EXHIBIT 2
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Agreement") dated July 1, 1999, by
and between HEALTHCORE MEDICAL SOLUTIONS, INC., a Delaware corporation
("HealthCore"), and ADATOM, INC., a California corporation ("Adatom").
W I T N E S S E T H:
WHEREAS, the respective boards of directors of HealthCore and Adatom
have determined that the consummation of the merger (the "Merger") of Adatom
with and into HealthCore upon the terms and subject to the conditions set forth
in this Agreement would be in the best interest of both HealthCore and Adatom
and their respective shareholders, and each such board has duly approved the
Merger.
NOW, THEREFORE, the parties hereby agree as follows:
ALL TERMS USED BUT NOT OTHERWISE DEFINED HEREIN SHALL HAVE THE MEANINGS
ASCRIBED TO THEM IN SECTION 10.1 HEREOF.
ARTICLE I
THE MERGER
1.1 THE MERGER. Upon the terms and subject to the conditions set forth
in this Agreement, and in accordance with the applicable provisions of the
Delaware General Corporation Law (the "DGCL") and the California General
Corporation Law (the "CGCL"), at the Effective Time (as hereinafter defined),
the Merger shall be effectuated. Upon and after the Effective Time, the separate
corporate existence of Adatom shall cease and HealthCore shall be the surviving
corporation in the Merger (the "Surviving Corporation"). All of the rights,
privileges, powers, immunities, purposes and franchises of Adatom shall vest in
the Surviving Corporation, and all of the debts, liabilities, obligations and
duties of Adatom shall become the debts, liabilities, obligations and duties of
the Surviving Corporation.
1.2 CLOSING. The closing of the Merger (the "Closing") will take place
at the offices of Xxxxxxx Xxxxxx & Green, P.C., 000 Xxxx Xxxxxx, Xxx Xxxx, Xxx
Xxxx 00000, at 10:00 a.m. on the third Business Day following the satisfaction,
or waiver by the party entitled to the benefit of such condition, of each of the
conditions set forth in Article VII, or at such other place, time and date as
Adatom and HealthCore may agree in writing. The time and date upon which the
Closing occurs is referred to herein as the "Closing Date".
1.3 EFFECTIVE TIME. On the Closing Date, Adatom and HealthCore shall
cause a certificate of merger (the "Certificate of Merger") to be prepared,
executed and filed with the Secretary of State of the States of Delaware and
California in accordance with the applicable
provisions of the DGCL and the CGCL, and shall make all other filings or
recordings as may be required under the DGCL and the CGCL. The Merger shall
become effective at such time as the Certificate of Merger is duly filed with
the Secretary of State of the States of Delaware and California (the "Effective
Time").
1.4 CERTIFICATE OF INCORPORATION AND BY-LAWS. The Certificate of
Incorporation of HealthCore shall be the Certificate of Incorporation of the
Surviving Corporation until thereafter changed or amended as provided herein or
therein, or by applicable laws, except that (i) Article FIRST of the Certificate
of Incorporation shall be amended and restated in its entirety as follows:
"FIRST: The name of the Corporation is Xxxxxx.xxx, Inc.", and (ii) Article
FOURTH, with respect to the designation of the various classes, and rights
associated therewith, of the capital stock of HealthCore, shall be amended and
restated in its entirety as set forth on Schedule 1.4 hereof. The By-laws of
HealthCore shall be the By-laws of the Surviving Corporation until thereafter
changed or amended as provided therein or by applicable law.
1.5 DIRECTORS AND OFFICERS. At the Effective Time, the number of
directors on the Board of Directors of the Surviving Corporation shall be
increased to five (5), and shall consist of (i) the three (3) directors on the
Board of Directors of Adatom at the Effective Time, (ii) one (1) Adatom
designee, and (iii) the Chairman of the Board and Chief Executive Officer of
HealthCore, Xxxx X. Xxxxx ("Xxxxx"). The officers of Adatom at the Effective
Time shall be the officers of the Surviving Corporation. The directors and
officers of the Surviving Corporation shall hold office until their respective
successors are duly elected or appointed and qualified or until their earlier
death, resignation or removal in accordance with the Certificate of
Incorporation and By-laws of the Surviving Corporation
ARTICLE II
EFFECT OF MERGER ON CAPITAL STOCK
2.1 EFFECT ON ADATOM CAPITAL STOCK, OPTIONS AND WARRANTS. At the
Effective Time, by virtue of the Merger and without any action on the part of
the holder thereof:
(a) CONVERSION OF SHARES OF ADATOM COMMON STOCK. Each issued and
outstanding share of Adatom common stock, no par value per share (the "Adatom
Common Stock") shall be converted into the right to receive the Per Share Merger
Consideration (as hereinafter defined), subject, however, to the execution by
each of the holders (other than Xxxxx) of the shares of Adatom Common Stock of a
lock-up agreement in form and substance reasonably satisfactory to Adatom (the
"Adatom Lock-up Agreement") covering the shares received by such Adatom
shareholders in respect of the Per Share Merger Consideration (collectively, the
"Adatom Newly Issued Shares"), other than the Xxxxx Adatom Shares (as
hereinafter defined), which shall be subject to a lock-up period pursuant to the
terms of the HealthCore Lock-up Agreements (as hereinafter defined). The Adatom
Lock-Up Agreement shall provide, among other things, that the Adatom Newly
Issued Shares shall be subject to a six (6) month lock-up, prohibiting the sale,
assignment or transfer thereof during such six (6) month period. The holders of
certificates representing shares of Adatom Common Stock (each a "Certificate",
and collectively, the "Certificates") shall cease to have any rights with
respect to
2
such shares except the right to receive the applicable Per Share Merger
Consideration, without interest, upon surrender of the Certificate in accordance
with Article IV hereof.
(b) TREASURY SHARES. Each share of Adatom Common Stock, if any, held in
the treasury by Adatom shall be canceled and retired and cease to exist, without
any conversion thereof.
(c) ADATOM OPTIONS AND WARRANTS. Each issued and outstanding option
(each an "Adatom Option") and warrant (each an "Adatom Warrant") exercisable for
shares of Adatom Common Stock shall be converted into an option or warrant, as
applicable, exercisable for shares of HealthCore Common Stock, $.01 par value
per share (the "HealthCore Common Stock") with the same terms and conditions as
the Adatom Option or the Adatom Warrant, as the case may be, except that the
exercise price and the number of shares of HealthCore Common Stock issuable upon
exercise of such options and warrants shall be divided and multiplied,
respectively, by the Per Share Merger Consideration.
