<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
(Amendment No. 1)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 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.0-26275
drkoop.com, Inc.
(Exact name of registrant as specified in our charter)
Delaware 95-4697615
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
7000 N Mopac, Suite 400
Austin, TX 78731
(Address of principal executive offices)
Registrant's telephone number, including area code: (512) 583-5667
Securities registered under Section 12(b) of the Exchange Act:
None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, $0.001 par value
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES [X] NO [_]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [_]
The aggregate market value of the voting stock held by non-affiliates of the
Registrant, based on the closing price of Common Stock on March 31, 2000, as
reported by Nasdaq, was approximately $54,378,737. Shares of voting stock held
by each officer and director and by each person who owns 5% or more of the
outstanding voting stock have been excluded in that such persons may be deemed
to be affiliates. This assumption regarding affiliate status is not necessarily
a conclusive determination for other purposes.
The number of outstanding shares of the Registrant's Common Stock on March 31,
2000 was 31,182,745.
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EXPLANATORY NOTES
This Amendment No. 1 on Form 10-K/A is being filed by drkoop.com, Inc. as
an amendment to our Annual Report on Form 10-K for the fiscal year ended
December 31, 1999 to amend and restate in its entirety Part III.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
CERTAIN INFORMATION WITH RESPECT TO DIRECTORS
The following table sets forth certain information with respect to the
members of our Board of Directors as of April 26, 2000:
<TABLE>
<CAPTION>
Name of Director Age Principal Occupation Director Since Class
- -------------------------------- ----------- ---------------------------------------- -------------------- -----------
<S> <C> <C> <C> <C>
C. Everett Koop. M.D. 83 Chairman of the Board of the Company 1997 III
John F. Zaccaro (2) 65 Vice-Chairman of the Board of the 1997 II
Company
Donald W. Hackett 43 Chief Executive Officer and President 1997 III
of the Company
Jeffrey C. Ballowe (1)(2) 44 Self-Employed 1999 I
G. Carl Everett, Jr. (1)(2) 49 Senior Vice President, Personal Systems 1999 II
Group, of Dell Computer Corporation
Nancy L. Snyderman, M.D. (1) 48 Practicing Physician; Medical 1998 II
Correspondent for ABC
</TABLE>
(1) Member of Compensation Committee
(2) Member of Audit Committee
C. Everett Koop, M.D. has served as our Chairman of the Board of Directors
since he co-founded drkoop.com in July 1997. Since 1992, Dr. Koop has served as
the McInerney Professor of Surgery at the Dartmouth Medical School and as Senior
Scholar at the C. Everett Koop Institute at Dartmouth. Dr. Koop is also a
frequent lecturer on healthcare topics. An internationally respected pediatric
surgeon, Dr. Koop was Surgeon-in-Chief of the Children's Hospital of
Philadelphia from 1948 to 1981 and Editor-in-Chief of the Journal of Pediatric
Surgery from 1964 to 1976. Dr. Koop is a director of Superior Consultant
Holdings Corporation, a publicly-traded healthcare consulting company, as well
as several private healthcare companies. From 1994 to 1996, Dr. Koop was a
director and ex-officio Chairman of the Board of Patient Education Media, Inc.,
a producer of medical video tapes which filed for bankruptcy protection in 1996.
Dr. Koop was Surgeon General of the United States from 1981 to 1989. He was
also appointed Director of the Office of International Health in May 1982. Dr.
Koop is also the recipient of numerous honors and awards, including 35 honorary
doctorates. Dr. Koop serves as our Chief Medical Officer. In this role, he
oversees and sets policies and standards for all content on the website and
keeps current with respect to medical issues in the political and national
arenas. Dr. Koop is our liaison to the medical community. He is also our
primary spokesperson, making many appearances on our behalf.
John F. Zaccaro has served as our Vice Chairman of the Board of Directors
since he co-founded drkoop.com in July 1997. From 1994 until 1997, Mr. Zaccaro
served as the President and Executive Producer of the International Health &
Medical Film Festival. Mr. Zaccaro is also a director of Kit Manufacturing
Company, a publicly-traded constructor of manufactured housing.
Donald W. Hackett has served as our President, Chief Executive Officer and
a director since he co-founded drkoop.com in July 1997. From January 1996 until
joining drkoop.com, Mr. Hackett served in various
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management positions, including President and Chief Executive Officer of
Tradewave Corporation, an Internet network security company. From September 1988
until December 1995, Mr. Hackett served as Senior Vice President of Physician
Computer Network, Inc., a provider of practice management services. While
employed at Physician Computer Network, Inc., Mr. Hackett successfully
implemented the first provider-centric, computer-based pay-per-view-advertising
network, and initiated direct data interchange transactions between
laboratories, pharmacies and hospitals with practice management systems.
Jeffrey C. Ballowe has served as a director of drkoop.com since March 1999.
