain shareholders deposited
900,000 shares of common stock (the "Escrow Shares") into an escrow
account. Some or all of these shares are to be released upon the Company
meeting certain performance goals or the stock price exceeding certain
targets. If these goals are not met the shares will be canceled. As of
September 30, 1999, the Company did not attain the income level nor did
the stock price meet or exceed the per share value necessary for the
release of the escrow shares.
F-7
<PAGE>
NOTE D - STOCKHOLDERS' EQUITY (CONTINUED)
[6] ISSUANCE OF CLASS A COMMON STOCK:
In April 1999, in partial consideration for the Chairman of the Board
modifying his employment agreement, the Company issued him 165,000 shares of
Class A common stock valued based on the market value at date of issuance at
$433,000.
[7] WARRANTS:
At September 30, 1999, the Company had outstanding warrants, held by the
chairman of the board, to purchase 284,000 shares of Class A common stock
expiring September 2007 with an exercise price of $1 per share. Warrants
for 142,000 shares will become exercisable upon the Company meeting
certain performance goals or the stock price exceeding certain targets. As
of September 30, 1999, the Company did not attain the income level nor did
the stock price meet or exceed the per share value necessary for such
warrants to become exercisable. However, in conjunction with the Adatom
Transaction, such warrants were converted into 28,400 shares of Class A
common stock. The remaining warrants to purchase 142,000 shares are
currently exercisable.
During the year ended September 30, 1999, the Company issued warrants to
purchase 100,000 shares of Class A common stock in connection with
professional services rendered in connection with the Adatom transaction.
Additionally, warrants were issued to purchase 12,500 shares of Class A
common stock in connection with a litigation settlement.
Subsequent to September 30, 1999, in conjunction with the Adatom
Transaction, a warrant to purchase 100,000 shares was issued to an
investment banker.
[8] STOCK OPTION PLAN:
Subsequent to September 30, 1999, in conjunction with the Adatom
Transaction, an option to purchase 100,000 shares was issued to an executive.
In 1997, the Company adopted a stock option plan. These shares are
reserved for issuance upon exercise of either incentive or nonincentive stock
options which may be granted from time to time by the board of directors to
employees and others. The options have a term of 10 years and outstanding
options expire between May 2007 through September 2008.
The fair value of each option granted has been estimated on the date of
grant using the Black-Scholes options pricing model with the following
assumptions; no dividend yield, expected volatility of 40%, risk-free interest
rates ranging from 4.65% and 6.00%, and expected lives of approximately 10
years. The weighted average fair value of options granted during 1999 and 1998
were $0.64 and $0.73 per share, respectively.
The Company applies APB 25 in accounting for its stock option incentive
plan and, accordingly, recognizes compensation expense for the difference
between fair value of the underlying common stock and the exercise price
of the option at the date of grant. Had compensation cost for the
Company's stock option plan been determined based upon the fair value at
the grant date for awards under the plan consistent with the methodology
prescribed under FAS 123, the Company's proforma net loss for 1999 and
1998 would have been approximately $(2,380,000) and $(2,057,000),
respectively, and net loss per share would have been approximately $(0.99)
and $(0.93), respectively.
F-8
<PAGE>
NOTE D - STOCKHOLDERS' EQUITY (CONTINUED)
The following table summarizes stock option transactions under the Plans:
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
--------------------------------------------------------------------------
1999 1998
------------------------------------ -----------------------------------
WEIGHTED WEIGHTED
AVERAGE AVERAGE
EXERCISE EXERCISE
SHARES PRICE SHARES PRICE
------ ----- ------ -----
<S> <C> <C> <C> <C>
Outstanding options at the
beginning of year 159,500 $2.16 57,500 $5.00
Options granted 46,000 1.05 125,000 1.37
Options forfeited (23,000) 5.00
Options exercised (7,750) 1.00
------ ---- -------- -----
Outstanding options at the
end of year 197,750 $1.94 159,500 $2.16
======= ===== ======= =====
</TABLE>
Subsequent to September 30, 1999, options on 13,000 shares were granted.
The following table summarizes information about stock options outstanding as of
September 30, 1999:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------------------------------------------------------ ------------------------------------------
WEIGHTED
AVERAGE WEIGHTED WEIGHTED
REMAINING AVERAGE AVERAGE
EXERCISE NUMBER, CONTRACTUAL EXERCISE NUMBER EXERCISE
PRICE OUTSTANDING LIFE PRICE EXERCISABLE PRICE
----------- ----------- --------------- ------------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
$0.875 -
$1.09 148,250 8.87 $0.92 147,500 $ .90
$5.00 49,500 7.99 $5.00 49,500 $5.00
</TABLE>
[7] SHARES RESERVED FOR ISSUANCE:
The Company has reserved 4,229,150 shares of its Class A common stock for
issuance upon exercise of the outstanding warrants and options.
[8] COMMON AND PREFERRED STOCK:
The Class A and Class B shares of common stock are substantially identical
except that the Class A common stockholders have the right to cast one
vote per share and the Class B common stockholders have the right to cast
five votes per share.
F-9
EXHIBIT 10.20
NOTE E - INCOME TAXES
The Company's deferred tax asset as of September 30, 1999 represents a benefit
from net operating loss carryforwards of $2,667,000 which is reduced by a
valuation allowance of $2,667,000 since the future realization of such tax
benefit is not presently determinable.
As of September 30, 1999, the Company has a net operating loss carryforward of
approximately $6,261,000 expiring in 2012 and 2019. As a result of the IPO,
usage of approximately $2,000,000 of this net operating loss carryforward is
limited to approximately $789,000 per year.
The difference between the statutory federal income tax rate applied to the
Company's net loss and the Company's effective income tax rate for the years
ended September 30, 1999 and 1998 is summarized as follows:
YEAR ENDED
SEPTEMBER 30,
------------------------
1999 1998
------ --------
Statutory federal income tax rate 34.0% 34.0%
Increase in valuation allowance (35.7) (33.7)
Miscellaneous (1.7) (0.3)
---- ----
Effective income tax rate 0.0% 0.0%
==== ====
NOTE F - COMMITMENT AND CONTINGENCY
OPERATING LEASE:
The Company leases office space with initial or remaining terms of one year or
more expiring through October 1999. The lease obligates the Company for property
taxes, insurance and maintenance. Future minimum rental payments (including
maintenance costs) under this lease is $2,000.
Office and equipment rent expense inclusive of taxes, maintenance and insurance,
aggregated $214,000 for the year ended September 30, 1999 and $154,000 for the
year ended September 30, 1998.
F-10
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities and Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Date: December 21, 1999 HEALTHCORE MEDICAL SOLUTIONS, INC.
By: /S/ RICHARD S. BARTON
----------------------------------------
Richard S. Barton
Chairman and Chief Executive Officer
Pursuant to the requirements of the Securities and Exchange Act of 1934,
this report has been signed below by the following persons in the capacity and
as of the date indicated.
Name Title Date
---- ----- ----
/S/ RICHARD S. BARTON
- ----------------------- Chairman of the Board December 21, 1999
Richard S. Barton and Chief Executive Officer
(principal executive officer)
/S/MICHAEL M. WHEELER
- ---------------------- Secretary and December 21, 1999
Michael M. Wheeler Principal Accounting Officer
/S/ SRIDHAR JAGANNATHAN Director December 21, 1999
- ----------------------
Sridhar Jagannathan
/S/ NEAL J. POLAN Director December 21, 1999
- -------------------------
Neal J. Polan
Exhibit 3.1
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
HEALTHCORE MEDICAL SOLUTIONS, INC.
----------------------------------------------
(Pursuant to Sections 242 and 245 of the General Corporation Law of the State of
Delaware)
HealthCore Medical Solutions, Inc., a corporation organized and existing
under the General Corporation Law of the State of Delaware (the "Corporation")
does hereby certify as follows:
A. The name of the Corporation is HealthCore Medical Solutions, Inc. The
date of filing of the original Certificate of Incorporation with the Secretary
of State of the State of Delaware was February 11, 1997. An Amended and Restated
Certificate of Incorporation was filed on August 4, 1997.
B. Such amendments and additions made by this Amended and Restated
Certificate of Incorporation are set forth herein and have been duly adopted
pursuant to the provisions of Sections 242 and 245 of the General Corporation
Law of the State of Delaware.
C. The Amended and Restated Certificate of Incorporation is hereby amended
and restated in its entirety to read as follows:
FIRST: The name of the Corporation is Adatom.com, Inc.
SECOND: The address of the Corporation's registered office in the State of
Delaware is located at 1013 Centre Road, Wilmington, County of New Castle. The
name of its registered agent at such address is Corporation Service Company.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of Delaware.
FOURTH:
A. The aggregate number of shares which the Corporation shall have
authority to issue is Fifty-five Million (55,000,000) shares, consisting of (i)
Fifty Million (50,000,000) shares of common Stock, $.01 par value per share (the
"Common Stock") and (ii) Five Million (5,000,000) shares of Preferred Stock,
$.01 par value per share (the "Preferred Stock").
1
<PAGE>
B. The Preferred Stock may be issued from time to time in one or more
series. The Board of Directors of the Corporation is hereby expressly authorized
to provide, by resolution or resolutions duly adopted by its prior to issuance,
for the creation of each such series and to fix the designation and the powers,
preferences, rights, qualifications, limitations and restrictions relating to
the shares of each such series (the "Preferred Stock Designation"). The
authority of the Board of Directors with respect to each series of Preferred
Stock shall include, but not be limited to, determining the following:
(2) the designation of such series, the number of shares to
constitute such series and the stated value if different from the
par value thereof,
(3) whether the shares of such series shall have voting
rights, in addition to any voting rights provided by law, and, if
so, the terms of such voting rights, which may be general or
limited;
(4) the dividends, if any, payable on such series, whether any
such dividends shall be cumulative, and, if so, from what dates, the
conditions and dates upon which such dividends shall be payable, and
the preference or relation which such dividends shall bear to the
dividends payable on any shares of stock of any other class or any
other series of Preferred Stock;
(5) whether the shares of such series shall be subject to
redemption by the Corporation, and, if so, the times, prices and
other conditions of such redemption;
(6) the amount or amounts payable upon shares of such series
upon, and the rights of the holders of such series in, the voluntary
or involuntary liquidation, dissolution or winding up, or upon any
distribution of the assets, of the Corporation;
(7) whether the shares of such series shall be subject to the
operation of retirement or sinking fund and, if so, the extent to
and the manner in which any such retirement or sinking fund shall be
applied to the purchase or redemption of the shares of such series,
retirement or other corporate purposes and the terms and provisions
relating to the operation thereof;
(8) whether the shares of such series shall be convertible
into, or exchangeable for, shares of stock of any other class or any
other series of Preferred Stock or any other securities and, if so,
the price or prices or the rates of conversion or exchange and the
method, if any, of adjusting the same, and any other terms and
conditions of conversion or exchange;
(9) the limitations and restrictions, if any, to be effective
while any shares of such series are outstanding upon the payment of
dividends or the making of other distributions on, and upon the
purchase redemption or other acquisition by the Corporation of, the
Common Stock or shares of stock of any other class or any other
series of Preferred Stock;
2
<PAGE>
(10) the conditions or restrictions, if any, upon the creation
of indebtedness of the Corporation or upon the issue of any
additional stock, including additional shares of such series or of
any other series of Preferred Stock or of any other class; and
(11) any other powers, preferences and relative,
participating, optional and other special rights, and any
qualifications, limitations and restrictions, thereof.
The powers, preferences and relative, participating, optional and other
special rights of each series of Preferred Stock, and the qualifications,
limitations or restrictions thereof, if any, may differ from those of any and
all other series at any time outstanding. All shares of any one series of
Preferred Stock shall be identical in all respects with all other shares of such
series, except that shares of any one series issued at different times may
differ as to the dates from which dividends thereof shall be cumulative.
FIFTH: The following provisions are inserted for the management of the
business and for the conduct of the affairs of the Corporation, and for further
definition, limitation and regulation of the powers of the Corporation and of
its directors and stockholders:
(1) The election of directors need not be by written ballot,
unless the bylaws so provide. and
(2) The Board of Directors shall have power without the assent
or vote of the stockholders to make, alter, amend, change, add to or
repeal the By-Laws of the Corporation.
SIXTH: The Corporation shall indemnify and advance expenses to the fullest
extent permitted by Section 145 of the General Corporation Law of Delaware, as
amended from time to time, each person who is or was a director or officer of
the Corporation and the heirs, executors and administrators of such a person.
SEVENTH: Whenever a compromise or arrangement is proposed between the
Corporation and its creditors or any class of them and/or between the
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware, may, on application on a summary way
of the Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for the Corporation under the
provisions of Section 291 of Title 8 of the Delaware Code or on the application
of trustees in dissolution or of any receiver or receivers appointed for the
Corporation under the provisions of Section 279 of Title 8 of the Delaware Code
order a meeting or the creditors of class of creditors, and/or of the
stockholders or a class of stockholders of the Corporation, as the case may be,
to be summoned in such manner as the said court directs. If a majority in number
representing three-fourths in value of the creditors or class of creditors,
and/or of the stockholders or class of stockholders of the Corporation, as the
case may be, agree to any compromise or arrangement and to any reorganization of
the Corporation as a consequence of such compromise or arrangement, the said
compromise or arrangement and the said reorganization shall, if sanctioned by
the court to which the said application
3
<PAGE>
has been made be binding on all the creditors or class of creditors, and/or on
all the stockholders or class of stockholders, of the Corporation, as the case
may be, and also on the Corporation.
EIGHTH: The personal liability of directors of the Corporation is hereby
eliminated to the full extent permitted by Section 102(b)(7) of the General
Corporation Law of the State of Delaware as the same may be amended and
supplemented.
NINTH: The Corporation reserves the right to amend, alter, change or
repeal any provision contained in this Certificate of Incorporation in the
manner now or hereafter prescribed by law, and all rights and powers conferred
herein on stockholders, directors and officers are subject to this reserved
power.
IN WITNESS THEREOF, I have hereunto signed my name and affirm that the
statements made herein are true under the penalties of perjury, this ________
day of ________________, 1999.