2.2 EFFECT ON CAPITAL STOCK OF HEALTHCORE. At the Effective Time (a)
each issued and outstanding share of HealthCore Class A Common Stock, par value
$.01 per share (the "HealthCore Common Stock"), and each option and warrant
exercisable for shares of HealthCore Common Stock, shall remain outstanding with
the same rights, terms and conditions attendant thereto immediately prior to the
Effective Time; provided that such HealthCore Class A Common Stock shall be
reclassified as "Common Stock" in accordance with the provisions of Section 1.4
hereof; and (b) each issued and outstanding share of HealthCore Class B Common
Stock, par value $.01 (the "HealthCore Class B Common Stock") shall be converted
into one (1) share of HealthCore Common Stock. Notwithstanding anything
contained herein to the contrary, if a Certificate is held by a Dissenting
Shareholder (as hereinafter defined), such Dissenting Shareholder shall have the
rights with respect thereto as set forth in Section 4.4 hereof and as provided
by applicable law.
ARTICLE III
CALCULATION OF PER MERGER CONSIDERATION;
ADJUSTED PER SHARE MERGER CONSIDERATION
3.1 Calculation of Per Share Merger Consideration.
(a) BASE CALCULATION. The "Per Share Merger Consideration" shall be
defined as that number of shares of HealthCore Common Stock equal to (i) the
difference between (A) (1) the Outstanding HealthCore Common Stock (as
hereinafter defined), divided by (2) .225, and (B) the Outstanding HealthCore
Common Stock, divided by (ii) the Outstanding Adatom Common Stock (as
hereinafter defined), subject to adjustment as hereinafter set forth (the total
number of shares of HealthCore Common Stock issuable hereunder, the "Merger
Consideration").
(b) ADATOM COMMON STOCK OUTSTANDING. For purposes of calculating the
Per Share Merger Consideration, the "Outstanding Adatom Common Stock" shall be
defined as the total number of shares of Adatom Common Stock outstanding
immediately prior to the Closing
3
which shall be deemed to include (i) all outstanding shares of Adatom Common
Stock (including, without limitation, the shares of Adatom Common Stock issuable
to Xxxxx as described in Section 6.1(c) hereof), and (ii) all shares of Adatom
Common Stock underlying (A) the options and warrants to purchase such shares of
Adatom Common Stock, (B) the shares of Adatom Common Stock into which the
convertible bridge notes (the "Convertible Notes") placed by Jesup & Xxxxxx
Securities Corporation ("Jesup & Xxxxxx") are convertible prior to or
simultaneously with the Closing, and the shares issuable upon exercise of
warrants to purchase the Adatom Common Stock issued by Adatom to Jesup & Xxxxxx
as compensation under the terms of the Adatom Engagement Letter (as hereinafter
defined), and (C) shares of Adatom Common Stock issued or issuable to the
Brokers (as defined in Section 5.1(u) hereof).
(c) HEALTHCORE COMMON STOCK OUTSTANDING. For purposes of calculating
the Per Share Merger Consideration, the "Outstanding HealthCore Common Stock"
shall be defined as the total number of shares of HealthCore Common Stock
outstanding immediately prior to the Closing which shall be deemed to include
(i) all outstanding shares of HealthCore Common Stock (other than, and
specifically excluding, eighty (80) percent of the shares of HealthCore Common
Stock owned by the Escrow Shareholders who have executed and delivered to
HealthCore, as of the Closing Date, the Termination Agreements, and which are
held in escrow pursuant to the terms of the Escrow Agreement, as such
capitalized terms are defined in Section 6.5 hereof), and (ii) all shares of
HealthCore Common Stock underlying (A) the options and warrants to purchase such
shares of Class A Common Stock with an exercise price of $1.25 or less, other
than the warrants issued to Jesup & Xxxxxx as compensation pursuant to the terms
of that certain engagement letter (the "HealthCore Engagement Letter"), dated
April 27, 1999, between HealthCore and Jesup & Xxxxxx, a copy of which is
attached hereto as Exhibit A, and other than, and specifically excluding, eighty
(80) percent of the shares of HealthCore Common Stock underlying that certain
warrant to purchase 142,000 shares of HealthCore Common Stock held by Xxxxx,
provided Xxxxx shall have executed and delivered to HealthCore, as of the
Closing Date, an agreement in substantially the form of the Termination
Agreements, and (B) the options or warrants issued on or after the date hereof
in consideration for the settlement of certain obligations of HealthCore to
employees and third party creditors of HealthCore in accordance with the
provisions of Section 6.2(d) hereof.
3.2 ADJUSTMENT TO PER SHARE MERGER CONSIDERATION. The Per Share Merger
Consideration shall be subject to adjustment as follows:
(a) CLOSING CASH AMOUNT. In the event the cash assets of HealthCore
immediately prior to the Closing (the "Closing Cash Amount") are less than Two
Million Eight Hundred Fifty Thousand ($2,850,000) Dollars, then the number of
shares of HealthCore Common Stock issued to the holders of record on the Closing
Date of Outstanding Adatom Common Stock other than Xxxxx (the "Adatom Former
Shareholders") shall be increased as follows: first, subtract from twenty-two
and one-half (22.5%) percent (the "HealthCore Post Merger Percentage") the
product of the difference between (i) $2,850,000 and (2) the Closing Cash
Amount, multiplied by .00000309 (such difference being the "New HPMP"); second,
calculate the percentage obtained by dividing the HealthCore Post Merger
Percentage by the New HPMP and subtracting one hundred (100%) percent (the
difference being the "Margin Percentage"); and third, multiply the Margin
Percentage by the number of shares of HealthCore
4
Common Stock which would have been outstanding immediately after the Merger
pursuant to Section 3.1 (such product being the "Increased Shares"). For
purposes of calculating the new Per Share Merger Consideration, divide the
number of Increased Shares by the Outstanding Adatom Common Stock, and add that
number to the Per Share Merger Consideration. At the time of the Merger, and
without necessity of any further action, Xxxxx shall transfer and shall be
deemed to have transferred to the Adatom Former Shareholders, on a pro rata
basis, the number of shares of HealthCore Common Stock that he would have
received as his pro rata percentage of the Increased Shares had he been included
in the adjustment to the Per Share Merger Consideration described above. Polan
shall have no ownership interest of any kind in such shares at any time, but
shall hold them in trust for the other holders of Outstanding Adatom Common
Stock. For the purposes of this section the Closing Cash Amount shall be deemed
to include (i) all cash on hand, (ii) the aggregate consideration payable to
HealthCore upon the exercise of all outstanding options and warrants of
HealthCore as of the date hereof having an exercise price not greater than $1.25
per share; (iii) the aggregate consideration payable to HealthCore for the