Since 1997, Mr. Ballowe has been self-employed. From 1986 until 1997, Mr.
Ballowe held various management positions at Ziff-Davis, Inc., an international
media company, including President of the Interactive Media and Development
Group. Mr. Ballowe is a director of VerticalNet, NBCi, SuperGroups and Give Me
Talk.
G. Carl Everett, Jr. has served as a director of drkoop.com since March
1999. Mr. Everett has been Senior Vice President, Personal Systems Group, of
Dell Computer Corporation, responsible for worldwide development and marketing
of all Dell desktop and notebook products since February 1998. For the prior
twenty years, Mr. Everett was employed by Intel Corporation, most recently as
General Manager of the Desktop Products Group. Mr. Everett is a director of
All.com and a member of the board of advisors for Argoquest and Form Factor Inc.
Nancy L. Snyderman, M.D. has served as a director of drkoop.com since March
1998. Dr. Snyderman has been a practicing physician for more than fifteen
years. Dr. Snyderman is a medical correspondent for ABC and can be seen on Good
Morning America and Prime Time Live. Dr. Snyderman's Healthtalk segments can be
heard daily on the CBS radio network, and she also writes a monthly column for
Good Housekeeping. Dr. Snyderman is a published author and has received
broadcasting awards from the California Medical Association, Radio and
Television News Directors, the Associated Press, United Press International and
the American Academy of Facial Plastic and Reconstructive Surgery. Dr.
Snyderman continues to publish in peer-reviewed journals and has received grants
from the Kellogg Foundation and the American Cancer Society.
During 1999, Richard D. Helppie, Jr., Chief Executive Officer of Superior
Consultant Holdings, Inc., and Mardian J. Blair, former President of Adventist
Health System Sunbelt Healthcare Corporation served as directors of drkoop.com.
Mr. Helppie resigned in April 2000 to attend to other business obligations. Mr
Blair resigned in April 2000 in connection with the termination of our
relationship with HealthMagic, Inc., an affiliate of Adventist Health System,
and which is more fully described under "Certain Transactions."
Agreements with Directors
Agreements with Dr. C. Everett Koop
Amended and Restated Name and Likeness Agreement. The terms of our
historical agreements with Dr. C. Everett Koop, pursuant to which we obtained
the ability to use his name and likeness provided Dr. Koop the right to receive
a percentage of the revenue received by us from certain activities. These
royalty payments have been immaterial, aggregating $41,000 for the year ended
December 31, 1999. Effective August 30, 1999, we amended and restated our
agreement with Dr. Koop in its entirety. This amendment made the following
principal changes to the agreement:
. the term of the agreement was extended for an additional five years and
automatically renews for additional five year terms unless terminated by
either party not more than 270 and not less than 180 days prior to the
end of each term;
. the obligation to make any payments to Dr. Koop based on our revenues
was completely eliminated; and
. the sole compensation to Dr. Koop under the amended and restated
agreement is the grant of an option acquire 214,400 shares of our common
stock at an exercise price of $17.88 per share (the public trading price
at the time of grant). The options vest at the rate of approximately
8,900 shares per month.
If a voluntary termination is requested by Dr. Koop and is not the result of
breach or default by us, we will have the right on a non-exclusive basis for
three years following voluntary termination to rebrand and sell approved
products bearing the name, image or likeness of Dr. Koop. In the event of a
change of control of our company, the amended and restated agreement will
terminate and all rights to the Koop name granted under the amended and restated
agreement will immediately revert to Dr. Koop. If we default in our obligations
to Dr. C. Everett Koop and do not promptly cure the default, Dr. C. Everett Koop
may terminate the Koop Agreement immediately, no rebrading period will apply and
we would immediately lose all rights to use Dr. Koop's name and likeness. Dr. C.
Everett Koop may also terminate the Koop Agreement upon a change in control of
our company. Any developments that would cause Dr. C. Everett Koop to exercise
his right to terminate his relationship with us or which otherwise would cause
us to lose the benefits of our affiliation with him would have a material
adverse effect on our business.
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Consulting Agreement. We are party to a letter agreement with Dr. Koop
dated October 1, 1997. Under the agreement, which is for a three year term, we
paid him $100,000 for the first year ended September 30, 1998, $135,000 for the
second year ending September 30, 1999 and we are obligated to pay him $150,000
in the third year ending September 30, 2000. These amounts represent the cash
compensation payable to Dr. Koop for services provided to us as a consultant and
director. Dr. Koop has also provided lecture services from time to time for
which he has been separately compensated, and he has also been granted stock
options to purchase an aggregate of 713,437 shares of common stock with a
weighted average exercise price of $0.11 per share. The options vested
immediately on the date of grant.