HEALTHCORE MEDICAL SOLUTIONS, INC.
By: __________________________________
Neal J. Polan
Chairman and Chief Executive Officer
4
EXHIBIT 4.7
NEITHER THIS WARRANT NOR THE WARRANT STOCK HAS BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED. THE COMPANY WILL NOT TRANSFER THIS WARRANT
OR THE WARRANT SHARES UNLESS (i) THERE IS AN EFFECTIVE REGISTRATION COVERING
SUCH WARRANT OR SUCH WARRANT SHARES, AS THE CASE MAY BE, UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, AND APPLICABLE STATES SECURITIES LAWS, (ii) IT FIRST
RECEIVES A LETTER FROM AN ATTORNEY, ACCEPTABLE TO THE BOARD OF DIRECTORS OR ITS
AGENTS, STATING THAT IN THE OPINION OF THE ATTORNEY THE PROPOSED TRANSFER IS
EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED AND UNDER
ALL APPLICABLE STATE SECURITIES LAWS, OR (iii) THE TRANSFER IS VALIDLY MADE
PURSUANT TO RULE 144 UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
WARRANT NO. ______ 56,201 SHARES
Void after 5:00 p.m. New York City Time, on July 8, 2004.
Warrant to Purchase 56,201 Shares of Common Stock, no par value per share
WARRANT TO PURCHASE SHARES OF COMMON STOCK
OF
ADATOM.COM, INC.
This Is To Certify That, FOR VALUE RECEIVED, JESUP & LAMONT SECURITIES
CORPORATION ("Holder") having an address at 650 Fifth Avenue, New York, New York
10019, is entitled to purchase, subject to the provisions of this Warrant
("Warrant"), from Adatom.com, Inc., a Delaware corporation (the "Company"),
FIFTY-SIX THOUSAND TWO HUNDRED ONE (56,201) fully paid, validly issued and
non-assessable shares of Common Stock (the "Common Stock"), no par value per
share, of the Company at an exercise price of $.99 per share at any time or from
time to time during the period from the date hereof to July 8, 2004, but not
later than 5:00 p.m. New York City Time, on July 8, 2004. This Warrant is being
issued pursuant to the terms of a Letter Agreement, dated April 27, 1999, as
amended, by and between Jesup & Lamont Securities Corporation, an affiliate
1
<PAGE>
of Holder, and Adatom, Inc., a California corporation which has merged into the
Company effective as of the date hereof (the "Engagement Letter). The number of
shares of Common Stock to be received upon the exercise of this Warrant and the
price to be paid for each share of Common Stock may be adjusted from time to
time as hereinafter set forth. The shares of Common Stock deliverable upon such
exercise, and as adjusted from time to time, are hereinafter sometimes referred
to as "Warrant Shares" and the exercise price of a share of Common Stock in
effect at any time and as adjusted from time to time is hereinafter sometimes
referred to as the "Exercise Price."
(1) EXERCISE OF WARRANT. This Warrant may be exercised in whole or in part
at any time or from time to time on or after the date hereof and until July 8,
2004 (the "Exercise Period"); provided, however, that if such day is a day on
which banking institutions in the State of New York are authorized by law to
close, then on the next succeeding day which shall not be such a day. This
Warrant may be exercised by presentation and surrender hereof to the Company at
its principal office or to the Company's warrant agent, if any has been so
appointed, with the Purchase Form annexed hereto duly executed and accompanied
by payment of the Exercise Price, in cash or by certified or bank cashier's
check, for the number of Warrant Shares specified in such form. Notwithstanding
the foregoing, in lieu of any cash payment required hereunder, the Holder of
this Warrant shall have the right at any time during the Exercise Period to
exercise the Warrant in full or in part by surrender of this Warrant (with the
election at the end hereof duly executed) to the Company at its principal office
or to the Company's warrant agent, if any has been so appointed, in exchange for
the number of Warrant Shares equal to the product of (a) the number of Warrant
Shares as to which the Warrant is being exercised multiplied by
2
<PAGE>
(b) a fraction, the numerator of which is the Current Market Price (as defined
in Section (11) below) of the Common Stock less the Exercise Price and the
denominator of which is the Current Market Price. As soon as practicable after
each such exercise of the Warrants, the Company shall issue or cause to be
issued and delivered to the Holder a certificate or certificates for the Warrant
Shares issuable upon such exercise, registered in the name of the Holder. The
Warrant shall be deemed to have been exercised immediately prior to the close of
business on the date of any such exercise, provided such exercise is in
accordance with the provisions set forth herein. If this Warrant should be
exercised in part only, the Company shall, upon surrender of this Warrant for
cancellation, execute and deliver a new Warrant evidencing the rights of the
Holder thereof to purchase the balance of the Warrant Shares purchasable
thereunder. Upon receipt by the Company of this Warrant at its office in proper
form for exercise, the Holder shall be deemed to be the holder of record of the
shares of Common Stock issuable upon such exercise, notwithstanding that the
stock transfer books of the Company shall then be closed or that certificates
representing such shares of Common Stock shall not then be physically delivered
to the Holder.
(2) RESERVATION OF SHARES. The Company shall at all times reserve for
issuance and/or delivery upon exercise of this Warrant such number of shares of
its Common Stock as shall be required for issuance and delivery upon exercise of
the Warrants.
(3) FRACTIONAL SHARES. No fractional shares or script representing
fractional shares shall be issued upon the exercise of this Warrant. If more
than one Warrant shall be exercised at one time by the Holder, the number of
full shares which shall be issuable upon exercise thereof shall be computed on
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<PAGE>
the basis of the aggregate number of full shares issuable upon such exercise. No
adjustment shall be made in respect of cash dividends on Warrant Shares
delivered upon exercise of any Warrant. With respect to any fraction of a share
called for upon exercise hereof, the Company shall pay to the Holder an amount
in cash equal to such fraction multiplied by the average closing bid and asked
prices of the Common Stock on the last available date for which quotations are
available immediately preceding the date of exercise of this Warrant, or if the
bid and asked prices are not so reported, then the current market value shall be
an amount, not less than the book value thereof as at the end of the most recent
fiscal year of the Company ending prior to the date of the exercise of the
Warrant, determined in such reasonable manner as may be prescribed by the Board
of Directors of the Company.
(4) EXCHANGE OR LOSS OF WARRANT. This Warrant is exchangeable, without
expense, at the option of the Holder, upon presentation and surrender hereof to
the Company for other Warrants of different denominations entitling the holder
thereof to purchase in the aggregate the same number of shares of Common Stock
purchasable hereunder. This Warrant may be divided or combined with other
Warrants which carry the same rights upon presentation hereof at the principal
office of the Company with a written notice specifying the denominations in
which new Warrants are to be issued and signed by the Holder hereof. The term
"Warrant" as used herein includes any Warrants into which this Warrant may be
divided or exchanged. Upon receipt by the Company or its warrant agent, if any,
of evidence satisfactory to it of the loss, theft, destruction or mutilation of
this Warrant, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Warrant, if mutilated, the Company will execute and deliver a new Warrant of
like tenor and date.
(5) RIGHTS OF THE HOLDER. The Holder shall not, by virtue hereof, be
entitled to any rights of a stockholder in the Company, either at law or equity,
and the rights of the Holder are limited to those expressed in the Warrant and
are not enforceable against the Company except to the extent set forth herein
and in any warrant agreement entered into by and between the Company and a
warrant agent with respect to the Warrants. In the event the Company enters into
a warrant agreement with a warrant agent, the terms of the Warrant shall be
embodied in the warrant agreement; and the acceptance of this Warrant by the
Holder shall be deemed consent by the Holder for the Company to enter into any
such warrant agreement, upon such terms and conditions mutually agreeable
between the Company and any such warrant agent, provided such warrant agreement
does not adversely affect any of the rights of the Holder, as set forth in this
Warrant.
(6) ANTI-DILUTION PROVISIONS. (a) After each adjustment of the Exercise
Price pursuant to this Section (6), the number of shares of Common Stock
purchasable upon the exercise of the Warrant shall be the number of Warrant
Shares receivable upon exercise thereof prior to such adjustment multiplied by a
fraction the numerator of which shall be the original Exercise Price as defined
above and the denominator of which shall be such adjusted Exercise Price.: (b)
In case the Company shall hereafter (A) pay a dividend or make a distribution on
its Common Stock in shares of its capital stock (whether shares of Common Stock
or of capital stock of any other class), (B) subdivide its outstanding shares of
Common Stock, (C) combine its outstanding shares of Common Stock into a smaller
number of shares, or (D) issue by reclassification of its shares of Common Stock
any shares of capital stock of the Company, the Exercise Price in effect
immediately prior to such action shall be adjusted so that the Holder of any
Warrant thereafter exercised shall be entitled to receive the number of Warrant
Shares which the Holder would have owned immediately following such action had
such Warrant been exercised immediately prior thereto. An adjustment made
pursuant to this subsection shall become effective immediately after the record
date in the case of a dividend and shall become effective immediately after the
effective date in the case of a subdivision, combination or reclassification.
(c) No adjustment in the Exercise Price shall be required to be made
unless such adjustment would require an increase or decrease of at least $.01;
provided, however, that any adjustments which by reason of this subsection are
not required to be made shall be carried forward and taken into account in any
subsequent adjustment. All calculations under this Section (6) shall be made to
the nearest cent or to the nearest one-one hundredth of a share, as the case may
be, but in no event shall the Company be obligated to issue fractional shares
upon the exercise of any Warrant.
(d) The provisions of this Section 6 shall not apply to any Common
Stock issuable: (i) to any person pursuant to any stock option, stock purchase,
stock purchase or similar plan or arrangement for the benefit of the Company's
employees, consultants or directors or (ii) pursuant to options, warrants,
conversion rights, and rights to acquire Common Stock in existence on the date
of issuance hereof.
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(e) In case of any reclassification or change of outstanding shares
of Common Stock issuable upon exercise of the Warrants (other than a change in
par value or from par value to no par value or from no par value to par value or
as a result of a subdivision or combination), or in case of any consolidation or
merger of the Company with or into another corporation (other than a merger with
a Subsidiary in which merger the Company is the continuing corporation and which
does not result in any reclassification or change of the then outstanding shares
of Common Stock or other capital stock issuable upon exercise of the Warrants
other than a change in par value or from par value to no par value or from no
par value to par value) or in the case of any sale or conveyance to another
corporation of the property of the Company as an entirety or substantially as an
entirety, then, as a condition of such reclassification, change, consolidation,
merger, sale or conveyance, the Company, or such successor or purchasing
corporation, as the case may be, shall make lawful and adequate provision
whereby the Holder of the Warrant shall have the right thereafter to receive on
exercise of such Warrant the kind and amount of shares of stock and other
securities and property receivable upon such reclassification, change,
consolidation, merger, sale or conveyance by a holder of the number of shares of
Common Stock issuable upon exercise of such Warrant immediately prior to such
reclassification, change, consolidation, merger, sale or conveyance. Such
provisions shall include provision for adjustments which shall be as nearly
equivalent as may be practicable to the adjustments provided elsewhere in this
Section (6). The above provisions of this Section (6) shall similarly apply to
successive reclassifications and changes of shares of Common Stock and to
successive consolidations, mergers, sales or conveyances.
(f) Before taking any action which would cause an adjustment
reducing the Exercise Price below the then par value of the shares of Common
Stock issuable upon exercise of the Warrants, the Company will take any
corporate action which may, in the opinion of its counsel, be necessary in order
that the Company may validly and legally issue fully paid and non-assessable
shares of such the Company at such adjusted Exercise Price.
(g) Upon any adjustment of the Exercise Price and any increase or
decrease in the number of shares of Common Stock purchasable upon the exercise
of this Warrant, the Company promptly shall give written notice thereof to the
Holder, which shall state the Exercise Price resulting from such adjustment and
increase or decrease, if any, in the number of shares of Common Stock
purchasable at such price upon the exercise of this Warrant, setting forth in
reasonable detail the method of calculation and the facts upon which such
calculation is based.
(h) If at any time:
(i) the Company shall declare any cash dividend upon its
Common Stock;
(ii) the Company shall declare any dividend upon its
Common Stock payable in stock (other than a dividend
payable solely in shares of Common Stock or make any
special dividend or other distribution to the holders
of its Common stock;
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<PAGE>
(iii) there shall be any consolidation or merger of the
Company with another corporation, or a sale of all or
substantially all of the Company's assets to another
corporation; or
(iv) there shall be a voluntary or involuntary
dissolution, liquidation or winding-up of the
Company;
then, in any one or more of said cases, the Company shall give the Holder (A) at
least ten (10) calendar days' prior written notice of the date on which the
books of the Company shall close or a record date shall have occurred for such
dividend or distribution or for determining rights to vote in respect of any
such consolidation, merger, sale, dissolution, liquidation or winding-up, and
(B) in the case of any such consolidation, merger, sale, dissolution,
liquidation or winding-up, at least ten (10) calendar days' written notice of
the date when the same shall take place. Any notice given in accordance with
clause (A) above shall also specify, in the case of any such dividend or
distribution, the date on which the holders of Common Stock shall be entitled
thereof. Any notice given in accordance with clause (B) above shall also specify
the date on which the holders of Common Stock shall be entitled to exchange
their Common Stock for securities or other property deliverable upon such
consolidation, merger, sale, dissolution, liquidation or winding-up, as the case
may be.
(7) INVESTMENT REPRESENTATION. By accepting this Warrant, the Holder
acknowledges that it has been advised by the Company that this Warrant and the
Warrant Shares underlying this Warrant have not been registered under the
Securities Act of 1933, as amended (the "Act"), and that this Warrant is being
issued on the basis of the statutory exemption provided by section 4(2) of the
Act relating to transactions by an issuer not involving any public offering.
Holder hereby represents and warrants to the Company that (I) it is acquiring
this Warrant for its own account, for investment purposes only and not with a
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<PAGE>
view toward the distribution or resale thereof, (ii) it is a sophisticated
investor and had access to the same kind of information which would be available
in a registration statement filed under the Act, and (iii) it understands that
it may not sell or otherwise dispose of this Warrant in the absence of either a
registration statement under the Act or an exemption from the registration
provisions thereunder and in accordance with the transfer provisions set forth
in this Section 10 of this Warrant.