purchase of shares of HealthCore Common Stock upon the exercise of options and
warrants to purchase the same, up to an aggregate maximum of Thirty Thousand
(30,000) shares, issued on or after the date hereof in consideration for the
settlement of certain obligations of HealthCore to employees and third party
creditors of HealthCore, provided that only $1.25 shall be includable in the
Closing Cash Amount for options and warrants with an exercise price in excess of
$1.25, (iv) the aggregate amount of prepaid expenses paid by HealthCore for the
benefit of the Surviving Corporation, (v) the principal amount loaned by
HealthCore to Adatom for bridge financing as evidenced by that certain
Promissory Note (the "Note"), dated April 27, 1999, executed by Adatom in favor
of HealthCore, (vi) the aggregate amount of any cash payments made to Xxxxx
pursuant to the terms of Paragraph 4(c) of that certain Employment Agreement,
dated September 30, 1998, between HealthCore and Xxxxx, as amended, (vii) the
aggregate sum of any and all reasonable Transaction Expenses (as defined in
Section 10.5 hereof) paid by HealthCore through the Closing Date; provided,
however, that Adatom shall have approved of any Transaction Expense (other than
legal, accounting and investment banker fees and expenses, provided that the
fees payable in connection with the preparation of a fairness opinion shall be
commensurate with the fair market value for such services) incurred and paid by
HealthCore following the execution hereof, which, individually, is in excess of
Twenty-Five Thousand ($25,000) Dollars; and (viii) the aggregate sum of any
deferred payments to be received by HealthCore within one hundred twenty (120)
days following the Closing in connection with the sale of the HealthCore
Business (as hereinafter defined). The Closing Cash Amount shall be reduced by
the liquidated sum of the accrued but unpaid liabilities of HealthCore on the
Closing Date other than, and specifically excluding, (i) any and all reasonable
Transaction Expenses incurred by HealthCore prior to the Closing Date, and (ii)
any liabilities that Adatom and HealthCore mutually agree shall be excluded as
set forth on Schedule 3.2(a) hereof, as amended on the Closing Date. The
adjustment to the Per Share Merger Consideration set forth in this Section
3.2(a) shall be made on the Closing Date.
(b) INDEMNIFICATION OBLIGATIONS. In the event the Surviving Corporation
shall be obligated to indemnify (i) the holders of record on the Closing Date of
the shares of Outstanding Adatom Common Stock other than Xxxxx (the "Adatom
Former Shareholders"), or (ii) the holders of record on the Indemnification
Adjustment Date (as hereinafter defined) of the shares of Common Stock in the
Surviving Corporation, other than, and specifically excluding,
5
the Adatom Former Shareholders (the "HealthCore Former Shareholders"), as the
case may be, in respect of the Net Indemnification Amount (as defined in Section
8.5 hereof), the Surviving Corporation shall issue to such party, on a pro rata
basis, the number of shares of Common Stock of the Surviving Corporation
calculated as follows: first, subtract from the HealthCore Post Merger
Percentage the product of the Net Indemnification Amount multiplied by .00000309
(such difference being the "Indemnification HPMP"); second, calculate the
percentage obtained by dividing the HealthCore Merger Percentage by the
Indemnification HPMP and subtracting one hundred (100%) percent (the difference
being the "Indemnification Margin Percentage"); and third, multiply the
Indemnification Margin Percentage by the number of shares of HealthCore Common
Stock which were outstanding immediately after the Merger purcuant to Section
3.1, including any adjustment in respect of the Closing Cash Amount pursuant to
Section 3.2(a) hereof (such product being the "Net Indemnification Shares"). The
Net Indemnification Shares shall be divided among, in the case of the Surviving
Corporation's indemnification of the (A) Adatom Former Shareholders, the Adatom
Former Shareholders based on the number of shares of Common Stock of the
Surviving Corporation held by the Adatom Former Shareholders on the
Indemnification Adjustment Date, or (B) HealthCore Former Shareholders, the
HealthCore Former Shareholders based on the number of shares of Common Stock of
the Surviving Corporation outstanding on the Indemnification Adjustment Date,
excluding the shares of Common Stock of the Surviving Corporation held by the
Adatom Former Shareholders. The indemnification adjustment set forth in this
Section 3.2(b) shall be made thirteen (13) months following the Closing Date
(the "Indemnification Adjustment Date") in accordance with the provisions of
Article VIII hereof.
ARTICLE IV
PAYMENT OF MERGER CONSIDERATION
4.1 DELIVERY OF CERTIFICATES. As soon as reasonably practicable after
the Effective Time, and upon surrender of a Certificate for cancellation to the
Surviving Corporation, together with such documents as may reasonably be
required by the Surviving Corporation, each holder of a Certificate shall be
entitled to receive, and the Surviving Corporation shall issue and deliver to
such holder, in exchange therefor certificates representing shares of HealthCore
Common Stock, rounded up to the nearest whole number, equal to the product of
(A) the number of shares of Adatom Common Stock represented by such Certificate,
multiplied by (B) the Per Share Merger Consideration, and the Certificate so
surrendered shall forthwith be canceled. If certificates for the HealthCore
Common Stock deliverable hereunder are to be issued in a name other than that in
which the Certificate surrendered for exchange is registered, it shall be a
condition of such issuance that the Certificate so surrendered shall be properly
endorsed, with the signature guaranteed, or otherwise in proper form for
transfer and that the party requesting such issuance shall pay to the Surviving
Corporation any transfer or other taxes required by reason thereof, and shall be
deemed (other than Polan) to be an Adatom Former Shareholder for the purposes of
this Agreement, including, without limitation, under the indemnification
provisions set forth in Sections 3.2(b) and Article VIII of this Agreement.
Until surrendered as contemplated by this Section 4.1, after the Effective Time,
each Certificate shall represent only the right to receive, upon such surrender,
the applicable Per Share Merger Consideration.
6
4.2 DISTRIBUTIONS. Each holder, upon surrender of a Certificate as
herein provided and acceptance thereof by the Surviving Corporation, shall be
entitled to payment of all dividends or other distributions or payments made or
payable with respect to HealthCore Common Stock with a record date after the
Effective Time and prior to the date of surrender of the Certificate, all
without interest, based upon the number of shares of HealthCore Common Stock
issued to such holder in payment of the Per Share Merger Consideration.