Other Consulting Agreements with Directors
John F. Zaccaro. We are party to a letter agreement with Mr. Zaccaro dated
October 1, 1997. Under the agreement, which is for a three year term, we paid
him $100,000 for the first year ended September 30, 1998, $135,000 for the
second year ending September 30, 1999 and are obligated to pay him $150,000 in
the third year ending September 30, 2000. These amounts represent the cash
compensation payable to Mr. Zaccaro for services provided to us as a consultant
and director. He has also been granted stock options to purchase an aggregate
of 938,437 shares of common stock with a weighted average exercise price of
$0.08 per share. Options to purchase 225,000 shares were fully vested on July
17, 1999. The other options to purchase 713,437 shares of common stock vested
immediately on the date of grant.
Dr. Nancy L. Snyderman. We are a party to an agreement, dated June 1,
1998, with Dr. Snyderman. The Snyderman Agreement permits us to use the image,
name and likeness of Dr. Snyderman in connection with healthcare-related
software services and programs. The agreement is exclusive in that Dr.
Snyderman may not enter into agreements with companies that directly compete
with us, except that Dr. Snyderman may continue to act under any agreements she
entered into prior to entering into this agreement. The term of the Snyderman
Agreement is for three years subject to automatic renewal for additional three
year terms unless terminated by either party within 60 days of the end of a
given term. If the voluntary termination is requested by Dr. Snyderman and is
not the result of a breach or default by us, we will have the right on a non-
exclusive basis for two years following voluntary termination to rebrand
approved software services and programs bearing the name, image or likeness of
Dr. Snyderman. As consideration for the Snyderman Agreement, we granted to Dr.
Snyderman options to acquire 183,750 shares of our common stock with an exercise
price of $0.16 per share. The options vested immediately on the date of grant.
Our use of Dr. Snyderman's name, image or likeness is also subject to her prior
written approval of the resulting programs, which may not be unreasonably
withheld and which must be rendered within ten working days of our request.
CERTAIN INFORMATION WITH RESPECT TO EXECUTIVE OFFICERS
The executive officers of drkoop.com as of April 26, 2000 are as follows:
<TABLE>
<CAPTION>
Name Age Position
- --------------------------------------- ---------- ------------------------------------------------------------
<S> <C> <C>
Donald W. Hackett...................... 43 President, Chief Executive Officer and Director
Dennis J. Upah......................... 38 Chief Operating Officer
Susan M. Georgen-Saad.................. 42 Chief Financial Officer
Louis A. Scalpati...................... 36 Senior Vice President, Chief Architect and Secretary
Neal K. Longwill....................... 45 Senior Vice President, Corporate Development
Ian J. Bagnall......................... 28 Executive Vice President and Chief Internet Strategist
John R. Osborne........................ 46 Executive Vice President, Marketing
</TABLE>
For purposes of the biographical data set forth below, service with
drkoop.com includes service with our predecessor, Empower Health Corporation.
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Donald W. Hackett has served as our President, Chief Executive Officer and
a director since he co-founded drkoop.com in July 1997. From January 1996 until
joining drkoop.com, Mr. Hackett served in various management positions,
including President and Chief Executive Officer of Tradewave Corporation, an
Internet network security company. From September 1988 until December 1995, Mr.
Hackett served as Senior Vice President of Physician Computer Network, Inc., a
provider of practice management services. While employed at Physician Computer
Network, Inc., Mr. Hackett successfully implemented the first provider-centric,
computer-based pay-per-view-advertising network, and initiated direct data
interchange transactions between laboratories, pharmacies and hospitals with
practice management systems.
Dennis J. Upah has served as our Chief Operating Officer since January
1999. From February 1995 until joining drkoop.com, Mr. Upah served as President
and General Manager of KEYE-TV (the CBS affiliate in Austin, Texas), a unit of
Granite Broadcasting Corporation. From September 1988 until January 1995, Mr.
Upah served as President and General Manager of WEEK-TV (the NBC affiliate in
Peoria, Illinois), also a unit of Granite Broadcasting Corporation. Mr. Upah is
the former Technology Chairman and an elected representative to the national CBS
Affiliates Advisory Board of Directors. He was also elected to the board of
directors for several groups, including the Illinois Broadcasters Association
(where he served as President), Texas Association of Broadcasters, Austin Better
Business Bureau and St. Jude Children's Hospital Midwest Affiliate.
Susan M. Georgen-Saad has served as our Chief Financial Officer since
October 1998. From March 1997 until joining drkoop.com, Ms. Georgen-Saad
served as Chief Financial Officer of IntelliQuest Information Group, a market
research company. From July 1996 until February 1997, Ms. Georgen-Saad served
as Chief Financial Officer of Clinicor, Inc., a clinical research company. From
April 1994 until June 1996, Ms. Georgen-Saad served as Senior Vice President,
Finance, of the Texas Workers' Compensation Insurance Fund, an insurance
company. Ms. Georgen-Saad has more than 19 years of experience in strategic
operational and financial management in the high-technology services,
pharmaceutical research, insurance, healthcare and financial services
industries.