(8) REGISTRATION RIGHTS. The Company hereby grants the Holder the right to
"piggy back" the Warrant Shares on each Registration Statement for the sale of
Common Stock filed by the Company (or any securities of a successor company of
the Company) at the Company's cost and expense (except those incurred by the
Holder for legal fees and commissions). In this connection, the Company shall
give the Holder at least 30 days' prior notice of its intent to file a
Registration Statement. The Company shall use its best efforts to keep any
Registration Statement onto which Holder has "piggy backed" his shares effective
for a period of not less than 180 days from the date whereby the Holder is first
entitled to sell thereunder, or such shorter period terminating when the Holder
has sold all of his shares. Such "piggy back" rights are subject to standard
underwriters' approval and holdback, whereby the Holder's rights to sell in an
initial public offering may be limited pro rata with the other stockholders and
shall not apply to any Warrant Shares that can be sold under SEC Rule 144. For
purposes of this Section (8), the term Registration Statement shall mean any
registration statement for the sale of common stock or other securities filed by
the Company or any selling shareholder or filed by any successor entity (in the
case of merger, reclassification, change, consolidation, sale or conveyance of
the Company) under the Act (except for a Registration Statement on Form S-4,
Form S-8 or any successor form thereto), which shall include, but not be limited
to, any Registration Statement filed by Healthcore Medical Solutions, Inc.
("Healthcore") in connection with, relating to or subsequent to the effective
date of the merger of the Company into Healthcore (the "Merger") as contemplated
by that certain Letter of Intent, dated April 27, 1999, by and between the
Company and/or Healthcore;
(i) The Company shall also grant to Holder such additional
"piggyback" rights and demand registration rights relative to the Warrant Shares
as shall be granted and included in a subsequent warrant that may be granted to
Holder.
(9) TRANSFER. (i) The Holder acknowledges that it has been informed by the
Company of, or is otherwise familiar with, the nature of the limitations imposed
by the Act and the rules and regulations thereunder on the transfer of this
Warrant and the Warrant Shares. In particular, the Holder agrees that no sale,
assignment, or transfer of this Warrant shall be valid or effective, and the
Company shall not be required to give any effect to any such sale, assignment,
or transfer, unless (A) the sale, assignment, or transfer of this Warrant or the
Warrant Shares is registered under the Act, it being understood that this
Warrant or the underlying Warrant Shares is not currently registered under the
Act and that the Company has no obligation to register this Warrant and is only
obligated to register the Warrant Shares to the extent set forth in Section 9 of
this Warrant, (B) this Warrant or the underlying Warrant Shares are sold,
assigned or transferred in
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<PAGE>
accordance with all of the requirements and limitations of Rule 144 under the
Act, it being understood that Rule 144 is not available at the present time for
the sale of the Warrant or underlying Warrant Shares and that there can be no
assurance that Rule 144 will be available at any time in the future, or (C) such
sale, assignment, or transfer is otherwise exempt from registration under the
Act. The Holder and each transferee hereof further agrees that in any
distribution of this Warrant or the underlying Warrant Shares is proposed to be
made by them otherwise than by delivery of a prospectus meeting the requirements
of Section 10 of the Act, such action shall be taken only after submission to
the Company of an opinion of counsel, reasonably satisfactory in form and
substance to the Company's counsel, to the effect that the proposed distribution
will not be in violation of the Act or applicable state law.
(ii) Prior to any such proposed transfer, and as a condition thereto, if such
transfer is not made pursuant to an effective registration statement under the
Act, the Holder will, if requested by the Company, deliver to the Company (i) an
investment covenant signed by the proposed transferee, (ii) an agreement by such
transferee, that such transferee will be bound by the terms of this Warrant and
that the restrictive investment legend set forth above be placed on the
certificate or certificates representing the securities acquired by such
transferee, and (iii) an agreement by such transferee that the Company may place
a "stop transfer order" with its transfer agent or registrar.
(iii) Except as specifically restricted hereby, this Warrant and the Warrant
Shares issued hereunder may be transferred by the Holder in whole or in part at
any time or from time to time. Upon surrender of this Warrant certificate to the
Company or at the office of its stock transfer agent, if any, with the
Assignment Form annexed hereto duly executed and funds sufficient to pay any
transfer tax, and upon compliance with the foregoing provisions, the Company
shall without charge, execute and deliver a new Warrant certificate in the name
of the assignee named on such instrument of assignment, and this Warrant
certificate shall promptly be canceled. An assignment, transfer, pledge,
hypothecation or other disposition of this Warrant attempted contrary to the
provisions of this Warrant, or any levy of execution, attachment or other
process attempted upon this warrant, shall be null and void and without effect.
(10) NOTICES. All notices and other communications which are required or
may be given under this Warrant shall be in writing and shall be deemed to have
been duly given when delivered in person or transmitted by telex or three (3)
days after being mailed, postage prepaid, in the case of the Company to Adatom,
Inc., 920 Hillview Court, Suite 160, Milipitas, CA 95035, Attention: President,
and in the case of the Holder to the address set forth herein, or to such other
address as such party shall have specified by notice to the other party hereto.
If notice is given by registered or certified first class mail, postage prepaid,
return receipt requested, the return receipt shall be conclusive evidence of the
notice having been mailed on the date set forth.
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<PAGE>
(11) DEFINITION. The "Current Market Price" per share of Common Stock on
any date shall be deemed to be the average of the daily closing prices for the
thirty (30) consecutive trading days immediately preceding the date in question.
The closing price for each day shall be the last reported sales price regular
way or, in case no such reported sale takes place on such day, the closing bid
price regular way, in either case on the principal national securities exchange
(including, for purposes hereof, the NASDAQ Stock Market, Inc. ("NASDAQ") on
which the shares of Common Stock are listed or admitted to trading, or, if the
shares of Common Stock are not listed or admitted to trading on any national
securities exchange, the highest reported bid price for the Common Stock as
furnished by the National Association of Securities Dealers, Inc. (the "NASD")
or a similar organization if the NASD is no longer reporting such information
(including for purposes hereof NASDAQ). If on any such date the shares of Common
Stock are not listed or admitted to trading on any national securities exchange
and is not quoted by NASDAQ or any similar organization, the fair value of a
share on such date, as determined in good faith by the Board of Directors of the
Company, whose determination shall be conclusive, shall be used.
(12) MISCELLANEOUS. This Agreement contains the entire Agreement and
supersedes all prior agreements and understandings, oral or written, between the
parties hereto with respect to the subject matter hereof. This Warrant may not
be changed orally, but only by an agreement in writing signed by the party
against whom any waiver, change, amendment, modification or discharge is sought,
provided however, that this Warrant may be amended or modified without the
consent of the Holder if such amendment or modification does not adversely
affect the rights of the Holder hereunder. This Agreement may be assigned by
Holder in
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<PAGE>
accordance with Section (i) of this Agreement. This Agreement will not be
assigned by the Company and shall be interpreted under the laws of the State of
New York without application to the principles of conflicts of laws.
ADATOM.COM, INC.
By: ______________________________
[SEAL]
Dated:
Attest:
<PAGE>
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder desires to transfer
the attached Warrant.)
FOR VALUE RECEIVED, _____________________ hereby sells, assigns, and
transfers unto ________________________ a warrant (the "Warrant") __________ to
purchase __________ shares of Common Stock, no par value per share, of
Adatom.com, Inc. (the "Company"), together with all right, title, and interest
therein, and does hereby irrevocably constitute and appoint
_______________________________________ as attorney to transfer such Warrant on
the books of the Company, with full power of substitution.
Dated:___________________
Signature: ___________________
NOTICE
The signature on the foregoing Assignment must correspond to the name as
written upon the face of this Warrant in every particular, without alteration or
enlargement or any change whatsoever.
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<PAGE>
PURCHASE FORM
Dated ________, ____
The undersigned hereby irrevocably elects to exercise the within Warrant to
the extent of purchasing shares of Common Stock and hereby (i) tenders payment
herewith in the amount of $_____________ or (ii) surrender the Warrant in the
amount of _________, in payment of the actual exercise price thereof, and
requests that certificates for such securities be issued in the name of, and
delivered to, and, if such number of Warrant Shares shall not be all the Warrant
Shares covered by the within Warrant, that a new Warrant for the balance of the
Warrant Shares be registered in the name of, and delivered to, the undersigned
at the address stated below.
INSTRUCTIONS FOR REGISTRATION OF STOCK
Name: _________________________________________________________________________
(Please typewrite or print in block letters)
Address: ______________________________________________________________________
Signature: _____________________________________________________________________
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<PAGE>
EXHIBIT 4.9
NEITHER THIS WARRANT NOR THE WARRANT STOCK HAS BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED. THE COMPANY WILL NOT TRANSFER THIS WARRANT
OR THE WARRANT SHARES UNLESS (i) THERE IS AN EFFECTIVE REGISTRATION COVERING
SUCH WARRANT OR SUCH WARRANT SHARES, AS THE CASE MAY BE, UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, AND APPLICABLE STATES SECURITIES LAWS, (ii) IT FIRST
RECEIVES A LETTER FROM AN ATTORNEY, ACCEPTABLE TO THE BOARD OF DIRECTORS OR ITS
AGENTS, STATING THAT IN THE OPINION OF THE ATTORNEY THE PROPOSED TRANSFER IS
EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED AND UNDER
ALL APPLICABLE STATE SECURITIES LAWS, OR (iii) THE TRANSFER IS VALIDLY MADE
PURSUANT TO RULE 144 UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
WARRANT NO. ___________________________________________
56,201 SHARES
______________________________________
Void after 5:00 p.m. New York City Time, on September 15, 2004.
Warrant to Purchase 56,201 Shares of Common Stock, no par value per share
WARRANT TO PURCHASE SHARES OF COMMON STOCK
OF
ADATOM.COM, INC.
This Is To Certify That, FOR VALUE RECEIVED, JESUP & LAMONT PARTNERS L.L.C.
("Holder") having an address at 650 Fifth Avenue, New York, New York 10019, is
entitled to purchase, subject to the provisions of this Warrant ("Warrant"),
from Adatom.com, Inc., a Delaware corporation (the "Company"), FIFTY-SIX
THOUSAND TWO HUNDRED ONE (56,201) fully paid, validly issued and non-assessable
shares of Common Stock (the "Common Stock"), no par value per share, of the
Company at an exercise price of $.99 per share at any time or from time to time
during the period from the date hereof to September 15, 2004, but not later than
5:00 p.m. New York City Time, on September 15, 2004. This Warrant is being
issued pursuant to the terms of a Letter Agreement, dated April 27, 1999, as
amended, by and between Holder and Adatom, Inc., a California corporation which
as merged into the Company effective as of the date hereof (the "Engagement
Letter") in connection with the placement of an
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additional $500,000 of convertible bridge notes of the Company, dated on or
about September 15, 1999 (the " Second Note"). The number of shares of Common
Stock to be received upon the exercise of this Warrant and the price to be paid
for each share of Common Stock may be adjusted from time to time as hereinafter
set forth. The shares of Common Stock deliverable upon such exercise, and as
adjusted from time to time, are hereinafter sometimes referred to as "Warrant
Shares" and the exercise price of a share of Common Stock in effect at any time
and as adjusted from time to time is hereinafter sometimes referred to as the
"Exercise Price."
(2) EXERCISE OF WARRANT. This Warrant may be exercised in whole or in part
at any time or from time to time on or after the date hereof and until
September 15, 2004 (the "Exercise Period"); provided, however, that if
such day is a day on which banking institutions in the State of New
York are authorized by law to close, then on the next succeeding day
which shall not be such a day. This Warrant may be exercised by
presentation and surrender hereof to the Company at its principal
office or to the Company's warrant agent, if any has been so
appointed, with the Purchase Form annexed hereto duly executed and
accompanied by payment of the Exercise Price, in cash or by certified
or bank cashier's check, for the number of Warrant Shares specified in
such form. Notwithstanding the foregoing, in lieu of any cash payment
required hereunder, the Holder of this Warrant shall have the right at
any time during the Exercise Period to exercise the Warrant in full or
in part by surrender of this Warrant (with the election at the end
hereof duly executed) to the Company at its principal office or to the
Company's warrant agent, if any has been so appointed, in exchange for
the number of Warrant Shares equal to the product of (a) the number of
Warrant Shares as to which the Warrant is being
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<PAGE>
exercised multiplied by (b) a fraction, the numerator of which is the
Current Market Price (as defined in Section (11) below) of the Common
Stock less the Exercise Price and the denominator of which is the
Current Market Price. As soon as practicable after each such exercise
of the Warrants, the Company shall issue or cause to be issued and
delivered to the Holder a certificate or certificates for the Warrant
Shares issuable upon such exercise, registered in the name of the
Holder. The Warrant shall be deemed to have been exercised immediately
prior to the close of business on the date of any such exercise,
provided such exercise is in accordance with the provisions set forth
herein. If this Warrant should be exercised in part only, the Company
shall, upon surrender of this Warrant for cancellation, execute and
deliver a new Warrant evidencing the rights of the Holder thereof to
purchase the balance of the Warrant Shares purchasable thereunder.
Upon receipt by the Company of this Warrant at its office in proper
form for exercise, the Holder shall be deemed to be the holder of
record of the shares of Common Stock issuable upon such exercise,
notwithstanding that the stock transfer books of the Company shall
then be closed or that certificates representing such shares of Common
Stock shall not then be physically delivered to the Holder.
(2) RESERVATION OF SHARES. The Company shall at all times reserve for
issuance and/or delivery upon exercise of this Warrant such number of shares of
its Common Stock as shall be required for issuance and delivery upon exercise of
the Warrants.