4.3 NO FURTHER TRANSFERS. After the Effective Time, there shall be no
further transfer of Certificates on the books and records of Adatom or its
transfer agent
4.4 APPRAISAL RIGHTS. Notwithstanding anything contained herein to the
contrary, in the event that holders of shares of HealthCore Common Stock
outstanding immediately prior to the Effective Time shall not have voted in
favor of the Merger, in person or by proxy, or consented thereto in writing,
(such holders, the "Dissenting Shareholders"), then, in such event the shares of
HealthCore Common Stock held by such Dissenting Shareholders shall entitle the
holders thereof to receive payment of the fair value of such shares of
HealthCore Common Stock in accordance with the provisions of Section 262 of the
DGCL. Nothing contained herein shall be construed to relieve a Dissenting
Shareholder from compliance with all of the provisions of the DGCL.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
5.1 REPRESENTATIONS AND WARRANTIES OF ADATOM. Adatom represents and
warrants to HealthCore as follows:
(a) ORGANIZATION AND AUTHORITY. Adatom is a corporation duly organized,
validly existing and in good standing under the laws of the State of California,
has all requisite corporate power and authority to own, lease and operate its
properties and carry on its business as now conducted, is duly qualified,
authorized and in good standing to transact business in the states listed in
Section 5.1(a) of the disclosure schedule delivered to HealthCore by Adatom on
or prior to the date hereof (the "Adatom Disclosure Schedule"), and is not
required to be qualified as a foreign corporation in any other jurisdiction
where failure to qualify would have a Material Adverse Effect on Adatom.
(b) CAPITALIZATION. As of the date hereof, the authorized capital stock
of Adatom consists of 10,000,000 shares of Adatom Common Stock of which, (A)
2,384,600 shares are issued and outstanding, (B) no shares are held in the
treasury of Adatom, and (C) no shares are reserved for future issuance upon the
exercise of Adatom Options and Adatom Warrants, which options and warrants have
a term, exercise price, vesting schedule and other material terms set forth in
Section 5.1(b) of the Adatom Disclosure Schedule. The outstanding shares of
Adatom Common Stock have been duly authorized and are validly issued, fully paid
and nonassessable, and, except as set forth in this Section 5.1(b) or in Section
5.1(b) of the Adatom Disclosure Schedule, there are no outstanding rights,
subscriptions, warrants, calls, preemptive rights, options or other agreements
or commitments of any kind or character to purchase or otherwise to acquire from
Adatom any shares of its capital stock or any other security, and no
7
security or obligation of any kind convertible into the capital stock or other
security of Adatom exists in favor of any Person (as hereinafter defined).
Except as set forth in Section 5.1(b) of the Adatom Disclosure Schedule, Adatom
has no outstanding bonds, debentures, notes or other such obligations the
holders of which have the right to vote or which are convertible into or
exercisable for securities having the right to vote with the shareholders of
Adatom on any matter. Other than as contemplated by this Agreement or as set
forth in Section 5.1(b) of the Adatom Disclosure Schedule, there are no
outstanding contractual obligations, commitments, understandings or arrangements
of Adatom to repurchase, redeem or otherwise acquire or make any payment in
respect of any shares of capital stock or other equity securities or ownership
interests of Adatom.
(c) ARTICLES OF INCORPORATION, BY-LAWS, CORPORATE RECORDS AND
COMMITTEES. The copies of the Articles of Incorporation and By-Laws or
equivalent organizational documents, each as amended to date, of Adatom
delivered to HealthCore on or prior to the date hereof are correct and complete.
The stock transfer, minute books and corporate records of Adatom which have been
made available to HealthCore, are correct and complete and constitute the only
written records and minutes of the meetings, proceedings, and other actions of
the Board of Directors and the shareholders of Adatom from its date of
incorporation.
(d) FINANCIAL STATEMENTS. The audited balance sheet of Adatom as at
December 31, 1998 (the "Adatom Audited Balance Sheet"), the unaudited balance
sheet of Adatom as at March 31, 1999 (the "Adatom Unaudited Balance Sheet", and,
together with the Adatom Audited Balance Sheet, the "Adatom Balance Sheets" )
and, with respect to the Adatom Audited Balance Sheet, the related audited
statements, and, with respect to the Adatom Unaudited Balance Sheet, the related
unaudited statements, of income, capital and cash flows for the three years then
ended (as such documents may have been amended to date) heretofore delivered to
HealthCore, have been prepared in accordance with generally accepted accounting
principles ("GAAP") applied on a consistent basis during the periods involved
(except as may be indicated in the notes thereto subject), subject to year end
audit adjustments for the Adatom Unaudited Balance Sheet, and are true and
correct in all material respects and fairly present the financial condition and
the results of operations and cash flow of Adatom as at the date and for the
periods covered thereby. Section 5.1(d) of the Adatom Disclosure Schedule
contains a description (specifying obligation, obligee and amount) of all Debt
(as defined in Section 10.1) of Adatom as of the date hereof.
(e) AUTHORITY. The Board of Directors and shareholders of Adatom have
each unanimously approved this Agreement, the Merger and the other transactions
contemplated hereby. Adatom has all requisite corporate power and authority to
enter into this Agreement and to perform its obligations hereunder and to
consummate the transactions contemplated hereby. This Agreement has been duly
and validly executed and delivered by Adatom and constitutes a valid and binding
obligation of Adatom enforceable against Adatom in accordance with its terms.
(f) GOVERNMENTAL AUTHORIZATIONS AND OTHER CONSENTS. No consent, order,
license, approval or authorization of, or exemption by, or registration or
declaration or filing with, any Governmental Entity (as hereinafter defined),
and no consent or approval of any other Person, is required to be obtained or
made by Adatom in connection with the performance by
8
Adatom of this Agreement or the consummation of the transactions contemplated to
be performed by it hereunder.
(g) NON-CONTRAVENTION. The performance of this Agreement will not (i)
violate any provision of the Articles of Incorporation or By-Laws or equivalent
organizational document of Adatom; (ii) violate, conflict with or result in the
breach or termination of, or constitute an amendment to, or otherwise give any
Person the right to terminate, or constitute (or with notice or lapse of time or
both would constitute) a default (by way of substitution, novation or otherwise)
under the terms of, any contract, mortgage, lease, bond, indenture, agreement,
franchise or other instrument or obligation to which Adatom is a party or by
which Adatom or any of its assets or properties are bound; (iii) result in the
creation of any lien, mortgage, claim, charge, security interest, encumbrance,
restriction or limitation (collectively, "Liens") upon the properties or assets
of Adatom pursuant to the terms of any contract, mortgage, lease, bond,
indenture, agreement, franchise or other instrument or obligation to which
Adatom is a party or by which Adatom or any of its assets or properties are
bound; (iv) violate any judgment, order, injunction, decree or award of any
court, arbitrator, administrative agency or Governmental Entity against, or
binding upon, Adatom or any of its securities, properties, assets or businesses;
(v) constitute a violation by Adatom of any statute, law, rule or regulation of
any jurisdiction as such statute, law, rule or regulation relates to any of its
securities, properties, assets or business; or (vi) violate any Permit (as
herein defined).