Louis A. Scalpati has served as our Senior Vice President, Chief Architect
and Secretary since he co-founded drkoop.com in July 1997. From December 1995
until joining drkoop.com, Mr. Scalpati served as Director of the Healthcare
Business Unit, Tradewave Corporation, an Internet network security company, and
from July 1990 until November 1995, Mr. Scalpati served as Chief Network
Architect of Physician Computer Network, Inc., a provider of practice management
services.
Neal K. Longwill has served as our Senior Vice President of Corporate
Development since June 1999. From May 1998 until June 1999, Mr. Longwill served
as our Senior Vice President of Sales. From May 1980 until joining drkoop.com,
Mr. Longwill served in various sales and management positions with Intel
Corporation.
Ian J. Bagnall serves as our Executive Vice President and Chief Internet
Strategist. From February 1999 until November 1999, Mr. Bagnall served as our
Vice President of Business Development and Director of our website from April
1998 until February 1999. From October 1996 until joining drkoop.com, Mr.
Bagnall served as Marketing Relations Manager for ichat, Inc. (now Acuity,
Inc.), a provider of web-integrated chat browser and server products. From
October 1995 to October 1996, Mr. Bagnall worked as an Internet Consultant, and
from July 1994 until October 1995 Mr. Bagnall served as Business Manager for
Enter Television, Inc.
John R. Osborne serves as our Executive Vice President, Marketing and has
served as Senior Vice President of New Media since June 1999. From 1997 until
joining drkoop.com, Mr. Osborne was the Managing General Partner of Ronin Growth
Services, a consulting firm. During 1996, Mr. Osborne was President and Chief
Executive Officer of Boundless Technologies, Inc., a manufacturer of network
computers, terminals and software. From 1993 to 1996, Mr. Osborne served as
Vice President, Sales, Marketing and Operations of International Business
Machines, Inc., an international computer system manufacturer.
Compliance With Section 16(a) Under the Securities Exchange Act of 1934
Section 16(a) of the Exchange Act requires that our executive officers and
directors, and persons who own more than ten percent of a registered class of
our equity securities, file reports of ownership and changes in ownership
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(Forms 3, 4 and 5) with the Securities and Exchange Commission. Executive
officers, directors and greater-than-ten-percent holders are required to furnish
us with copies of all of these forms which they file.
Based solely on our review of these reports or written representations from
certain reporting persons, we believe that during the fiscal year ended December
31, 1999, all filing requirements applicable to our officers, directors,
greater-than-ten-percent beneficial owners and other persons subject to Section
16(a) of the Exchange Act were met, except that Mr. Helppie (a former director)
filed a Form 3 late failing to report one transaction on a timely basis, and Dr.
Koop, Mr. Blair (a former director), Mr. Everett, Ms. Georgen-Saad, Dr.
Snyderman and Mr. Helppie (a former director) each filed a Form 4 late each
failing to report one transaction on a timely basis.
ITEM 11. EXECUTIVE COMPENSATION
The following table provides for the periods shown summary information
concerning compensation paid or accrued by us to or on behalf of our Chief
Executive Officer and each of our four highest paid executive officers for the
year ended December 31, 1999 (collectively referred to as the "named executive
officers"). We were formed in 1997 and therefore did not compensate any of the
named executive officers for a full fiscal year in 1997.
Summary Compensation Table
<TABLE>
<CAPTION>
Long Term
Compensation
Annual Compensation ($) ----------------
------------------------------------- Securities
Other Annual Underlying
Name and Principal Position Year Salary Bonus Compensation ($)(1) Options/SAR# (2)
- ---------------------------------------- ---- ------- ------- ------------------- ----------------
<S> <C> <C> <C> <C> <C>
Donald W. Hackett 1999 244,350 -- 4,365
President and Chief Executive Officer 1998 146,250 -- 2,061,975
Robert C. Hackett (3) 1999 193,940 50,000 4,365
Executive Vice President, Business 1998 144,750 -- 465,000
Development
Dennis J. Upah 1999 132,110 182,110 487,500
Chief Operating Officer 1998 N/A N/A N/A
Neal K. Longwill 1999 120,014 134,760 78,274
Senior Vice President, Corporate 1998 77,833 32,500 150,000
Development
Louis A. Scalpati 1999 194,492 -- 4,365
Senior Vice President, Chief Architect 1998 129,750 -- 367,500
and Secretary
</TABLE>
____________________
(1) Excludes perquisites and other personal benefits, securities or property
aggregating less than $50,000 or 10% of the total annual salary and bonus
reported for each named executive officer.
(2) The securities underlying the options are shares of common stock.
(3) Mr. Robert Hackett resigned effective November 15, 1999.