(3) FRACTIONAL SHARES. No fractional shares or script representing
fractional shares shall be issued upon the exercise of this Warrant. If more
than one Warrant shall be exercised at one time by the Holder, the number of
full shares which shall be issuable upon exercise thereof shall be computed on
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<PAGE>
the basis of the aggregate number of full shares issuable upon such exercise. No
adjustment shall be made in respect of cash dividends on Warrant Shares
delivered upon exercise of any Warrant. With respect to any fraction of a share
called for upon exercise hereof, the Company shall pay to the Holder an amount
in cash equal to such fraction multiplied by the average closing bid and asked
prices of the Common Stock on the last available date for which quotations are
available immediately preceding the date of exercise of this Warrant, or if the
bid and asked prices are not so reported, then the current market value shall be
an amount, not less than the book value thereof as at the end of the most recent
fiscal year of the Company ending prior to the date of the exercise of the
Warrant, determined in such reasonable manner as may be prescribed by the Board
of Directors of the Company.
(4) EXCHANGE OR LOSS OF WARRANT. This Warrant is exchangeable, without
expense, at the option of the Holder, upon presentation and surrender hereof to
the Company for other Warrants of different denominations entitling the holder
thereof to purchase in the aggregate the same number of shares of Common Stock
purchasable hereunder. This Warrant may be divided or combined with other
Warrants which carry the same rights upon presentation hereof at the principal
office of the Company with a written notice specifying the denominations in
which new Warrants are to be issued and signed by the Holder hereof. The term
"Warrant" as used herein includes any Warrants into which this Warrant may be
divided or exchanged. Upon receipt by the Company or its warrant agent, if any,
of evidence satisfactory to it of the loss, theft, destruction or mutilation of
this Warrant, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Warrant, if mutilated, the Company will execute and deliver a new Warrant of
like tenor and date.
(5) RIGHTS OF THE HOLDER. The Holder shall not, by virtue hereof, be
entitled to any rights of a stockholder in the Company, either at law
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<PAGE>
or equity, and the rights of the Holder are limited to those expressed in the
Warrant and are not enforceable against the Company except to the extent set
forth herein and in any warrant agreement entered into by and between the
Company and a warrant agent with respect to the Warrants. In the event the
Company enters into a warrant agreement with a warrant agent, the terms of the
Warrant shall be embodied in the warrant agreement; and the acceptance of this
Warrant by the Holder shall be deemed consent by the Holder for the Company to
enter into any such warrant agreement, upon such terms and conditions mutually
agreeable between the Company and any such warrant agent, provided such warrant
agreement does not adversely affect any of the rights of the Holder, as set
forth in this Warrant.
(6) ANTI-DILUTION PROVISIONS. (a) After each adjustment of the Exercise
Price pursuant to this Section (6), the number of shares of Common Stock
purchasable upon the exercise of the Warrant shall be the number of Warrant
Shares receivable upon exercise thereof prior to such adjustment multiplied by a
fraction the numerator of which shall be the original Exercise Price as defined
above and the denominator of which shall be such adjusted Exercise Price.: (b)
In case the Company shall hereafter (A) pay a dividend or make a distribution on
its Common Stock in shares of its capital stock (whether shares of Common Stock
or of capital stock of any other class), (B) subdivide its outstanding shares of
Common Stock, (C) combine its outstanding shares of Common Stock into a smaller
number of shares, or (D) issue by reclassification of its shares of Common Stock
any shares of capital stock of the Company, the Exercise Price in effect
immediately prior to such action shall be adjusted so that the Holder of any
Warrant thereafter exercised shall be entitled to receive the number of Warrant
Shares which the Holder would have owned immediately following such action had
such Warrant been exercised immediately prior thereto. An adjustment made
pursuant to this subsection shall become effective immediately after the record
date in the case of a dividend and shall become effective immediately after the
effective date in the case of a subdivision, combination or reclassification.
(c) No adjustment in the Exercise Price shall be required to be made
unless such adjustment would require an increase or decrease of at least $.01;
provided, however, that any adjustments which by reason of this subsection are
not required to be made shall be carried forward and taken into account in any
subsequent adjustment. All calculations under this Section (6) shall be made to
the nearest cent or to the nearest one-one hundredth of a share, as the case may
be, but in no event shall the Company be obligated to issue fractional shares
upon the exercise of any Warrant.
(d) The provisions of this Section 6 shall not apply to any Common
Stock issuable: (i) to any person pursuant to any stock option, stock purchase,
stock purchase or similar plan or arrangement for the benefit of the Company's
employees, consultants or directors or (ii) pursuant to options, warrants,
conversion rights, and rights to acquire Common Stock in existence on the date
of issuance hereof.
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<PAGE>
(e) In case of any reclassification or change of outstanding shares
of Common Stock issuable upon exercise of the Warrants (other than a change in
par value or from par value to no par value or from no par value to par value or
as a result of a subdivision or combination), or in case of any consolidation or
merger of the Company with or into another corporation (other than a merger with
a Subsidiary in which merger the Company is the continuing corporation and which
does not result in any reclassification or change of the then outstanding shares
of Common Stock or other capital stock issuable upon exercise of the Warrants
other than a change in par value or from par value to no par value or from no
par value to par value) or in the case of any sale or conveyance to another
corporation of the property of the Company as an entirety or substantially as an
entirety, then, as a condition of such reclassification, change, consolidation,
merger, sale or conveyance, the Company, or such successor or purchasing
corporation, as the case may be, shall make lawful and adequate provision
whereby the Holder of the Warrant shall have the right thereafter to receive on
exercise of such Warrant the kind and amount of shares of stock and other
securities and property receivable upon such reclassification, change,
consolidation, merger, sale or conveyance by a holder of the number of shares of
Common Stock issuable upon exercise of such Warrant immediately prior to such
reclassification, change, consolidation, merger, sale or conveyance. Such
provisions shall include provision for adjustments which shall be as nearly
equivalent as may be practicable to the adjustments provided elsewhere in this
Section (6). The above provisions of this Section (6) shall similarly apply to
successive reclassifications and changes of shares of Common Stock and to
successive consolidations, mergers, sales or conveyances.
(f) Before taking any action which would cause an adjustment
reducing the Exercise Price below the then par value of the shares of Common
Stock issuable upon exercise of the Warrants, the Company will take any
corporate action which may, in the opinion of its counsel, be necessary in order
that the Company may validly and legally issue fully paid and non-assessable
shares of such the Company at such adjusted Exercise Price.
(g) Upon any adjustment of the Exercise Price and any increase or
decrease in the number of shares of Common Stock purchasable upon the exercise
of this Warrant, the Company promptly shall give written notice thereof to the
Holder, which shall state the Exercise Price resulting from such adjustment and
increase or decrease, if any, in the number of shares of Common Stock
purchasable at such price upon the exercise of this Warrant, setting forth in
reasonable detail the method of calculation and the facts upon which such
calculation is based.
(h) If at any time:
(v) the Company shall declare any cash dividend upon its
Common Stock;
(vi) the Company shall declare any dividend upon its
Common Stock payable in stock (other than a dividend
payable solely in shares of Common Stock or make any
special dividend or other distribution to the holders
of its Common stock;
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(vii) there shall be any consolidation or merger of the
Company with another corporation, or a sale of all or
substantially all of the Company's assets to another
corporation; or
(viii) there shall be a voluntary or involuntary
dissolution, liquidation or winding-up of the
Company;
then, in any one or more of said cases, the Company shall give the Holder (A) at
least ten (10) calendar days' prior written notice of the date on which the
books of the Company shall close or a record date shall have occurred for such
dividend or distribution or for determining rights to vote in respect of any
such consolidation, merger, sale, dissolution, liquidation or winding-up, and
(B) in the case of any such consolidation, merger, sale, dissolution,
liquidation or winding-up, at least ten (10) calendar days' written notice of
the date when the same shall take place. Any notice given in accordance with
clause (A) above shall also specify, in the case of any such dividend or
distribution, the date on which the holders of Common Stock shall be entitled
thereof. Any notice given in accordance with clause (B) above shall also specify
the date on which the holders of Common Stock shall be entitled to exchange
their Common Stock for securities or other property deliverable upon such
consolidation, merger, sale, dissolution, liquidation or winding-up, as the case
may be.
(7) INVESTMENT REPRESENTATION. By accepting this Warrant, the Holder
acknowledges that it has been advised by the Company that this Warrant and the
Warrant Shares underlying this Warrant have not been registered under the
Securities Act of 1933, as amended (the "Act"), and that this Warrant is being
issued on the basis of the statutory exemption provided by section 4(2) of the
Act relating to transactions by an issuer not involving any public offering.
Holder hereby represents and warrants to the Company that (I) it is acquiring
this Warrant for its own account, for investment purposes only and not with a
27
<PAGE>
view toward the distribution or resale thereof, (ii) it is a sophisticated
investor and had access to the same kind of information which would be available
in a registration statement filed under the Act, and (iii) it understands that
it may not sell or otherwise dispose of this Warrant in the absence of either a
registration statement under the Act or an exemption from the registration
provisions thereunder and in accordance with the transfer provisions set forth
in this Section 10 of this Warrant.
(8) REGISTRATION RIGHTS. The Company hereby grants the Holder the right to
"piggy back" the Warrant Shares on each Registration Statement for the sale of
Common Stock filed by the Company (or any securities of a successor company of
the Company) at the Company's cost and expense (except those incurred by the
Holder for legal fees and commissions). In this connection, the Company shall
give the Holder at least 30 days' prior notice of its intent to file a
Registration Statement. The Company shall use its best efforts to keep any
Registration Statement onto which Holder has "piggy backed" his shares effective
for a period of not less than 180 days from the date whereby the Holder is first
entitled to sell thereunder, or such shorter period terminating when the Holder
has sold all of his shares. Such "piggy back" rights are subject to standard
underwriters' approval and holdback, whereby the Holder's rights to sell in an
initial public offering may be limited pro rata with the other stockholders and
shall not apply to any Warrant Shares that can be sold under SEC Rule 144. For
purposes of this Section (8), the term Registration Statement shall mean any
registration statement for the sale of common stock or other securities filed by
the Company or any selling shareholder or filed by any successor entity (in the
case of merger, reclassification, change, consolidation, sale or conveyance of
the Company) under the Act (except for a Registration Statement on Form S-4,
Form S-8 or any successor form thereto), which shall include, but not be limited
to, any Registration Statement filed by Healthcore Medical Solutions, Inc.
("Healthcore") in connection with, relating to or subsequent to the effective
date of the merger of the Company into Healthcore (the "Merger") as contemplated
by that certain Letter of Intent, dated April 27, 1999, by and between the
Company and/or Healthcore;
(ii) The Company shall also grant to Holder such additional
"piggyback" rights and demand registration rights relative to the Warrant Shares
as shall be granted and included in a subsequent warrant that may be granted to
Holder.
(9) TRANSFER. (i) The Holder acknowledges that it has been informed by the
Company of, or is otherwise familiar with, the nature of the limitations imposed
by the Act and the rules and regulations thereunder on the transfer of this
Warrant and the Warrant Shares. In particular, the Holder agrees that no sale,
assignment, or transfer of this Warrant shall be valid or effective, and the
Company shall not be required to give any effect to any such sale, assignment,
or transfer, unless (A) the sale, assignment, or transfer of this Warrant or the
Warrant Shares is registered under the Act, it being understood that this
Warrant or the underlying Warrant Shares is not currently registered under the
Act and that the Company has no obligation to register this Warrant and is only
obligated to register the Warrant Shares to the extent set forth in Section 9 of
this Warrant, (B) this Warrant or the underlying Warrant Shares are sold,
assigned or transferred in accordance
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<PAGE>
with all of the requirements and limitations of Rule 144 under the Act, it being
understood that Rule 144 is not available at the present time for the sale of
the Warrant or underlying Warrant Shares and that there can be no assurance that
Rule 144 will be available at any time in the future, or (C) such sale,
assignment, or transfer is otherwise exempt from registration under the Act. The
Holder and each transferee hereof further agrees that in any distribution of
this Warrant or the underlying Warrant Shares is proposed to be made by them
otherwise than by delivery of a prospectus meeting the requirements of Section
10 of the Act, such action shall be taken only after submission to the Company
of an opinion of counsel, reasonably satisfactory in form and substance to the
Company's counsel, to the effect that the proposed distribution will not be in
violation of the Act or applicable state law. (ii) Prior to any such proposed
transfer, and as a condition thereto, if such transfer is not made pursuant to
an effective registration statement under the Act, the Holder will, if requested
by the Company, deliver to the Company (i) an investment covenant signed by the
proposed transferee,
(ii) an agreement by such transferee, that such transferee will be bound by the
terms of this Warrant and that the restrictive investment legend set forth above
be placed on the certificate or certificates representing the securities
acquired by such transferee, and (iii) an agreement by such transferee that the
Company may place a "stop transfer order" with its transfer agent or registrar.
(iii) Except as specifically restricted hereby, this Warrant and the Warrant
Shares issued hereunder may be transferred by the Holder in whole or in part at
any time or from time to time. Upon surrender of this Warrant certificate to the
Company or at the office of its stock transfer agent, if any, with the
Assignment Form annexed hereto duly executed and funds sufficient to pay any
transfer tax, and upon compliance with the foregoing provisions, the Company
shall without charge, execute and deliver a new Warrant certificate in the name
of the assignee named on such instrument of assignment, and this Warrant
certificate shall promptly be canceled. An assignment, transfer, pledge,
hypothecation or other disposition of this Warrant attempted contrary to the
provisions of this Warrant, or any levy of execution, attachment or other
process attempted upon this warrant, shall be null and void and without effect.
(10) NOTICES. All notices and other communications which are required or
may be given under this Warrant shall be in writing and shall be deemed to have
been duly given when delivered in person or transmitted by telex or three (3)
days after being mailed, postage prepaid, in the case of the Company to Adatom,
Inc., 920 Hillview Court, Suite 160, Milipitas, CA 95035, Attention: President,
and in the case of the Holder to the address set forth herein, or to such other
address as such party shall have specified by notice to the other party hereto.
If notice is given by registered or certified first class mail, postage prepaid,
return receipt requested, the return receipt shall be conclusive evidence of the
notice having been mailed on the date set forth.
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<PAGE>
(11) DEFINITION. The "Current Market Price" per share of Common Stock on
any date shall be deemed to be the average of the daily closing prices for the
thirty (30) consecutive trading days immediately preceding the date in question.