(h) TANGIBLE PROPERTY. Adatom has good title to all of the assets
reflected on its books and records and on the Adatom Balance Sheets, free and
clear of all Liens, except for those assets leased by Adatom under those leases
listed in Section 5.1(h) of the Adatom Disclosure Schedule. All furniture,
fixtures and equipment owned or used by Adatom (collectively, the "Fixed
Assets") will be in substantially the same condition at Closing as existed on
the date of this Agreement, reasonable wear and tear excepted.
(i) REAL PROPERTY AND LEASES. Section 5.1(i) of the Adatom Disclosure
Schedule sets forth a true and correct list of all leases, subleases or other
agreements under which Adatom is lessee or lessor of any real property or has
any interest in real property and, except as set forth in Section 5.1(i) of the
Adatom Disclosure Schedule, there are no rights or options held by Adatom or any
contractual obligations on its part to purchase or otherwise acquire (including
by way of lease or sublease) any interest in or use of any real property, nor
any rights or options granted by Adatom, or any contractual obligations entered
into by it, to sell or otherwise dispose of (including by way of lease or
sublease) any interest in or use of any real property. All such leases,
subleases and other agreements are in full force and effect and constitute
legal, valid and binding obligations of Adatom and, to the knowledge of Adatom,
the other parties thereto, with no existing or, to the knowledge of Adatom,
claimed default or event of default, or event which with notice or lapse of time
or both would constitute a default or event of default, by Adatom or, to the
knowledge of Adatom, by any other party thereto, which would have a Material
Adverse Effect on Adatom. Adatom is not in violation of any building, zoning,
health, safety, environmental or other law, rule or regulation the violation of
which would have a Material Adverse Effect on Adatom and no notice from any
Person has been served upon Adatom claiming any such violation.
9
(j) INTELLECTUAL PROPERTY. Section 5.1(j) of the Adatom Disclosure
Schedule sets forth all material trademarks, trade names, trade secrets,
patents, inventions, processes, registered copyrights, or other intellectual
property rights (or applications therefor) used by Adatom in connection with its
business.
(k) TAX MATTERS. Adatom has timely filed all federal, state, county and
local tax returns, estimates and reports (collectively, "Returns") required to
be filed by it through the date hereof, copies of which have been delivered to
HealthCore, which Returns accurately reflect, in all material respects, the
taxes due for the periods indicated, and Adatom has paid in full all income,
gross receipts, value added, excise, property, franchise, sales, use,
employment, payroll and other taxes of any kind whatsoever (collectively,
"Taxes") shown to be due by such Returns, and has established adequate reserves
with respect to any liabilities for Taxes accrued through March 31, 1999, which
are reflected on the Adatom Balance Sheets. Adatom does not know of any
unassessed deficiency for Taxes proposed or threatened against Adatom, and, to
Adatom's knowledge, no taxing authority has raised any issue with respect to
Adatom which, if adversely determined, would result in a liability for any Tax
which has not been reserved against on the Adatom Balance Sheets. No extensions
with respect to the dates on which any Return was or is due to be filed by
Adatom nor any waivers or agreements by Adatom for the extension of time for the
assessment or payment of any Taxes are in force. Adatom has not been, and, to
Adatom's knowledge, currently is not being, audited by any federal, state or
local tax authority.
(l) COMPLIANCE WITH LAWS. Adatom is in compliance with all applicable
laws, rules and regulations, the violation of which could have a Material
Adverse Effect on its assets, properties, liabilities, business, results of
operations, condition (financial or otherwise) or prospects, nor does Adatom
know of the enactment, promulgation or adoption of any such law, rule or
regulation which is not yet effective.
(m) PERMITS AND LICENSES. Except as set forth in Section 5.1(m) of the
Adatom Disclosure Schedule, Adatom (including, without limitation, its
employees) has duly obtained and holds in full force and effect all consents,
authorizations, permits, licenses, orders or approvals of, and has made all
declarations and filings with, all Governmental Entities that are material in
the conduct of its business (collectively, the "Permits"); all the Permits were
duly obtained and are in full force and effect; no violations have been recorded
by any Governmental Entity in respect of any such Permit and no proceeding is
pending or, to Adatom's knowledge, threatened to revoke, deny or limit any such
Permit
(n) CONTRACTS AND AGREEMENTS. Section 5.1(n) of the Adatom Disclosure
Schedule lists all material written or oral contracts, agreements, leases,
mortgages and commitments to which Adatom is a party or by which it may be bound
(individually a "Material Contract", and collectively, "Material Contracts").
All Material Contracts constitute legal, valid and binding obligations of Adatom
and, to the knowledge of Adatom, the other parties thereto, and are in full
force and effect on the date hereof, and Adatom has paid in full all amounts due
thereunder which are due and payable and is not in default under any such
Material Contract nor, to the knowledge of Adatom, is any other party to any
such Material Contract in default thereunder, nor does any condition exist that,
with notice or lapse of time, or both, would constitute a default or event of
default thereunder by Adatom or, to the knowledge of Adatom, by
10
any other Person. Except as set forth in Section 5.1(n) of the Adatom Disclosure
Schedule, no Material Contract requires the consent or approval of a third party
in connection with the performance by Adatom of this Agreement or the
transactions contemplated to be performed by it hereunder.
(o) EMPLOYEE COMPENSATION AND BENEFITS AND RELATIONS.
(i) Section 5.1(o) of the Adatom Disclosure Schedule lists all
current employees of Adatom, setting forth their respective salaries, whether
they are employed under contract or at will, and the expiration date of each
contract.
(ii) Notwithstanding anything contained in this Agreement to the
contrary, Adatom has no liabilities of any kind or nature to any of its
employees in connection with their employment by Adatom other than (A) for
compensation payable to such employees arising in the ordinary course, provided
that (x) all employee salaries have been paid by Adatom other than that portion
of employee salaries, if any, accruing in the current pay period, and (y) Adatom
has no existing severance obligations to any of its employees, and (B) the
Shareholder Indebtedness (as such term is hereinafter defined), which
Shareholder Indebtedness shall be discharged by Adatom prior to the Closing
Date.
(iii) Except as set forth in Section 5.1(o) of the Adatom
Disclosure Schedule, there are no pension, retirement, savings, disability,
medical, dental or other health plans, life insurance (including any individual
life insurance policy as to which Adatom makes premium payments whether or not
Adatom is the owner, beneficiary or both of such policy) or other death benefit
plans, profit sharing, deferred compensation, stock option, bonus or other
incentive plans, vacation benefit plans, severance plans, or other employee
benefit plans or arrangements (whether written or arising from custom), and
Adatom does not have any employee pension benefit plan as defined in Section
3(2) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), or any employee welfare benefit plan as defined in Section 3(1) of
ERISA.