Stock Option Plans
We presently have two stock option plans pursuant to which options to
purchase our common stock have been granted. Our Amended and Restated 1997 Stock
Option Plan relates to the grant of options to our employees, directors and
consultants. Our 1999 Equity Participation Plan is a successor equity plan to
our first stock option plan and relates to the discretionary grants of incentive
stock options to employees and to the grant of nonstatutory stock options, stock
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appreciation rights, performance awards, dividend equivalents, stock payments
and deferred stock to employees and consultants, as well as grants to non-
employee directors of nonstatutory stock options. We also expect to adopt an
additional plan which will provide for the grant of nonstatutory stock options
to employees and consultants, except that directors and officers will be
ineligible to participate in the new plan. The number of options to be granted
has not been determined.
The Board has also authorized our officers to enter into bonus agreements
with certain individuals who had been with us as of January 1, 1999. The
options granted under the bonus agreements shall vest pursuant to a four-year
schedule and shall be exercisable for three months after the optionee ceases to
be a service provider, but in no event may the option be exercised after the
expiration date for the option grant.
Option Grants During Year Ended December 31, 1999
The following table sets forth specified information regarding options
granted to each of the named executive officers during the year ended December
31, 1999. We have not granted any stock appreciation rights. The options were
granted under our Amended and Restated 1997 Stock Option Plan, 1999 Plan and
Bonus Agreements. In general, options granted under the Amended and Restated
1997 Stock Option Plan, 1999 Plan and Bonus Agreements vest over four years and
expire on the tenth anniversary of the date of grant. The exercise price is
equal to the fair market value of the stock on the date of grant.
The percentage of total options granted to employees in the last fiscal
year is based on an aggregate of 5,013,906 options granted in the last fiscal
year to our employees and non-employee directors, and consultants, including
options granted to the named executive officers. Potential realizable value
amounts represent certain assumed rates of appreciation in stock price for a
given exercise price only and assume the conversion or exchange of all options
to purchase common stock. Actual gains, if any, on stock option exercises and
holdings of the common stock are dependent on the future performance of such
stock. There is not assurance that the amounts reflected will be realized. The
5% and 10% assumed annual rates of compounded stock price appreciation are
mandated by the rules of the Securities and Exchange Commission and do not
represent our estimate or projection of future stock prices. Unless the market
price of the applicable shares of the common stock appreciates over the option
term, no value will be realized from the stock option grants made to the named
executive officers.
Option Grants in Last Fiscal Year
<TABLE>
<CAPTION>
Potential Realizable
Value At Assumed Annual
Rates of Stock Price
Appreciation for Option
Individual Grants Term
------------------------------- ------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
% of Total
Number of Options
Securities Granted to
Underlying Employees Exercise Market Expiration
Name Options Granted in 1999 Price Price Date 5% 10%
- ---------------------- --------------- -------------- ----------- ------------ -------------- --------------- --------------
Donald W. Hackett... 4,365 0% $0.01 $9.00 01/01/09 63,920 101,782
Robert C. Hackett(1) 4,365 0% $0.01 $9.00 01/01/09 63,920 101,782
Dennis J. Upah...... 337,500 7% 1.67 9.00 01/28/09 4,029,682 6,416,595
Dennis J. Upah...... 150,000 3% 9.00 9.00 06/04/09 2,199,008 3,501,552
Neal K. Longwill.... 75,000 1% 1.67 9.00 01/08/09 895,485 1,425,910
Neal K. Longwill.... 3,274 0% 0.01 9.00 01/01/09 47,945 76,342
Louis A. Scalpati... 4,365 0% 0.01 9.00 01/01/09 63,920 101,782
</TABLE>
____________________
(1) Mr. Robert Hackett resigned effective November 15, 1999.
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Option Grants in 1999; Aggregate Option Exercises in 1999; 1999 Year-End Option
Values
The following table sets forth, on an aggregated basis, information
regarding securities underlying unexercised options during the year ended
December 31, 1999 by the named executive officers. The value of in-the-money
options is based on the fair market value at close of market on December 31,
1999 of $11.88 per share and is net of the exercise price:
Aggregate Option Exercises and Year-End Values
<TABLE>
<CAPTION>
Shares Acquired
Name on Exercise (#) Value Realized ($) Option Values at December 31, 1999
- --------------------- ---------------- ------------------ -----------------------------------------------------------------
Number of Securities Underlying Value of Unexercised
Unexercised Options at Fiscal In-The-Money Options at
Year-End (1)(#) Fiscal Year-End ($)
-------------------------------- ---------------------------
Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Donald W. Hackett... -- -- 1,127,682 1,550,846 $13,310,857 $18,219,874
Robert C. Hackett(2) 1,120,750 22,756,188 -- 4,365 -- 51,813
Dennis J. Upah...... -- -- -- 487,500 -- 3,879,000
Neal K. Longwill.... 112,500 941,000 81,250 34,524 916,833 387,029
Louis A. Scalpati... -- -- 1,187,813 4,365 14,051,493 51,813
</TABLE>
____________________
(1) The securities underlying the options are shares of common stock.