The closing price for each day shall be the last reported sales price regular
way or, in case no such reported sale takes place on such day, the closing bid
price regular way, in either case on the principal national securities exchange
(including, for purposes hereof, the NASDAQ Stock Market, Inc. ("NASDAQ") on
which the shares of Common Stock are listed or admitted to trading, or, if the
shares of Common Stock are not listed or admitted to trading on any national
securities exchange, the highest reported bid price for the Common Stock as
furnished by the National Association of Securities Dealers, Inc. (the "NASD")
or a similar organization if the NASD is no longer reporting such information
(including for purposes hereof NASDAQ). If on any such date the shares of Common
Stock are not listed or admitted to trading on any national securities exchange
and is not quoted by NASDAQ or any similar organization, the fair value of a
share on such date, as determined in good faith by the Board of Directors of the
Company, whose determination shall be conclusive, shall be used.
(12) MISCELLANEOUS. This Agreement contains the entire Agreement and
supersedes all prior agreements and understandings, oral or written, between the
parties hereto with respect to the subject matter hereof. This Warrant may not
be changed orally, but only by an agreement in writing signed by the party
against whom any waiver, change, amendment, modification or discharge is sought,
provided however, that this Warrant may be amended or modified without the
consent of the Holder if such amendment or modification does not adversely
affect the rights of the Holder hereunder. This Agreement may be assigned by
Holder in accordance with Section (i) of this Agreement. This Agreement will not
be assigned by the Company and shall be interpreted under the laws of the State
of New York without application to the principles of conflicts of laws.
30
<PAGE>
ADATOM.COM, INC.
By: ________________________________
[SEAL]
Dated:
Attest:
31
<PAGE>
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder desires to transfer
the attached Warrant.)
FOR VALUE RECEIVED, _____________________ hereby sells, assigns, and
transfers unto ________________________ a warrant (the "Warrant") __________ to
purchase __________ shares of Common Stock, no par value per share, of
Adatom.com, Inc. (the "Company"), together with all right, title, and interest
therein, and does hereby irrevocably constitute and appoint
_______________________________________ as attorney to transfer such Warrant on
the books of the Company, with full power of substitution.
Dated:___________________
Signature: ___________________
NOTICE
The signature on the foregoing Assignment must correspond to the name as
written upon the face of this Warrant in every particular, without alteration or
enlargement or any change whatsoever.
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<PAGE>
PURCHASE FORM
Dated ________, ____
The undersigned hereby irrevocably elects to exercise the within Warrant to
the extent of purchasing shares of Common Stock and hereby (i) tenders payment
herewith in the amount of $_____________ or (ii) surrender the Warrant in the
amount of _________, in payment of the actual exercise price thereof, and
requests that certificates for such securities be issued in the name of, and
delivered to, and, if such number of Warrant Shares shall not be all the Warrant
Shares covered by the within Warrant, that a new Warrant for the balance of the
Warrant Shares be registered in the name of, and delivered to, the undersigned
at the address stated below.
INSTRUCTIONS FOR REGISTRATION OF STOCK
Name: _________________________________________________________________________
(Please typewrite or print in block letters)
Address: ______________________________________________________________________
Signature: _____________________________________________________________________
33
EXHIBIT 4.10
NEITHER THIS WARRANT NOR THE WARRANT STOCK HAS BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED. THE COMPANY WILL NOT TRANSFER THIS WARRANT
OR THE WARRANT SHARES UNLESS (i) THERE IS AN EFFECTIVE REGISTRATION COVERING
SUCH WARRANT OR SUCH WARRANT SHARES, AS THE CASE MAY BE, UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, AND APPLICABLE STATES SECURITIES LAWS, (ii) IT FIRST
RECEIVES A LETTER FROM AN ATTORNEY, ACCEPTABLE TO THE BOARD OF DIRECTORS OR ITS
AGENTS, STATING THAT IN THE OPINION OF THE ATTORNEY THE PROPOSED TRANSFER IS
EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED AND UNDER
ALL APPLICABLE STATE SECURITIES LAWS, OR (iii) THE TRANSFER IS VALIDLY MADE
PURSUANT TO RULE 144 UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
WARRANT NO.
________________________________________________________________________________
200,000 SHARES
______________
Void after 5:00 p.m. New York City Time, on October 12, 2004.
Warrant to Purchase 200,000 Shares of Common Stock, no par value per share
WARRANT TO PURCHASE SHARES OF COMMON STOCK
OF
ADATOM.COM, INC.
This Is To Certify That, FOR VALUE RECEIVED, JESUP & LAMONT PARTNERS
L.L.C. ("Holder") having an address at 650 Fifth Avenue, New York, New York
10019, is entitled to purchase, subject to the provisions of this Warrant
("Warrant"), from Adatom.com, Inc., a Delaware corporation (the "Company"), TWO
HUNDRED THOUSAND (200,000) fully paid, validly issued and non-assessable shares
of Common Stock (the "Common Stock"), no par value per share, of the Company at
an exercise price of $1.00 per share at any time or from time to time during the
period from the date hereof to October 12, 2004, but not later than 5:00 p.m.
New York City Time, on October 12, 2004. This Warrant is being issued pursuant
to the terms of a Letter Agreement, dated April 27, 1999, by and between Jesup &
Lamont Securities Corporation and the Company (the "Engagement Letter") in
connection with the merger of the Company with Adatom, Inc., the company being
the surviving company. The number of shares of Common Stock
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<PAGE>
to be received upon the exercise of this Warrant and the price to be paid for
each share of Common Stock may be adjusted from time to time as hereinafter set
forth. The shares of Common Stock deliverable upon such exercise, and as
adjusted from time to time, are hereinafter sometimes referred to as "Warrant
Shares" and the exercise price of a share of Common Stock in effect at any time
and as adjusted from time to time is hereinafter sometimes referred to as the
"Exercise Price."
(3) EXERCISE OF WARRANT. This Warrant may be exercised in whole or in
part at any time or from time to time on or after the date hereof
and until October 12, 2004 (the "Exercise Period"); provided,
however, that if such day is a day on which banking institutions in
the State of New York are authorized by law to close, then on the
next succeeding day which shall not be such a day. This Warrant may
be exercised by presentation and surrender hereof to the Company at
its principal office or to the Company's warrant agent, if any has
been so appointed, with the Purchase Form annexed hereto duly
executed and accompanied by payment of the Exercise Price, in cash
or by certified or bank cashier's check, for the number of Warrant
Shares specified in such form. Notwithstanding the foregoing, in
lieu of any cash payment required hereunder, the Holder of this
Warrant shall have the right at any time during the Exercise Period
to exercise the Warrant in full or in part by surrender of this
Warrant (with the election at the end hereof duly executed) to the
Company at its principal office or to the Company's warrant agent,
if any has been so appointed, in exchange for the number of Warrant
Shares equal to the product of (a) the number of Warrant Shares as
to which the Warrant is being exercised multiplied by (b) a
fraction, the numerator of which is the Current Market Price (as
defined in Section (11) below) of
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<PAGE>
the Common Stock less the Exercise Price and the denominator of
which is the Current Market Price. As soon as practicable after each
such exercise of the Warrants, the Company shall issue or cause to
be issued and delivered to the Holder a certificate or certificates
for the Warrant Shares issuable upon such exercise, registered in
the name of the Holder. The Warrant shall be deemed to have been
exercised immediately prior to the close of business on the date of
any such exercise, provided such exercise is in accordance with the
provisions set forth herein. If this Warrant should be exercised in
part only, the Company shall, upon surrender of this Warrant for
cancellation, execute and deliver a new Warrant evidencing the
rights of the Holder thereof to purchase the balance of the Warrant
Shares purchasable thereunder. Upon receipt by the Company of this
Warrant at its office in proper form for exercise, the Holder shall
be deemed to be the holder of record of the shares of Common Stock
issuable upon such exercise, notwithstanding that the stock transfer
books of the Company shall then be closed or that certificates
representing such shares of Common Stock shall not then be
physically delivered to the Holder.
(2) RESERVATION OF SHARES. The Company shall at all times reserve for
issuance and/or delivery upon exercise of this Warrant such number of shares of
its Common Stock as shall be required for issuance and delivery upon exercise of
the Warrants.
(3) FRACTIONAL SHARES. No fractional shares or script representing
fractional shares shall be issued upon the exercise of this Warrant. If more
than one Warrant shall be exercised at one time by the Holder, the number of
full shares which shall be issuable upon exercise thereof shall be computed on
the basis of the aggregate number of full shares issuable upon such exercise. No
adjustment shall be made in respect of cash dividends on Warrant Shares
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<PAGE>
delivered upon exercise of any Warrant. With respect to any fraction of a share
called for upon exercise hereof, the Company shall pay to the Holder an amount
in cash equal to such fraction multiplied by the average closing bid and asked
prices of the Common Stock on the last available date for which quotations are
available immediately preceding the date of exercise of this Warrant, or if the
bid and asked prices are not so reported, then the current market value shall be
an amount, not less than the book value thereof as at the end of the most recent
fiscal year of the Company ending prior to the date of the exercise of the
Warrant, determined in such reasonable manner as may be prescribed by the Board
of Directors of the Company.
(4) EXCHANGE OR LOSS OF WARRANT. This Warrant is exchangeable, without
expense, at the option of the Holder, upon presentation and surrender hereof to
the Company for other Warrants of different denominations entitling the holder
thereof to purchase in the aggregate the same number of shares of Common Stock
purchasable hereunder. This Warrant may be divided or combined with other
Warrants which carry the same rights upon presentation hereof at the principal
office of the Company with a written notice specifying the denominations in
which new Warrants are to be issued and signed by the Holder hereof. The term
"Warrant" as used herein includes any Warrants into which this Warrant may be
divided or exchanged. Upon receipt by the Company or its warrant agent, if any,
of evidence satisfactory to it of the loss, theft, destruction or mutilation of
this Warrant, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Warrant, if mutilated, the Company will execute and deliver a new Warrant of
like tenor and date.
(5) RIGHTS OF THE HOLDER. The Holder shall not, by virtue hereof, be
entitled to any rights of a stockholder in the Company, either at law or equity,
and the rights of the Holder are limited to those expressed in the Warrant and
are not enforceable against the Company except to the extent set
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<PAGE>
forth herein and in any warrant agreement entered into by and between the
Company and a warrant agent with respect to the Warrants. In the event the
Company enters into a warrant agreement with a warrant agent, the terms of the
Warrant shall be embodied in the warrant agreement; and the acceptance of this
Warrant by the Holder shall be deemed consent by the Holder for the Company to
enter into any such warrant agreement, upon such terms and conditions mutually
agreeable between the Company and any such warrant agent, provided such warrant
agreement does not adversely affect any of the rights of the Holder, as set
forth in this Warrant.
(6) ANTI-DILUTION PROVISIONS. (a) After each adjustment of the Exercise
Price pursuant to this Section (6), the number of shares of Common Stock
purchasable upon the exercise of the Warrant shall be the number of Warrant
Shares receivable upon exercise thereof prior to such adjustment multiplied by a
fraction the numerator of which shall be the original Exercise Price as defined
above and the denominator of which shall be such adjusted Exercise Price.: (b)
In case the Company shall hereafter (A) pay a dividend or make a distribution on
its Common Stock in shares of its capital stock (whether shares of Common Stock
or of capital stock of any other class), (B) subdivide its outstanding shares of
Common Stock, (C) combine its outstanding shares of Common Stock into a smaller
number of shares, or (D) issue by reclassification of its shares of Common Stock
any shares of capital stock of the Company, the Exercise Price in effect
immediately prior to such action shall be adjusted so that the Holder of any
Warrant thereafter exercised shall be entitled to receive the number of Warrant
Shares which the Holder would have owned immediately following such action had
such Warrant been exercised immediately prior thereto. An adjustment made
pursuant to this subsection shall become effective immediately after the record
date in the case of a dividend and shall become effective immediately after the
effective date in the case of a subdivision, combination or reclassification.
(c) No adjustment in the Exercise Price shall be required to be made
unless such adjustment would require an increase or decrease of at least $.01;
provided, however, that any adjustments which by reason of this subsection are
not required to be made shall be carried forward and taken into account in any
subsequent adjustment. All calculations under this Section (6) shall be made to
the nearest cent or to the nearest one-one hundredth of a share, as the case may
be, but in no event shall the Company be obligated to issue fractional shares
upon the exercise of any Warrant.
(d) The provisions of this Section 6 shall not apply to any Common
Stock issuable: (i) to any person pursuant to any stock option, stock purchase,
stock purchase or similar plan or arrangement for the benefit of the Company's
employees, consultants or directors or (ii) pursuant to options, warrants,
conversion rights, and rights to acquire Common Stock in existence on the date
of issuance hereof.
(e) In case of any reclassification or change of outstanding shares
of Common Stock issuable upon exercise of the Warrants (other than a change in
par value or from par value to no par value or from no par value to par value or
as a result of a subdivision or combination), or in case of any
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<PAGE>
consolidation or merger of the Company with or into another corporation (other
than a merger with a Subsidiary in which merger the Company is the continuing
corporation and which does not result in any reclassification or change of the
then outstanding shares of Common Stock or other capital stock issuable upon
exercise of the Warrants other than a change in par value or from par value to
no par value or from no par value to par value) or in the case of any sale or
conveyance to another corporation of the property of the Company as an entirety
or substantially as an entirety, then, as a condition of such reclassification,
change, consolidation, merger, sale or conveyance, the Company, or such
successor or purchasing corporation, as the case may be, shall make lawful and
adequate provision whereby the Holder of the Warrant shall have the right
thereafter to receive on exercise of such Warrant the kind and amount of shares
of stock and other securities and property receivable upon such
reclassification, change, consolidation, merger, sale or conveyance by a holder
of the number of shares of Common Stock issuable upon exercise of such Warrant
immediately prior to such reclassification, change, consolidation, merger, sale
or conveyance. Such provisions shall include provision for adjustments which
shall be as nearly equivalent as may be practicable to the adjustments provided
elsewhere in this Section (6). The above provisions of this Section (6) shall
similarly apply to successive reclassifications and changes of shares of Common
Stock and to successive consolidations, mergers, sales or conveyances.