(iv) Adatom has, in all material respects, complied with the
requirements, to the extent applicable, of the Consolidated Omnibus Budget
Reconciliation Act of 1985 ("COBRA") with respect to the continuation of
employer-provided health benefits following a "qualifying event" which would
otherwise terminate such benefits, as provided in Section 4980B of the Internal
Revenue Code of 1986, as amended, and applicable regulations and Internal
Revenue Service rulings, notices and other pronouncements.
(v) Adatom has not at any time during the last five years had, or
is there now threatened, a strike, picket, work stoppage, work slowdown, or
other labor trouble or dispute, and Adatom does not know of any employee's
proposed resignation whose annual salary exceeds $25,000.
(p) INSURANCE. Section 5.1(p) of the Adatom Disclosure Schedule lists
all policies of property, theft, fire, liability, workers' compensation, title,
professional liability or life insurance or other insurance owned or maintained
by Adatom or in which Adatom is a named
11
insured, or additional insured, or on which Adatom or is paying any premiums.
Except as set forth in Section 5.1(p) of the Adatom Disclosure Schedule, all
such policies are in full force and effect as of the date hereof, and Adatom is
not in default with respect to any provision contained in any such insurance
policy nor failed to give any notice or present any claim thereunder in due and
timely fashion. Section 5.1(p) of the Adatom Disclosure Schedule sets forth a
list of the claims history for Adatom under such policies since January 1, 1999
and, except as set forth in Section 5.1(p) of the Adatom Disclosure Schedule,
there are no claims outstanding by Adatom under any such policies.
(q) LIABILITIES. There are no material liabilities or obligations of
Adatom, either accrued, absolute, contingent or otherwise, whether or not of a
kind required by GAAP to be set forth on a financial statement (collectively,
"Liabilities"), except (i) those accrued, reflected or otherwise provided for on
the Adatom Balance Sheets, provided that the Shareholder Indebtedness (as
hereinafter defined) and any and all indebtedness to any lending institutions
reflected thereon (collectively, the "Adatom Bank Debt") shall have been fully
paid, performed and discharged prior to the Closing Date, (ii) those incurred in
the ordinary course of Adatom's business since December 31, 1998, provided that
such liabilities have been paid, performed and discharged(or will be paid,
performed and discharged) by Adatom in the ordinary course of business,
consistent with past practice, (iii) reasonable Transaction Expenses incurred by
Adatom, (iv) amounts payable to HealthCore under the Note, and (v) the Jesup
Convertible Notes not exceeding, in the aggregate, Seven Hundred Fifty Thousand
($750,000) Dollars.
(r) ACTIONS AND PROCEEDINGS. Except as provided in Section 5.1(r) of
the Adatom Disclosure Schedule, there are no claims actions, suits,
arbitrations, proceedings, investigations or inquiries, whether at law or in
equity and whether or not before any court, private body or group or
Governmental Entity (collectively, "Actions"), pending or, to Adatom's
knowledge, threatened against, or reasonably involving or affecting, to Adatom's
knowledge, having performed no investigation, Adatom nor any of its assets,
whether or not fully or partially covered by insurance or which would give rise
to any right of indemnification by any Person from Adatom, and there are, to
Adatom's knowledge, no outstanding orders, writs, injunctions, awards, sentences
or decrees of any court, private body or group or Governmental Entity against,
reasonably involving or affecting, to Adatom's knowledge, having performed no
investigation, Adatom.
(s) ABSENCE OF CHANGES. Except as set forth in Section 5.1(s) of the
Adatom Disclosure Schedule, since December 31, 1998, Adatom has carried on its
business in the ordinary course, and there has not been:
(i) any material adverse change in its business condition
(financial or otherwise), results of operations or liabilities, other than
operating losses sustained by Adatom;
(ii) any pending or, to Adatom's knowledge, threatened adverse
amendment, adverse modification, or termination of any agreement, license or
permit which is material to its business, and which cannot be replaced by an
agreement, license or permit containing substantially all of the same material
terms thereof;
12
(iii) any disposition or acquisition of any of its assets or
properties other than in the ordinary course which exceeds $50,000 in the
aggregate, other than under the terms of that certain Security Agreement, dated
April 27, 1999, between Adatom and HealthCore;
(iv) any damage, destruction or other casualty loss (whether or
not covered by insurance) having a Material Adverse Effect, or that could
reasonably be expected to have a Material Adverse Effect, on its business or
assets;
(v) any increase in the compensation of any of its employees; or
(vi) except in the ordinary course, the incurrence of any
obligation or liability (whether matured, unmatured, absolute, accrued,
contingent or otherwise) which exceeds $50,000 in the aggregate, other than
amounts owed to (x) HealthCore under the Note, and (y) under the Jesup
Convertible Notes to be issued under the terms of the Adatom Engagement Letter
not in excess of Seven Hundred Fifty ($750,000) Dollars, which Jesup Convertible
Notes, by their terms, shall be converted into shares of Adatom Common Stock
immediately prior to the Closing.
(t) AFFILIATED TRANSACTIONS. For purposes of this Section 5.1(t), an
"Affiliate" means any Adatom shareholder or any employee, officer or director of
Adatom or any spouse or family member (including in-laws) of, or any corporation
or other entity "controlled by" (as such term is defined in Rule 405 of the
General Rules and Regulations under the Securities Act of 1933, as amended (the
"Securities Act")), any such persons or in which any such person has an equity
or ownership interest exceeding five percent.
(i) Except as specifically set forth (including dollar amounts) in
Section 5.1(v) of the Adatom Disclosure Schedule, as of the date hereof, no
Affiliate is indebted to, or is a creditor of, Adatom.
(ii) During the past three (3) years, except as set forth on
Section 5.1(t) of the Adatom Disclosure Schedule, Adatom has not, directly or
indirectly, purchased, leased from or otherwise acquired any property or
obtained any services from, or sold, leased to or otherwise disposed of any
property or furnished any services to, or otherwise dealt with, any Affiliate
nor is Adatom a party to any contract, agreement, license, commitment or other
arrangement, written or oral, express or implied, with an Affiliate except as
disclosed on the Adatom Disclosure Schedule.