(2) Mr. Robert Hackett resigned effective November 15, 1999.
Employment Agreements with Named Executive Officers
Donald W. Hackett. We are a party to an employment agreement with Mr.
Hackett, dated August 1, 1997. The term of the agreement is three years,
although we may, by mutual agreement with Mr. Hackett, extend the agreement for
successive one-year terms. Pursuant to the agreement, we are obligated to pay
Mr. Hackett an initial annual salary of $195,000. This salary automatically
increases by 20% at the end of each of the first three years of the agreement.
For the year ended December 31, 1999, Mr. Hackett received a salary of $244,350.
In addition, Mr. Hackett receives a monthly car allowance of $700 and is
eligible for annual discretionary bonuses. In the event Mr. Hackett's
employment is terminated without cause or by reason of disability, he would
receive a severance payment in an amount equal to his annual base salary. In
the event Mr. Hackett resigns or his employment is terminated with cause, he has
agreed not to compete with us for a period of 12 months following the cessation
of his employment.
Robert C. Hackett. We entered into an employment agreement with Robert C.
Hackett, dated August 1, 1997. The term of the agreement was three years,
subject to extension for successive one-year terms. Pursuant to the agreement,
we were obligated to pay Mr. Robert Hackett an initial annual salary of
$165,000. This salary automatically increased by 20% at the end of each of the
first three years of the agreement. In addition, Mr. Robert Hackett received a
monthly car allowance of $600 and was eligible for annual discretionary
bonuses. Mr. Robert Hackett resigned effective November 15, 1999. Upon the
termination of his employment, Mr. Robert Hackett's employment agreement was
terminated and he did not receive a severance package.
Dennis J. Upah. We are a party to an employment agreement with Mr. Upah,
dated January 15, 1999. The term of the agreement is three years. Pursuant to
the agreement, we are obligated to pay Mr. Upah an annual salary of $140,000
plus an annual bonus of at least $140,000 for the first year of the agreement
and $105,000 for the second and third years. For the year ended December 31,
1999, Mr. Upah received a salary of $132,110. In addition, Mr. Upah receives a
monthly car allowance of $600. Upon commencement of his employment, Mr. Upah
was granted options to purchase 337,500 shares of common stock and, upon the
closing of our initial public offering, received an option to purchase an
additional 150,000 shares of our common stock with an exercise price equal to
our initial public offering price of $9.00 per share. In the event Mr. Upah's
employment is terminated without cause or by reason of disability, each of the
options granted under the agreement would vest immediately, and he would receive
a severance payment in an amount equal to his annual base salary and annual
bonus. Mr. Upah has agreed not to compete with us for a period of 12 months
following the cessation of his employment.
Louis A. Scalpati. We are a party to an employment agreement with Louis A.
Scalpati, dated August 1, 1997. The term of the agreement is three years,
although we may, by mutual agreement with Mr. Scalpati, extend the agreement for
successive one-year terms. Pursuant to the agreement, we are obligated to pay
Mr. Scalpati an initial
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annual salary of $145,000. This salary automatically increases by 20% at the end
of each of the first three years of the agreement. For the year ended December
31, 1999, Mr. Scalpati received a salary of $194,492. In addition, Mr. Scalpati
receives a monthly car allowance of $600 and is eligible for annual
discretionary bonuses. In the event Mr. Scalpati's employment is terminated
without cause or by reason of disability, he would receive a severance payment
in an amount equal to his annual base salary. In the event Mr. Scalpati resigns
or his employment is terminated with cause, he has agreed not to compete with us
for a period of 12 months following the cessation of his employment.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During fiscal year 1999, the Compensation Committee consisted of Dr.
Snyderman and Messrs. Ballowe and Everett, none of whom is (1) a present or
former officer or employee of drkoop.com, or (2) engaged in any transactions
described under the heading "Certain Transactions," except that we are a party
to a name and likeness agreement with Dr. Snyderman as described in that
section.
DIRECTOR COMPENSATION
Each member of our Board of Directors who is not a full-time employee,
other than Dr. C. Everett Koop and Mr. John Zaccaro, is paid $1,500 for
attendance at each board meeting and $750 for attendance at each meeting of a
committee of the Board of Directors, and all directors are reimbursed for
reasonable out-of-pocket expenses arising from their attendance at any meetings.
The 1999 Plan provides for the grant of options to non-employee directors:
. upon being elected to the Board of Directors, each non-employee
director is granted an option to purchase 37,500 shares of our common
stock; and
. after each annual meeting, each non-employee director, other than Dr.
C. Everett Koop and John Zaccaro so long as they receive compensation
under their respective consulting agreements, is granted an option to
purchase 12,500 shares of our common stock, provided that no such
subsequent annual grant will be made if the director was initially
appointed within 90 days of the annual meeting.