(f) Before taking any action which would cause an adjustment
reducing the Exercise Price below the then par value of the shares of Common
Stock issuable upon exercise of the Warrants, the Company will take any
corporate action which may, in the opinion of its counsel, be necessary in order
that the Company may validly and legally issue fully paid and non-assessable
shares of such the Company at such adjusted Exercise Price.
(g) Upon any adjustment of the Exercise Price and any increase or
decrease in the number of shares of Common Stock purchasable upon the exercise
of this Warrant, the Company promptly shall give written notice thereof to the
Holder, which shall state the Exercise Price resulting from such adjustment and
increase or decrease, if any, in the number of shares of Common Stock
purchasable at such price upon the exercise of this Warrant, setting forth in
reasonable detail the method of calculation and the facts upon which such
calculation is based.
(h) If at any time:
(ix) the Company shall declare any cash dividend upon its
Common Stock;
(x) the Company shall declare any dividend upon its Common
Stock payable in stock (other than a dividend payable
solely in shares of Common Stock or make any special
dividend or other distribution to the holders of its
Common stock;
(xi) there shall be any consolidation or merger of the
Company with another corporation, or a sale of all or
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<PAGE>
substantially all of the Company's assets to another
corporation; or
(xii) there shall be a voluntary or involuntary dissolution,
liquidation or winding-up of the Company;
then, in any one or more of said cases, the Company shall give the Holder (A) at
least ten (10) calendar days' prior written notice of the date on which the
books of the Company shall close or a record date shall have occurred for such
dividend or distribution or for determining rights to vote in respect of any
such consolidation, merger, sale, dissolution, liquidation or winding-up, and
(B) in the case of any such consolidation, merger, sale, dissolution,
liquidation or winding-up, at least ten (10) calendar days' written notice of
the date when the same shall take place. Any notice given in accordance with
clause (A) above shall also specify, in the case of any such dividend or
distribution, the date on which the holders of Common Stock shall be entitled
thereof. Any notice given in accordance with clause (B) above shall also specify
the date on which the holders of Common Stock shall be entitled to exchange
their Common Stock for securities or other property deliverable upon such
consolidation, merger, sale, dissolution, liquidation or winding-up, as the case
may be.
(7) INVESTMENT REPRESENTATION. By accepting this Warrant, the Holder
acknowledges that it has been advised by the Company that this Warrant and the
Warrant Shares underlying this Warrant have not been registered under the
Securities Act of 1933, as amended (the "Act"), and that this Warrant is being
issued on the basis of the statutory exemption provided by section 4(2) of the
Act relating to transactions by an issuer not involving any public offering.
Holder hereby represents and warrants to the Company that (I) it is acquiring
this Warrant for its own account, for investment purposes only and not with a
view toward the distribution or resale thereof, (ii) it is a sophisticated
investor and had access to the same kind of information which would be
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available in a registration statement filed under the Act, and (iii) it
understands that it may not sell or otherwise dispose of this Warrant in the
absence of either a registration statement under the Act or an exemption from
the registration provisions thereunder and in accordance with the transfer
provisions set forth in this Section 10 of this Warrant.
(8) REGISTRATION RIGHTS. The Company hereby grants the Holder the right to
"piggy back" the Warrant Shares on each Registration Statement for the sale of
Common Stock filed by the Company (or any securities of a successor company of
the Company) at the Company's cost and expense (except those incurred by the
Holder for legal fees and commissions). In this connection, the Company shall
give the Holder at least 30 days' prior notice of its intent to file a
Registration Statement. The Company shall use its best efforts to keep any
Registration Statement onto which Holder has "piggy backed" his shares effective
for a period of not less than 180 days from the date whereby the Holder is first
entitled to sell thereunder, or such shorter period terminating when the Holder
has sold all of his shares. Such "piggy back" rights are subject to standard
underwriters' approval and holdback, whereby the Holder's rights to sell in an
initial public offering may be limited pro rata with the other stockholders and
shall not apply to any Warrant Shares that can be sold under SEC Rule 144. For
purposes of this Section (8), the term Registration Statement shall mean any
registration statement for the sale of common stock or other securities filed by
the Company or any selling shareholder or filed by any successor entity (in the
case of merger, reclassification, change, consolidation, sale or conveyance of
the Company) under the Act (except for a Registration Statement on Form S-4,
Form S-8 or any successor form thereto), which shall include, but not be limited
to, any Registration Statement filed by Healthcore Medical Solutions, Inc.
("Healthcore") in connection with, relating to or subsequent to the effective
date of the merger of the Company into Healthcore (the "Merger") as contemplated
by that certain Letter of Intent, dated April 27, 1999, by and between the
Company and/or Healthcore;
(iii) The Company shall also grant to Holder such additional
"piggyback" rights and demand registration rights relative to the Warrant Shares
as shall be granted and included in a subsequent warrant that may be granted to
Holder.
(9) TRANSFER. (i) The Holder acknowledges that it has been informed by the
Company of, or is otherwise familiar with, the nature of the limitations imposed
by the Act and the rules and regulations thereunder on the transfer of this
Warrant and the Warrant Shares. In particular, the Holder agrees that no sale,
assignment, or transfer of this Warrant shall be valid or effective, and the
Company shall not be required to give any effect to any such sale, assignment,
or transfer, unless (A) the sale, assignment, or transfer of this Warrant or the
Warrant Shares is registered under the Act, it being understood that this
Warrant or the underlying Warrant Shares is not currently registered under the
Act and that the Company has no obligation to register this Warrant and is only
obligated to register the Warrant Shares to the extent set forth in Section 9 of
this Warrant, (B) this Warrant or the underlying Warrant Shares are sold,
assigned or transferred in accordance with all of the requirements and
limitations of Rule 144 under the Act, it being understood that Rule 144 is not
available at the present time for the sale of the Warrant or underlying Warrant
Shares and that there can be no assurance that Rule 144 will be available at any
time in the future, or
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(C) such sale, assignment, or transfer is otherwise exempt from registration
under the Act. The Holder and each transferee hereof further agrees that in any
distribution of this Warrant or the underlying Warrant Shares is proposed to be
made by them otherwise than by delivery of a prospectus meeting the requirements
of Section 10 of the Act, such action shall be taken only after submission to
the Company of an opinion of counsel, reasonably satisfactory in form and
substance to the Company's counsel, to the effect that the proposed distribution
will not be in violation of the Act or applicable state law.
(ii) Prior to any such proposed transfer, and as a condition thereto, if such
transfer is not made pursuant to an effective registration statement under the
Act, the Holder will, if requested by the Company, deliver to the Company (i) an
investment covenant signed by the proposed transferee, (ii) an agreement by such
transferee, that such transferee will be bound by the terms of this Warrant and
that the restrictive investment legend set forth above be placed on the
certificate or certificates representing the securities acquired by such
transferee, and (iii) an agreement by such transferee that the Company may place
a "stop transfer order" with its transfer agent or registrar.
(iii) Except as specifically restricted hereby, this Warrant and the Warrant
Shares issued hereunder may be transferred by the Holder in whole or in part at
any time or from time to time. Upon surrender of this Warrant certificate to the
Company or at the office of its stock transfer agent, if any, with the
Assignment Form annexed hereto duly executed and funds sufficient to pay any
transfer tax, and upon compliance with the foregoing provisions, the Company
shall without charge, execute and deliver a new Warrant certificate in the name
of the assignee named on such instrument of assignment, and this Warrant
certificate shall promptly be canceled. An assignment, transfer, pledge,
hypothecation or other disposition of this Warrant attempted contrary to the
provisions of this Warrant, or any levy of execution, attachment or other
process attempted upon this warrant, shall be null and void and without effect.
(10) NOTICES. All notices and other communications which are required or
may be given under this Warrant shall be in writing and shall be deemed to have
been duly given when delivered in person or transmitted by telex or three (3)
days after being mailed, postage prepaid, in the case of the Company to Adatom,
Inc., 920 Hillview Court, Suite 160, Milipitas, CA 95035, Attention: President,
and in the case of the Holder to the address set forth herein, or to such other
address as such party shall have specified by notice to the other party hereto.
If notice is given by registered or certified first class mail, postage prepaid,
return receipt requested, the return receipt shall be conclusive evidence of the
notice having been mailed on the date set forth.
(11) DEFINITION. The "Current Market Price" per share of Common Stock on
any date shall be deemed to be the average of the daily closing prices for the
thirty (30) consecutive trading days immediately preceding the date in
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question. The closing price for each day shall be the last reported sales price
regular way or, in case no such reported sale takes place on such day, the
closing bid price regular way, in either case on the principal national
securities exchange (including, for purposes hereof, the NASDAQ Stock Market,
Inc. ("NASDAQ") on which the shares of Common Stock are listed or admitted to
trading, or, if the shares of Common Stock are not listed or admitted to trading
on any national securities exchange, the highest reported bid price for the
Common Stock as furnished by the National Association of Securities Dealers,
Inc. (the "NASD") or a similar organization if the NASD is no longer reporting
such information (including for purposes hereof NASDAQ). If on any such date the
shares of Common Stock are not listed or admitted to trading on any national
securities exchange and is not quoted by NASDAQ or any similar organization, the
fair value of a share on such date, as determined in good faith by the Board of
Directors of the Company, whose determination shall be conclusive, shall be
used.
(12) MISCELLANEOUS. This Agreement contains the entire Agreement and
supersedes all prior agreements and understandings, oral or written, between the
parties hereto with respect to the subject matter hereof. This Warrant may not
be changed orally, but only by an agreement in writing signed by the party
against whom any waiver, change, amendment, modification or discharge is sought,
provided however, that this Warrant may be amended or modified without the
consent of the Holder if such amendment or modification does not adversely
affect the rights of the Holder hereunder. This Agreement may be assigned by
Holder in
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accordance with Section (i) of this Agreement. This Agreement will not be
assigned by the Company and shall be interpreted under the laws of the State of
New York without application to the principles of conflicts of laws.
ADATOM.COM, INC.
By: ________________________________
[SEAL]
Dated:
Attest:
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FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder desires to transfer
the attached Warrant.)
FOR VALUE RECEIVED, _____________________ hereby sells, assigns, and
transfers unto ________________________ a warrant (the "Warrant") __________ to
purchase __________ shares of Common Stock, no par value per share, of
Adatom.com, Inc. (the "Company"), together with all right, title, and interest
therein, and does hereby irrevocably constitute and appoint
_______________________________________ as attorney to transfer such Warrant on
the books of the Company, with full power of substitution.
Dated:___________________
Signature: ___________________
NOTICE
The signature on the foregoing Assignment must correspond to the name as
written upon the face of this Warrant in every particular, without alteration or
enlargement or any change whatsoever.
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PURCHASE FORM
Dated ________, ____
The undersigned hereby irrevocably elects to exercise the within Warrant to
the extent of purchasing shares of Common Stock and hereby (i) tenders payment
herewith in the amount of $_____________ or (ii) surrender the Warrant in the
amount of _________, in payment of the actual exercise price thereof, and
requests that certificates for such securities be issued in the name of, and
delivered to, and, if such number of Warrant Shares shall not be all the Warrant
Shares covered by the within Warrant, that a new Warrant for the balance of the
Warrant Shares be registered in the name of, and delivered to, the undersigned
at the address stated below.
INSTRUCTIONS FOR REGISTRATION OF STOCK
Name: _________________________________________________________________________
(Please typewrite or print in block letters)
Address: ______________________________________________________________________
Signature: _____________________________________________________________________
46
INSERT 10.19
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (this "Agreement"), dated as of October 11, 1999,
between Adatom, Inc., a California corporation (the "Company"), and Neal J.
Polan, an individual residing at 20 Cameron Drive Greenwich, Connecticut (the
"Employee").
W I T N E S S E T H:
WHEREAS, the Company has heretofore executed (i) a certain Agreement and
Plan of Merger (the "Merger Agreement"), dated July 1, 1999, among the Company,
HealthCore Medical Solutions, Inc., a Delaware corporation ("HealthCore"), the
Employee, and the shareholders of the Company, pursuant to which the Company
will be merged (the "Merger") with and into HealthCore, and (ii) a certain
Letter Agreement (the "Letter Agreement"), dated July 1, 1999, between the
Company and the Employee; and
WHEREAS, in connection with the consummation of the Merger, and in
accordance with the terms of the Letter Agreement, the Company desires to retain
the services of the Employee, and the Employee desires to provide such services
to the Company, on the terms and subject to the conditions set forth in this
Agreement.
NOW, THEREFORE, the parties hereby agree as follows:
1. EMPLOYMENT AND DUTIES.
(a) The Company hereby employs the Employee, and the Employee
hereby accepts employment with the Company, to advise the Company on
mergers, acquisitions and other initiatives and strategic ventures
contemplated to be undertaken by the Company, as the Company's
President may direct.
(b) The Employee hereby agrees to perform the duties described
in Section 1(a) hereof, and to serve the Company, faithfully,
diligently and to the best of his ability, subject to the direction
of the Company's President. The parties hereby agree that the
Employee shall not be required to devote in excess of sixty (60)
hours per month (the "Monthly Employment Period") to the performance
of his duties under this Agreement, at such timed mutually
acceptable to the Company and the Employee. The parties further
acknowledge and agree that the Employee's employment hereunder shall
in no manner restrict or limit the Employee's freedom to pursue
other professional endeavors provided they do not materially impair
the Employee's ability to perform his duties hereunder.
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(c) During the Term (as defined in Section 2 hereof) the
Employee shall not, directly or indirectly, engage in the internet
retail superstore business or any related internet retail business
in which the Company shall actually engage in any material manner;
provided, however, that such prohibition shall not apply to any
business in which the Employee shall have been engaged, independent
of his employment with the Company, prior to the date on which the
Company commences its engagement of such business.
2. TERM.
The term of the Employee's employment under this Agreement
shall commence (the "Commencement Date") contemporaneously with the
Closing (the "Closing") of the transactions contemplated by the
Merger Agreement, and shall continue for a period of two (2) years
thereafter, unless earlier terminated in accordance with the terms
and conditions of Section 4 hereof (the "Term").