(u) BROKERS OR FINDERS. No agent, broker, investment banker, financial
advisor or other Person retained by or on behalf of Adatom is or will be
entitled to any broker's or finder's fee or any other commission or similar fee
in connection with any of the transactions contemplated by this Agreement,
except Xxxxxxxxxx & Associates and ValueAdd Financial Corporation (collectively,
the "Brokers"). The Surviving Corporation's maximum aggregate liability to the
Brokers is limited to a cash fee equal to the sum of (i) five (5%) percent of
the cash on-hand of HealthCore as at the Closing Date, (ii) five (5%) percent of
the principal amount of the Note, and (iii) five (5%) percent of up to an
aggregate maximum of Seven Hundred Fifty Thousand ($750,000) Dollars in respect
of the Jesup Convertible Notes. The Brokers shall also
13
receive that number of shares of Adatom Common Stock which shall be convertible
(in accordance with the provisions of Section 2.1(a) hereof) into five (5%)
percent of the total outstanding shares of common stock in the Surviving
Corporation on the Closing Date, subject to adjustment based on any adjustment
to the Per Share Merger Consideration in accordance with the terms of Section
3.2 hereof.
(v) ENVIRONMENTAL MATTERS. Except as set forth in Section 5.1(v) of the
Adatom Disclosure Schedule: (i) Adatom has obtained and is in material
compliance with the terms and conditions of all permits, licenses and other
authorizations required under applicable federal, state, local and foreign laws,
regulations and codes as currently in effect relating to pollution and
protection of the environment ("Environmental Laws"); (ii) to Adatom's
knowledge, no asbestos in a friable condition or equipment containing
polychlorinated biphenyls or leaking underground or above-ground storage tanks
is contained in or located at any facility owned, leaned or controlled by
Adatom; (iii) Adatom is in material compliance with all applicable Environmental
Laws, and has fully disclosed to HealthCore all known material past and present
non-compliance with Environmental Laws, and all known past discharges of
emissions, leaking or releases known to Adatom of any substance or waste
regulated under or defined by Environmental Laws that could reasonably be
expected to form the basis of any claim, action, suit, proceeding, hearing or
investigation under any applicable Environmental Laws; and (iv) Adatom has not
received notice of any past or present events, conditions, circumstances,
activities, practices, incidents, actions or plans that have resulted in or
threaten to result in any common law or legal liability, or otherwise form the
basis of any claim, action, suit, proceeding, hearing or investigation under any
applicable Environmental Laws; provided, however, that clauses (i) through (iv)
address only those matters that would have a Material Adverse Effect with
respect to Adatom.
(w) INVESTMENT COMPANY ACT. Adatom either (i) is not an "investment
company," or a company "controlled" by an "affiliated company" with respect to
an "investment company," required to register under the Investment Company Act
of 1940, as amended (the "Investment Company Act") or (ii) satisfies all
conditions for an exemption from the Investment Company Act, and, accordingly,
Adatom is not required to be registered under the Investment Company Act.
(x) COMPLIANCE WITH SECURITIES LAWS, RULES AND REGULATIONS. Adatom has
complied with all applicable state and federal securities laws, rules and
regulations in connection with the offer and sale of any and all of its
securities.
5.2 REPRESENTATIONS AND WARRANTIES OF HEALTHCORE. HealthCore represents
and warrants to Adatom as follows:
(a) ORGANIZATION AND AUTHORITY. HealthCore is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, has all requisite corporate power and authority to own, lease and
operate its properties and carry on its business as now conducted, is duly
qualified, authorized and in good standing to transact business in the states
listed in Section 5.2(a) of the disclosure schedule delivered to Adatom by
HealthCore on or prior to the date hereof (the "HealthCore Disclosure
Schedule"), and is not required to be qualified as a foreign corporation in any
other jurisdiction.
14
(b) CAPITALIZATION. As of the date hereof, the authorized capital stock
of HealthCore consists of (i) 19,640,000 shares of HealthCore Common Stock, of
which 3,348,000 shares are issued and outstanding, (ii) 216,000 shares of
HealthCore Class B Common Stock, of which 216,000 shares are issued and
outstanding, (iii) no shares are held in the treasury of HealthCore, (iv) no
shares of HealthCore Common Stock are reserved for issuance upon exercise of
outstanding stock options, and (v) no shares are reserved for issuance upon the
exercise of outstanding warrants. The shares of HealthCore Common Stock have
been duly authorized and are validly issued, fully paid and nonassessable and
are not subject to preemptive rights. Except as set forth in this Section 5.2(b)
or in Section 5.2(b) of the HealthCore Disclosure Schedule, there are no
outstanding rights, subscriptions, warrants, calls, preemptive rights, options
or other agreements or commitments of any kind or character to purchase or
otherwise to acquire from HealthCore any shares of its capital stock or any
other security, and no security or obligation of any kind convertible into the
capital stock or other security of HealthCore exists in favor of any Person (as
hereinafter defined). Except as set forth in Section 5.2(b) of the HealthCore
Disclosure Schedule, HealthCore has no outstanding bonds, debentures, notes or
other such obligations the holders of which have the right to vote or which are
convertible into or exercisable for securities having the right to vote with the
shareholders of HealthCore on any matter. Other than as contemplated by this
Agreement or as set forth in Section 5.2(b) of the HealthCore Disclosure
Schedule, there are no outstanding contractual obligations, commitments,
understandings or arrangements of HealthCore to repurchase, redeem or otherwise
acquire or make any payment in respect of any shares of capital stock or other
equity securities or ownership interests of HealthCore.
(c) CERTIFICATE OF INCORPORATION, BY-LAWS, CORPORATE RECORDS AND
COMMITTEES. The copies of the Certificate of Incorporation and By-Laws or
equivalent organizational documents, each as amended to date, of HealthCore
delivered to Adatom on or prior to the date hereof are correct and complete. The
stock transfer, minute books and corporate records of HealthCore which have been
made available to Adatom, are correct and complete and constitute the only
written records and minutes of the meetings, proceedings, and other actions of
the Board of Directors and the shareholders of HealthCore from its date of
incorporation to the date hereof.
(d) SEC DOCUMENTS. HealthCore has made available to Adatom a true and
complete copy of each form, report, schedule and registration statement filed
with the SEC by HealthCore since September 30, 1998 (as such documents have
since the time of their filing been amended or supplemented, the "HealthCore SEC
Documents") which are all the documents (other than preliminary material) that
HealthCore was required to file with the SEC since such date. As of their
respective dates, the HealthCore SEC Documents (other than preliminary material)
complied in all material respects with the requirements of the Securities Act or
the Exchange Act of 1934 (the "Exchange Act") as applicable, and the rules and
regulations of SEC thereunder applicable to such HealthCore SEC Documents, and
none of the HealthCore SEC Documents, as such documents have been amended to
date (including all financial statements included therein and exhibits and
schedules thereto and documents incorporated by reference therein), contained
any untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading.
HealthCore (i) has filed in a timely
15
manner all reports required to be filed during the twelve (12) calendar months
immediately preceding the date of the execution of this Agreement, and (ii) has
not been in default, in any material respect, in the payment of (A) any
installment or installments on indebtedness for borrowed money, or (B) any
rental on one or more long term leases, which defaults, in the aggregate have
had a Material Adverse Effect on the financial condition of HealthCore.