All options granted to non-employee directors vest in three equal annual
installments and have a per share exercise price equal to the fair market value
of a share of our common stock on the date of the grant.
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<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Security Ownership
The information in the following table sets forth the ownership of our
common stock, as of March 31, 2000, by (i) each person who, to our knowledge,
beneficially owns more than 5% of the outstanding shares of our common stock;
(ii) each named executive officer (as listed in the summary compensation table);
(iii) each of our directors; and (iv) all of our directors and executive
officers, as a group. As of March 31, 2000, we had 31,182,744 shares of common
stock outstanding.
<TABLE>
<CAPTION>
Shares
5% Stockholders, Directors, Acquirable
Named Executive Officers, and Shares Within 60 Shares Beneficially Owned
--------------------------------
Directors and Executive Officers as a Group Owned Days Number Percent
- -------------------------------------------------------- -------------- ----------------- --------------- -------------
<S> <C> <C> <C> <C>
C. Everett Koop, M.D. (2) 1,830,067 704293 2,534,360 7%
John F. Zaccaro (3) 619,067 939,893 1,558,960 4%
Donald W. Hackett (4) 5,415,225 1,644,631 7,059,856 19%
Jeffrey C. Ballowe (5) 11,805 51,158 62,963 *
Mardian J. Blair (6) 3,023,269 51,852 3,075,121 8%
Adventist Health System Sunbelt Healthcare Corporation 3,023,269 3,023,269 8%
111 North Orlando Avenue
Winter Park, Florida 32789
G. Carl Everett, Jr. (7) 9,720 42,132 50,231 *
Richard D. Helppie (8) 4,553,555 8,201 4,561,756 12%
Superior Consultant Holdings Corporation 4,475,430 4,475,430 12%
4000 Town Center, Suite 1100
Southfield, Michigan 48075
Nancy L. Snyderman (9) 118,591 118,591 *
Louis A. Scalpati (10) 375,000 1,189,268 1,564,268 4%
Neal K. Longwill (11) 486,223 13,590 499,813 1%
Ian J. Bagnall (12) 45,229 26,873 72,102 *
Susan M. Georgen-Saad (13) 31,987 148,141 180,128 *
Dennis J. Upah (14) 33,792 112,500 146,292 *
John R. Osborne (15) 3,028 3,028 *
All directors and executive officers as a group 21,489,091 58%
(14 persons)
</TABLE>
________________
* Represents less than 1% of the issued and outstanding shares.
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or
investment power with respect to securities. Shares of common stock
subject to options and warrants which are currently exercisable, or will
become exercisable within 60 days of March 31, 2000, are deemed
outstanding for computing the percentage of the person or entity holding
such securities but are not outstanding for computing the percentage of
any other person or entity. Except as indicated by footnote, and subject
to the community property laws where applicable, to our knowledge the
persons named in the table above have sole voting and investment power
with respect to all shares of common stock shown as beneficially owned by
them. Unless otherwise indicated, the address for each person is our
address at 7000 N. Mopac, Suite 400, Austin, Texas 78731.
(2) Includes 704,293 shares of common stock issuable upon the exercise of
options exercisable within 60 days of March 31, 2000.
(3) Includes 939,893 shares of common stock issuable upon the exercise of
options exercisable within 60 days of March 31, 2000. The business address
of Mr. Zaccaro is 24050 Madison Street, Torrance, California 90505.
(4) Includes 1,644,631 shares of common stock issuable upon the exercise of
options exercisable within 60 days of March 31, 2000.
(5) Includes 51,158 shares of common stock issuable upon the exercise of
options exercisable within 60 days of March 31, 2000.
(6) Consists of 3,023,269 shares of common stock held by Adventist Health
Systems Sunbelt Healthcare Corporation and 51,852 shares of common stock
issuable upon the exercise of options exercisable within 60 days of March
31, 2000. Mr. Blair, a former director of drkoop.com, is also formerly the
president of Adventist and disclaims beneficial ownership of the shares
held by Adventist. Mr. Blair's business address is the same as that of
Adventist.
(7) Includes 42,132 shares of common stock assumable upon the exercise of
options exercisable within 60 days of March 31, 2000.
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<PAGE>
(8) Consists of 4,475,430 shares of common stock held by Superior Consultant
Holdings Corporation and 8,201 shares of common stock issuable upon the
exercise of options exercisable within 60 days of March 31, 2000. Mr.
Helppie, a former director of drkoop.com, is the Chairman of the Board and
Chief Executive Officer of Superior and disclaims beneficial ownership of
the shares held by Superior. Mr. Helppie's business address is the same as
that of Superior.
(9) Includes 118,591 shares of common stock issuable upon the exercise of
options exercisable within 60 days of March 31, 2000.