3. COMPENSATION; SIGNING BONUS; EXPENSES; BENEFITS.
(a) BASE COMPENSATION. As compensation for the Employee's
performance of the services contemplated to be rendered by the
Employee hereunder, the Company shall pay to Employee an salary of
Fifty Thousand ($50,000) Dollars per annum, payable in accordance
with the Company's standard payroll practices for senior employees.
Such salary may be increased, but not decreased, by the Board of
Directors and shall be reviewed by the Board no less frequently than
annually.
(b) STOCK PURCHASE. In partial consideration for the
Employee's execution and delivery to Adatom of this Agreement
simultaneously with the execution of the Merger Agreement, the
Company has heretofore agreed, pursuant and subject to the terms of
the Letter Agreement, that immediately prior to the Commencement
Date the Company shall issue to the Employee such number of shares
(such shares being the "Polan Shares") of the Company's common
stock, no par value per share (collectively, the "Adatom Shares")
which in accordance with the terms and conditions set forth in the
Merger Agreement shall be convertible into three hundred fifty
thousand (350,000) shares of HealthCore Class A common stock, par
value $.01 per share, for a purchase price purchase price of Three
Hundred Twenty Thousand Seven Hundred Sixty ($320,760) Dollars
payable pursuant to the terms of a promissory note (the "Note') in
form and substance mutually satisfactory to the Employee and the
Company, and their respective counsel. The Company hereby agrees
that the principal amount of the Note, together with all accrued
interest thereon through the relevant date, shall be forgiven by the
Company six (6) months following the Commencement Date.
(c) EXPENSES. The Employee shall be entitled to advances or
reimbursement in accordance with the Company's standard business
practices for his ordinary and necessary business expenses incurred
in the performance of his duties hereunder provided that his claims
therefor shall be supported by the documentation required by the
Company in accordance with its usual practice;
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and further provided that the Employee acknowledges that in view of
the fact that the Company's offices are located in California, the
Employee will be responsible for the payment of all expenses
associated with the maintenance and management of his New York
office.
(d) Benefits. The Company shall provide the Employee with
family health insurance coverage, and shall allow the Employee to
participate in the Company's employee stock option plans.
4. TERMINATION.
(a) Termination for Cause. The Company may terminate the
Employee's employment hereunder for "cause," which term shall be
defined as (i) Employee's conviction of a crime constituting a
felony or involving moral turpitude, and (ii) an act by Employee of
fraud in connection with Employee's performance of his duties to the
Company. Upon a termination for cause, the parties' obligations
hereunder shall terminate and be of no further force or effect;
provided, however, that the Employee shall retain the Polan Shares
and the Note shall forthwith be deemed to be fully paid performed
and discharged, and the Employee shall own the Polan Shares free and
clear of any and all claims arising under the Note and/or this
Agreement.
(b) Termination Without Cause. The Company may terminate the
Employee's employment at any time "without cause" (which term shall
be defined as a termination for any reason other than as set forth
in Section 4(a) hereof), including, without limitation, by reason of
the Employee's death, illness, disability or other incapacity. In
such event (i) the Employee's obligations under the Note shall
forthwith be deemed to be fully paid performed and discharged, and
the Employee shall own the Polan Shares free and clear of any and
all claims arising under the Note and/or this Agreement, and (ii)
except in the case of termination as a result of death, disability
or incapacity, the Employee shall be entitled receive the full
payment of any and all salary required to be provided to the
Employee pursuant to the terms of this Agreement at the times such
salary would have been paid hereunder, and, other than as provided
(i) and (ii) of this Section 4(b), the parties' obligations
hereunder shall terminate and be of no further force or effect.
(c) Termination by Employee. In the event the Employee shall
terminate his employment hereunder for any reason the parties'
obligations hereunder shall terminate and be of no further force or
effect; provided, however, that the Employee shall retain the Polan
Shares, and the Note shall forthwith be deemed to be fully paid
performed and discharged, and the Employee shall own the Polan
Shares free and clear of any and all claims arising under the Note
and/or this Agreement.
5. BOARD OF DIRECTORS.
In the event the Employee shall at any time during the term
hereof serve on the Board of Directors of the Company, the Employee
shall be entitled to receive, in addition to the compensation and
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benefits payable hereunder, such compensation, benefits and
entitlements as provided to the outside directors of the Company.
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<PAGE>
6. MISCELLANEOUS.
(a) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of California
applicable to agreements made and to be performed in that state.
(b) Notices. All notices, consents and other communications
under this Agreement shall be in writing and shall be deemed to have
been duly given when (a) delivered by hand (with receipt confirmed),
(b) sent by telex or telecopier (with receipt confirmed), provided
that a copy is mailed by registered mail, return receipt requested,
or (c) when received by the addressee, if sent by Express Mail,
Federal Express or other express delivery service (receipt
requested), in each case to the appropriate addresses and telecopier
numbers set forth below (or to such other addresses and telecopier
numbers as a party may designate as to itself by notice to the other
parties):
If to the Employee:
Neal J. Polan
20 Cameron Drive
Greenwich, Connecticut 07831
Facsimile: (917) 368-3601
with a copy to:
Epstein Becker & Green, P.C.
250 Park Avenue
New York, NY 10177
Attn: Seth Truwit, Esq.
Facsimile: (212) 661-0989
If to the Company:
Adatom, Inc.
920 Hillview Court, Suite 160
Milpitas, Ca 95035
Attn: Mr. Richard Barton, President
Facsimile: (561) 364-0771
with a copy to:
McCutchen, Doyle, Brown & Enersen, LLP
Three Embarcadero Center
San Francisco, CA 94111
Attn: Hank Evans, Esq.
Facsimile: (415) 393-2286
(c) Entire Agreement; Amendment. This Agreement contains the
entire understanding between the parties and may not be modified,
altered or terminated except by an instrument in writing signed by
the parties.
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(d) Waiver. The failure of a party to insist upon strict
adherence to any term of this Agreement on any occasion shall not be
considered a waiver thereof or deprive that party of the right
thereafter to insist upon strict adherence to that term or any other
term of this Agreement.
(e) Assignment. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective heirs,
representatives, successors and assigns.
(f) Severability. If any of the provisions, terms or clauses
of this Agreement are declared illegal, unenforceable or ineffective
in a legal forum, those provisions, terms and clauses shall be
deemed severable, such that all other provisions, terms and clauses
of this Agreement shall remain valid and binding upon both parties.
(g) Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of
which, when taken together, shall constitute one and same
instrument.
IN WITNESS WHEREOF, the parties hereto have each executed this
Employment Agreement as of the day and year first above written.
ADATOM, INC.
By:
_______________________________________
Name:
Title:
_______________________________________
Neal J. Polan
ACCEPTED AND AGREED TO AS OF THE
CLOSING:
HEALTHCORE MEDICAL SOLUTIONS, INC.
By: __________________________________ Date: _____________________
Name:
Title:
51
EXHIBIT 10.20
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("the Agreement") is entered into as of October
12, 1999 between Adatom.com, Inc., having its principal place of business at 920
Hillview Court, Suite 160, Milpitas, CA 95035 (the "Company"), and Mr. Richard
Barton ("Executive").
A. Executive has been employed by Adatom, Inc. as its President.
Concurrently with the execution of this Agreement, Adatom, Inc. is merging into
the Company, whose name immediately prior to said merger was HealthCore Medical
Solutions, Inc. The Company wishes to employ Executive as its Chairman of the
Board of Directors, President and Chief Executive Officer, and now enters into
this agreement to memorialize the terms of such employment.
B. The parties hereto therefore agree as follows:
1. EMPLOYMENT.
The Company hereby employs Executive to serve as Chairman of the Board of
Directors, President and Chief Executive Officer for the period commencing on
the date of this Agreement and ending December 31, 2002, unless such employment
is sooner terminated as provided in this Agreement (the "Employment Period");
provided, however, that on each annual anniversary of the date of this Agreement
the term of this Agreement shall be automatically extended for a period of one
additional year unless the Company or Executive gives the other party notice of
non-extension at least 30 days prior to the then relevant anniversary date.
Executive's responsibilities shall consist of those of President and CEO as set
forth by the Board of Directors of the Company ("the Board"). In the event
Executive continues in the full-time employment of the Company after the end of
the Employment Period, without a new employment agreement or an extension or
renewal of this Agreement, such continued employment shall be on a yearly basis
terminable at any time, for any reason or for no reason, without cause, by
Executive or the Company upon 60 days' written notice.
2. COMPENSATION.
2.1 BASE SALARY. Executive shall be paid a base salary at a yearly rate of
$200,000, payable in accordance with the Company's payroll policies for
executive officers. The base salary shall be reviewed on or before June 1 of
each year, starting in the year 2000, by the Board or the Compensation Committee
of the Board (the "Committee") to determine if such base salary should be
increased in recognition of Executive's services to the
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Company; provided, however, that the base salary shall not be decreased below
$200,000.
2.2 BONUS. Executive shall be eligible for a bonus of up to $100,000
annually, which bonus shall be paid upon attainment of certain goals as set
forth in the business plan of the Company approved by the Board.
2.3 REIMBURSEMENTS. Executive shall be entitled to reimbursement for
reasonable travel, entertainment and other business expenses incurred by him in
the performance of his duties under this Agreement, subject to reasonable
reporting and documentation requirements for such expenses.
2.4 WITHHOLDING. The Company shall withhold from any compensation
hereunder such amounts on account of payroll taxes, income taxes and other
similar matters as are required to be withheld by applicable law.
2.5 BENEFIT PLANS; VACATION. During the Employment Period, Executive may
participate in any profit-sharing, stock option, bonus, retirement, disability,
life or medical insurance plans or programs now or hereafter maintained by the
Company for its employees generally. Nothing in this Agreement shall preclude
the Company or any affiliate of the Company from terminating or amending any
plans or programs at any time, or from time to time. Executive shall be entitled
to four weeks of paid vacation (or a pro rata portion thereof) during each year
of the Employment Period.
2.6 AUTOMOBILE. The Company shall lease a luxury automobile for use by
Executive and shall pay the insurance thereon for Executive's own use thereof.
3. EXECUTIVE'S BUSINESS ACTIVITIES.
Executive shall devote his full professional time, attention and energy to
the business and affairs of the Company, as its business and affairs now exist
and as they hereafter may be changed, and shall not during the term of his
employment hereunder be engaged in any other business activity, whether or not
such business activity is pursued for gain or profit; provided, however, that
Executive may serve as a director or trustee of any business enterprise or any
nonprofit or governmental entity or trade association if in each case such
service is approved by the Board of Directors and does not in any material way
interfere with Executive's duties hereunder.
4. INTERFERENCE WITH THE COMPANY'S BUSINESS.
For a period of one year after termination of his employment hereunder for
any reason, Executive shall not, directly or indirectly, employ, solicit for
employment, or advise or recommend to any other person that such other person
employ or solicit for employment, any person employed (whether as a consultant,
employee, agent or otherwise) by the Company.
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5. CONFIDENTIALITY.
As used in this Agreement, the term "Confidential Information" means all
information, knowledge (whether oral or written and howsoever stored or
recorded), documents and other materials which Executive has had, now has or may
hereafter acquire concerning or in any way related to the Company or its
business, whether developed by Executive, any other employee of the Company, any
consultant to the Company or any other person or entity whatsoever; provided,
that the term "Confidential Information" shall not include any such information,
knowledge, document or other material which is or becomes known to the public
generally other than by means of any disclosure thereof by Executive or any
other person or entity under a confidentiality obligation to the Company.
Executive has not and never will (whether during the Employment Period or after
it), directly or indirectly, disclose, divulge, communicate or use to the
detriment of the Company or for Executive's own benefit or for the benefit of
any other person or entity, or misuse in any way, any Confidential Information.
Immediately upon termination of Executive's employment by the Company, Executive
shall deliver to the Company all documents and other materials then in
Executive's custody or control constituting, containing or reflecting in any way
any Confidential Information, without retaining any copies or summaries thereof.
6. NON-COMPETITION.
Without limiting the provisions of Section 1 or Section 3 of this
Agreement, during the Employment Period Executive will not engage in any
activity competitive with or similar to (whether or not competitive with) the
business of the Company, or participate or have any interest, directly or
indirectly, in any person, firm, corporation or business (either financially or
as a shareholder (other than an owner of less than 5% of the voting shares of
any public company), owner, creditor, employee, director, officer, partner,
consultant, or in any capacity which calls for the rendering of personal
services, advice or acts of management, operation or control) which carries on a
business competitive with or similar to (whether or not competitive with) the
business of the Company. The Company and Executive acknowledge and agree that
the foregoing non-competition provisions are necessary, inter alia, to protect
the Confidential Information.
7. EQUITABLE RELIEF.
Executive acknowledges and agrees that in the event of a breach by
Executive of any of the provisions of Sections 4, 5 and 6 of this Agreement, the
Company would not have an adequate remedy at law and the Company shall be
entitled to injunctive and other equitable relief in addition to any other
remedies which may be available.
8. TERMINATION.
This Agreement is subject to termination upon occurrence of any of the
events described in this Section 8. Upon termination in all cases, the parties'
respective obligations under this Agreement shall cease, except for Executive's
obligations under Sections 4 and 5, and except for obligations arising prior to
termination or arising pursuant to this Section 8.
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8.1 TERMINATION BY THE COMPANY.
8.1.1 DEATH. This Agreement shall automatically terminate on
the date of Executive's death. Upon such termination as provided in this Section
8.1.1, the Company shall have no further obligation to Executive.
8.1.2 DISABILITY. If Executive's physical or mental disability
prevents him from fully performing his duties under this Agreement for an
uninterrupted period of 150 days, the Company may terminate this Agreement by
giving Executive written notice thereof at any time after said period and prior
to two weeks following the end of the disability, specifying the date on which
this Agreement shall terminate. The decision of any qualified physician selected
in good faith by the Company as to Executive's ability fully to perform his
duties under this Agreement shall be final and binding on the parties for
purposes of this Section 8.1.2. Upon termination as provided in this Section
8.1.2, the Company shall have no further obligation to Executive except that the
Company shall continue to provide Executive with coverage under the insurance
described in Section 2.5 in accordance with its terms until the end of the
Employment Period, if permitted by such insurance at no added cost to the
Company.