(10) Includes 1,189,268 shares of common stock issuable upon the exercise of
options exercisable within 60 days of March 31, 2000.
(11) Includes 13,590 shares of common stock issuable upon the exercise of
options exercisable within 60 days of March 31, 2000.
(12) Includes 26,873 shares of common stock issuable upon the exercise of
options exercisable within 60 days of March 31, 2000.
(13) Includes 148,141 shares of common stock issuable upon the exercise of
options exercisable within 60 days of March 31, 2000.
(14) Includes 146,292 shares of common stock issuable upon the exercise of
options exercisable within 60 days of March 31, 2000.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Series C Financing
On January 29, 1999, we received $3.5 million in cash and acquired 10% of
the outstanding stock of HealthMagic, Inc., a subsidiary of Adventist Health
System Sunbelt Healthcare Corporation, in exchange for 2,615,677 shares of our
Series C convertible preferred stock, which was converted into an equivalent
number of shares of common stock upon the closing of our initial public
offering. The parties also entered into related agreements which provide for
registration rights and specified transfer restrictions.
HealthMagic Transaction
On January 29, 1999, we established a technology relationship with
HealthMagic, a supplier of applications to Internet companies, whereby we
contributed to them our PMR product and received from them a license to use a
broad range of Internet technologies, including a web-enabled personal medical
record, personalization tools, and security and authentication features. In
April 2000, we terminated our technology relationship with HealthMagic. No cash
payment was made and no drkoop.com equity securities were issued in connection
with the termination of the relationship. Also in connection with the
termination of the Health Magic relationship, Mardian Blair resigned from the
Company's board of directors and Dr. C. Everett Koop resigned from the board of
HealthMagic, Inc.
In addition, on January 29, 1999 we entered into a content subscription and
software licensing agreement with Adventist for $500,000. The license fee was
fully paid at the execution of the license, and no future payments by Adventist
are required. Under the agreement, Adventist has the right, over a period of
three years, to enroll affiliates in our Community Partner Program. Each
Community Partner Program affiliate agreement has a term of one year.
Other Financing Agreement with Adventist
On March 3, 1999 we entered into a loan agreement with Adventist. Pursuant
to this agreement, Adventist was irrevocably obligated to loan to us the
aggregate principal amount of up to $2.0 million at an interest rate of 7% per
annum. As of March 31, 1999, we had borrowed the full $2.0 million under this
agreement. Upon the closing
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<PAGE>
of our initial public offering, the principal amount borrowed under this
agreement and all accrued interest converted into common stock at a per share
price of $7.43.
Loan to Ms. Georgen-Saad
On March 31, 2000, we loaned $95,440 to Ms. Georgen-Saad. The loan is to be
repaid on or prior to May 1, 2000 with interest at the applicable federal rate.
Ms. Georgen-Saad repaid the loan in full on April 28, 2000.
Transactions Involving Donald W. Hackett
From July 1997 through March 1998, Donald W. Hackett loaned the company an
aggregate of $216,043. On March 16, 1998, we issued 1,800,360 shares of common
stock to Mr. Hackett in exchange for cancellation of this indebtedness. The
conversion price was established by the board of directors based on their
assessment of the fair market value of the common stock on the date of
conversion.
On April 3, 2000, we entered into a loan agreement with Mr. Hackett, our
Chief Executive Officer and President, pursuant to which we loaned Mr. Hackett
$966,000 under a secured promissory note. The note, bore no interest and was due
on April 10, 2000. Mr. Hackett repaid the loan in full on April 10, 2000. Mr.
Hackett is obligated to reimburse us for $600,000 in connection with the
settlement of a third party litigation in February 2000 based on a cost
splitting arrangement between us and him.
Agreements with Dr. C. Everett Koop
We are party to an amended and restated name and likeness agreement and a
consulting agreement with Dr. Koop. For the year ended December 31, 1999 we
accrued royalty fees of $41,000 and paid him director's fees of $150,000.
Additionally, during such period we reimbursed him for his travel and other
expenses incurred on company business in the amount of $11,870. Please see
"Agreements with Directors-Agreements with Dr. C. Everett Koop."
Consulting Agreement with Mr. Zaccaro
We are party to a consulting agreement with Mr. Zaccaro pursuant to which
we paid him $138,750 for the year ended December 31, 1999. Please see
"Agreements with Directors Other Consulting Agreements with Directors."
Name and Likeness Agreement with Dr. Snyderman
We are party to a name and likeness agreement with Dr. Snyderman. For the
year ended December 31, 1999, she received no cash compensation. All of these
options vested immediately on the date of grant. Please see "Agreements with
Directors Other Consulting Agreements with Directors."
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act, the Registrant
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
drkoop.com, Inc.
(Registrant)
By: /s/ DONALD HACKETT
-------------------------------------
Donald Hackett
President and Chief Executive Officer
Date: April 28, 2000
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