8.1.3 CAUSE. The Company at any time may terminate this
Agreement for Cause. "Cause" as used herein shall mean:
(a) Executive's material breach of any of his agreements, covenants
or obligations under this Agreement;
(b) any act of insubordination, gross carelessness or misconduct, or
gross neglect of duty; or
(c) any act of fraud, dishonesty or moral turpitude or any other act
by Executive which brings him or the Company into disrepute in the community or
which materially and adversely affects the Company's business, affairs,
reputation or prospects.
Upon termination as provided in Section 8.1.3, the Company shall have no further
obligation to Executive.
8.1.4 OTHER TERMINATION. The Company may terminate this
Agreement at any time, without Cause, in its sole discretion for any reason it
deems sufficient. If the Company terminates this Agreement in a manner not
provided in Sections 8.1.1, 8.1.2 or 8.1.3, the Company shall (i) pay Executive
the base salary then in effect, on the terms provided in Section 2, for three
years after the date of termination, regardless of the time remaining in the
Employment Period, and (ii) continue to provide Executive with coverage under
the insurance described in Section 2.5 as long as Executive does not enter into
other employment and if permitted by such insurance at no added cost to the
Company, but shall have no further obligation to him. Executive acknowledges and
agrees that the payment of said base salary, and the furnishing of the insurance
coverage, as provided in this Section 8.1.4 shall be in lieu of severance pay or
any claim, cause of action or damages, in contract or in tort, he may otherwise
have, including without limitation any damages for breach of this Agreement, and
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shall extinguish any claim or cause of action he might otherwise have had
against the Company for termination for his employment.
8.2 TERMINATION BY EXECUTIVE.
8.2.1 THE COMPANY'S FAILURE TO PERFORM. Executive may
terminate this Agreement without any further liability to the Company for
failure by the Company to perform any of its obligations hereunder, which
failure continues for 30 days after written notice thereof to the Company by
Executive. Upon termination as provided in this Section 8.2.1, the Company shall
(i) pay Executive the base salary then in effect, on the terms provided in
Section 2, for three years after the date of termination, regardless of the time
remaining in the Employment Period, and (ii) continue to provide Executive with
the coverage under the insurance described in Section 2.5 as long as Executive
does not enter into other employment and if permitted by such insurance at no
added cost to the Company, but shall have no further obligation to him.
Executive acknowledges and agrees that the payment of said base salary, and the
furnishing of said insurance coverage, as provided in this Section 8.2.1 shall
be in lieu of severance pay or any claim, cause of action or damages, in
contract or in tort, he may otherwise have, including without limitation damages
for breach of this Agreement, and shall extinguish any claim or cause of action
he might otherwise have had against the Company for termination of his
employment.
8.2.2 TERMINATION AFTER CHANGE OF CONTROL. Executive may
terminate this Agreement, for Good Reason, at any time within two years after a
Change of Control. Upon termination as provided in this Section 8.2.2, the
Company shall (i) pay Executive the base salary then in effect, on the terms
provided in Section 2, for three years after the date of termination, regardless
of the time remaining in the Employment Period (less any amounts Executive earns
from other employment during such period), and (ii) continue to provide
Executive with coverage under the insurance described in Section 2.5 as long as
Executive does not enter into other employment and if permitted by such
insurance at no added cost to the Company. As used in this Section 8.2.2, the
terms "Change of Control" and "Good Reason" shall have the following meanings:
"Change of Control" means (i) any merger or
consolidation in which the Company is not the surviving
entity or sale of substantially all of the assets of the
Company; provided, however, if the Board of Directors and
officers remain in their positions for at least 12 months
following the transaction with the same authority and
control that existed prior to the transaction then this
provision shall not apply, (ii) a tender offer or exchange
offer for the outstanding shares of the Company as a
result of which the offeror acquires in excess of 50% of
the Company's outstanding shares, or (iii) a merger or
consolidation of the Company with another corporation or
entity that results in the former stockholders of the
Company, as they existed immediately prior to such merger
or consolidation, owning in the aggregate less than 50% of
the outstanding voting securities of the surviving or
resulting corporation or entity; provided, however, if the
Board of Directors and officers remain in their positions
for at least 12 months following the transaction with
56
<PAGE>
the same authority and control that existed prior to the
transaction then this provision shall not apply, or (iv)
any other transaction that, although different in form,
accomplishes substantially the same results as (i), (ii)
or (iii).
"Good Reason" means (i) the assignment to Executive
of any duties inconsistent with his duties and status with
the Company immediately prior to the Change of Control, or
a reduction in Executive's responsibilities, titles or
offices as in effect immediately prior to a Change of
Control, or any removal of Executive from or any failure
to re-elect Executive to any such positions, except in
connection with the involuntary termination of Executive's
employment for Cause, or as a result of Executive's death,
disability or retirement, or voluntary termination by
Executive for other than Good Reason; (ii) a reduction in
Executive's base salary as in effect immediately prior to
the Change of Control; (iii) the requirement that
Executive be based anywhere other than within a 50-mile
radius of the Company's location immediately prior to a
Change of Control, except for required travel on the
Company's business to an extent substantially consistent
with Executive's present business travel obligations; or
(iv) the failure by the Company to continue in effect, or
a change of Executive's participation or benefits under,
any bonus or incentive compensation plan, any employee
benefit plan qualified under Section 401(a) of the
Internal Revenue Code of 1986, as amended from time to
time (the "Code"), any stock ownership, stock purchase,
stock option or other equity incentive plan, any life,
health, accident, disability or similar plan providing
welfare benefits or any plan or program of fringe benefits
in which Executive is participating immediately prior to a
Change of Control, the effect of which would be to
materially reduce Executive's benefits under such plans as
such existed immediately prior to the Change of Control.
Notwithstanding the foregoing, if any payment to be made or benefit to be
provided to Executive pursuant to this Section 8.2.2, after taking into account
all other payments or benefits provided by the Company to Executive, would
constitute a "parachute payment" as defined in Section 280G of the Code, then
the payments to be made or benefits to be provided to Executive shall be reduced
so that the aggregate present value of all parachute payments does not exceed
299% of Executive's "annualized includible compensation for the base period" (as
such term is defined in Section 280G(d)(1) of the Code). The determination of
any reduction in the payments or benefits to be provided to Executive shall be
made by the Company and the Company's determination shall be conclusive and
binding on Executive.
8.2.3 OTHER TERMINATION. In addition to his rights under
Section 8.2.1 and 8.2.2 Executive may terminate this Agreement without cause,
for any reason, provided that he gives the Company at least 30 days' written
notice thereof. Upon termination as provided in this section 8.2.2, the Company
shall have no further obligation to Executive.
57
<PAGE>
9. ARBITRATION.
9.1 ARBITRATION OF DISPUTES. The parties agree that all
disputes, disagreements, controversies or claims of any kind, whether based on
wrongful discharge, tort, breach of contract, violation of statute (including
but not limited to claims of discrimination based on sex, age or race or sexual
harassment under federal or state law) or otherwise, arising out of or related
in any way to Executive's employment, or this Agreement, its interpretation, its
application or the question of whether it has been breached, shall be submitted
to final and binding arbitration in San Jose, California in accordance with the
Commercial Arbitration Rules of the American Arbitration Association, and
judgment on the award rendered by the arbitrators may be entered in any court
having jurisdiction. There shall be one arbitrator, and the parties shall split
the fee of the arbitrator as well as other costs of the arbitration.
9.2 WAIVER OF JURY TRIAL. EXECUTIVE ACKNOWLEDGES AND AGREES
THAT BY SIGNING THIS AGREEMENT HE IS WAIVING AND HEREBY DOES WAIVE ALL RIGHTS HE
MAY OTHERWISE HAVE TO BRING AN ACTION IN COURT OR HAVE A TRIAL BY JURY
CONCERNING HIS EMPLOYMENT, THE POSSIBLE TERMINATION OF IT, OR ANY OTHER SUCH
CLAIM, WHETHER BASED ON WRONGFUL DISCHARGE, UNLAWFUL DISCRIMINATION, TORT,
BREACH OF CONTRACT, VIOLATION OF STATUTE OR OTHERWISE, AND THAT HIS SOLE REMEDY
IS LIMITED TO ARBITRATION PURSUANT TO THIS SECTION 9.
10. ASSIGNMENT AND TRANSFER.
Executive's rights and obligations under this Agreement shall
not be transferable by assignment or otherwise, and any purported assignment,
transfer, or delegation thereof shall be void. This Agreement, shall inure to
the benefit of, and be enforceable by, any purchaser of substantially all of the
Company's assets, any corporate successor to the Company or any assignee
thereof.
11. MISCELLANEOUS.
11.1 ATTORNEYS' FEES. In any action or dispute covered by
Section 7 or Section 9 hereof or otherwise arising out of or relating in any way
to this Agreement, the party prevailing in such action or dispute shall be
entitled, in addition to such other relief as may be granted, to recover its
reasonable attorneys' fees and costs.
11.2 GOVERNING LAW. This Agreement shall be governed by and
construed according to the laws of the State of California.
11.3 ENTIRE AGREEMENT. This Agreement contains the entire
agreement and understanding between the parties and supersedes any prior or
contemporaneous written or oral agreements between them regarding the subject
matter of this Agreement.
11.4 AMENDMENT. This Agreement may be amended or modified only
by a writing signed by Executive and by a duly authorized representative of the
Company.
58
<PAGE>
11.5 SEVERABILITY. If any provision of this Agreement is held
by a court of competent jurisdiction to be invalid, void or unenforceable as to
a particular application, then such provision shall be deemed modified to
exclude such application, and such provision in all other applications, and all
other provisions of this Agreement, shall continue in full force and effect
without being modified, impaired or invalidated in any way.
11.6 CONSTRUCTION. The headings and captions of this Agreement
are provided for convenience only and are intended to have no effect in
construing or interpreting this Agreement. The language in all parts of this
Agreement shall be in all cases construed according to its fair meaning and not
strictly for or against the Company or Executive.
11.7 RIGHTS CUMULATIVE. The rights and remedies provided by
this Agreement are cumulative, and the exercise of any right or remedy by either
party hereto shall not preclude or waive its right to exercise any or all other
rights and remedies hereunder. Without limiting the foregoing, the provisions of
Section 9 shall not in any way limit the rights of the Company to equitable
relief under Section 7 hereof.
11.8 NONWAIVER. No failure or neglect of either party hereto
in any instance to exercise any right, power or privilege hereunder or under law
shall constitute a waiver of any other right, power or privilege or of the same
right, power or privilege in any other instance. All waivers by either party
hereto must be contained in a written instrument signed by the party to be
charged and, in the case of the Company, by an officer of the Company (other
than Executive) or other person duly authorized by the Company.
11.9 NOTICES. Any notice, request, consent, or approval
required or permitted to be given under this Agreement or pursuant to law shall
be sufficient if in writing, and if and when sent by certified or registered
mail, with postage prepaid, (i) with respect to Executive, to Executive's
residence (as noted in the Company's records), or (ii) with respect to the
Company, to the Company's principal office.
IN WITNESS WHEREOF, the undersigned have executed this
Employment Agreement as of the date first set forth above.
Executive:
_____________________________________________________________
Richard Barton
Adatom.com, Inc.
By: __________________________________________________________
Title: _______________________________________________________
59
<PAGE>
TABLE OF CONTENTS
1. Employment.................................................53
2. Compensation...............................................53
2.1 Base Salary................................................53
2.2 Bonus......................................................54
2.3 Reimbursements.............................................54
2.4 Withholding................................................54
2.5 Benefit Plans; Vacation....................................54
2.6 Automobile.................................................54
3. Executive's Business Activities............................54
4. Interference with the Company's Business...................54
5. Confidentiality............................................55
6. Non-Competition............................................55
7. Equitable Relief...........................................55
8. Termination................................................55
8.1 Termination by the Company.................................56
8.1.1 Death..............................................56
8.1.2 Disability.........................................56
8.1.3 Cause..............................................56
8.1.4 Other Termination..................................56
8.2 Termination by Executive...................................57
8.2.1 The Company's Failure to Perform...................57
8.2.2 Termination After Change of Control................57
8.2.3 Other Termination..................................58
9. Arbitration................................................59
9.1 Arbitration of Disputes....................................59
9.2 WAIVER OF JURY TRIAL.......................................59
10. Assignment and Transfer....................................59
11. Miscellaneous..............................................59
11.1 Attorneys'Fees.............................................59
11.2 Governing Law..............................................59
11.3 Entire Agreement...........................................59
11.4 Amendment..................................................59
11.5 Severability...............................................60
11.6 Construction...............................................60
11.7 Rights Cumulative..........................................60
11.8 Nonwaiver..................................................60
11.9 Notices....................................................60
60
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement
(No. 333-68557) of HealthCore Medical Solutions, Inc. (the "Company") on Form
S-3 of our report dated November 19, 1999 with respect to the financial
statements of the Company this Annual Report on Form 10-KSB for the year ended
September 30, 1999.
/s/ Richard A. Eisner & Company, LLP
- ------------------------------------
Richard A. Eisner & Company, LLP
Florham Park, New Jersey
December 23, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1998 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-START> OCT-01-1998
<PERIOD-END> SEP-30-1999
<CASH> 1,816,000
<SECURITIES> 0
<RECEIVABLES> 250,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,162,000
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 2,162,000
<CURRENT-LIABILITIES> 233,000
<BONDS> 0
0
0
<COMMON> 34,000
<OTHER-SE> 1,895,000
<TOTAL-LIABILITY-AND-EQUITY> 2,162,000
<SALES> 163,000
<TOTAL-REVENUES> 163,000
<CGS> 123,000
<TOTAL-COSTS> 123,000
<OTHER-EXPENSES> 2,923,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 12,000
<INCOME-PRETAX> (2,759,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,759,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,759,000)
<EPS-BASIC> 0
<EPS-DILUTED> (1.15)
</TABLE>