(e) FINANCIAL STATEMENTS. The audited balance sheet of HealthCore as at
September 30, 1998 (the "HealthCore Audited Balance Sheet"), the unaudited
balance sheet of HealthCore as at March 31, 1999 (the "HealthCore Unaudited
Balance Sheet", and, together with HealthCore Audited Balance Sheet, the
"HealthCore Balance Sheets"), and, with respect to the HealthCore Audited
Balance Sheet the related audited statements, and, with respect to the
HealthCore Unaudited Balance Sheet, the related unaudited statements, of income,
capital and cash flows for the three years then ended, included in HealthCore
SEC Documents (as such documents may have been amended to date) and heretofore
delivered to Adatom, comply as to form in all material respects with applicable
accounting requirements and with the rules and regulations of the SEC with
respect thereto, have been prepared in accordance with GAAP applied on a
consistent basis during the periods involved (except as may be indicated in the
notes thereto or, in the case of the unaudited financial statements, as
permitted by Exchange Act Form 10-Q) and are true and correct and fairly present
(subject, in the case of the unaudited financial statements, to normal,
recurring audit adjustments that, individually and in the aggregate, were not
material) the consolidated financial condition and the results of operations and
cash flows of HealthCore as at the respective dates and for the respective
periods covered thereby and the consolidated results of their operations and
cash flows for the periods then ended. The sum of all cash on hand of HealthCore
as at June 1, 1999 is estimated to be approximately Two Million Four Hundred
Fifty Thousand ($2,450,000) Dollars, after giving effect to the sums loaned by
HealthCore to Adatom pursuant to the Note.
(f) AUTHORITY. The Board of Directors of HealthCore has unanimously
approved this Agreement, the Merger and the other transactions contemplated
hereby and has recommended that its shareholders vote in favor of the adoption
and approval of this Agreement and the Merger (the "HealthCore Recommendation").
The affirmative vote of a majority of the votes that the holders of the
outstanding shares of HealthCore Common Stock are entitled to cast with respect
to the adoption and approval of this Agreement and the Merger is the only vote
of the holders of any class or series of the capital stock of HealthCore
necessary to approve this Agreement, the Merger and the transactions
contemplated hereby, and HealthCore has all other requisite corporate power and
authority to enter into this Agreement and to perform its obligations hereunder
and to consummate the transactions contemplated hereby. This Agreement has been
duly and validly executed and delivered by HealthCore and constitutes a valid
and binding obligation of HealthCore enforceable against HealthCore in
accordance with its terms, subject to the approval of this Agreement, the Merger
and the transactions contemplated hereby by the shareholders of HealthCore.
(g) MERGER SHARES. The HealthCore Common Stock to be delivered
hereunder, when issued in accordance with the terms of this Agreement, will be
validly issued, fully paid and non-assessable.
16
(h) GOVERNMENTAL AUTHORIZATIONS AND OTHER CONSENTS. Except as set forth
in Section 5.2(h) of the HealthCore Disclosure Schedule, no consent, order,
license, approval or authorization of, or exemption by, or registration or
declaration or filing with, any Governmental Entity, and no consent or approval
of any other Person, is required to be obtained or made by HealthCore in
connection with the performance by HealthCore of this Agreement or the
consummation of the transactions contemplated to be performed by it hereunder.
(i) NON-CONTRAVENTION. Except as set forth in Section 5.2(i) of the
HealthCore Disclosure Schedule, as amended on the Closing Date with respect to
Subsection (ii) hereof in connection with the Merger or the transactions
contemplated thereby, on the Closing Date, the performance of this Agreement
will not (i) violate any provision of the Certificate of Incorporation or
By-Laws or equivalent organizational document of HealthCore; (ii) violate,
conflict with or result in the breach or termination of, or constitute an
amendment to, or otherwise give any Person the right to terminate, or constitute
(or with notice or lapse of time or both would constitute) a default (by way of
substitution, novation or otherwise) under the terms of, any contract, mortgage,
lease, bond, indenture, agreement, franchise or other instrument or obligation
to which HealthCore is a party or by which HealthCore or any of its assets or
properties are bound, all as set forth on Schedule 3.2(a) hereof; (iii) result
in the creation of any Liens upon the properties or assets of HealthCore
pursuant to the terms of any contract, mortgage, lease, bond, indenture,
agreement, franchise or other instrument or obligation to which HealthCore is a
party or by which HealthCore or any of its assets or properties are bound (iv)
violate any judgment, order, injunction, decree or award of any court,
arbitrator, administrative agency or Governmental Entity against, or binding
upon, HealthCore or any of its securities, properties, assets or businesses;
(iv) constitute a violation by HealthCore of any statute, law, rule or
regulation of any jurisdiction as such statute, law, rule or regulation relates
to any of its securities, properties, assets or business; or (v) violate any
Permit.
(j) TANGIBLE PROPERTY. HealthCore has good title to all of the assets
reflected on its books and records and on the HealthCore Balance Sheets that
have not been sold or liquidated as contemplated by this Agreement, free and
clear of all Liens, except for those assets leased by HealthCore under those
leases listed in Section 5.2(j) of the HealthCore Disclosure Schedule as amended
on the Closing Date in connection with this Agreement, the Merger or the
transactions contemplated hereby or thereby. All Fixed Assets of HealthCore that
have not been sold or liquidated as of the Closing Date as contemplated by this
Agreement will be in substantially the same condition at Closing as existed on
the date of this Agreement, reasonable wear and tear excepted.
(k) REAL PROPERTY AND LEASES. Section 5.2(k) of the HealthCore
Disclosure Schedule sets forth a true and correct list of all leases, subleases
or other agreements under which HealthCore is lessee or lessor of any real
property or has any interest in real property and, except as set forth in
Section 5.2(k) of the HealthCore Disclosure Schedule, there are no rights or
options held by HealthCore or any contractual obligations on its part to
purchase or otherwise acquire (including by way of lease or sublease) any
interest in or use of any real property, nor any rights or options granted by
HealthCore, or any contractual obligations entered into by it, to sell or
otherwise dispose of (including by way of lease or sublease) any interest in or
use of any real property. Except as set forth in Section 5.2(k) of the
HealthCore Disclosure Schedule, as
17
amended on the Closing Date in connection with the Merger or the transactions
contemplated thereby, all such leases, subleases and other agreements that are
set forth on Schedule 3.2(a) hereof are in full force and effect and constitute
legal, valid and binding obligations of HealthCore and, to the knowledge of
HealthCore, the other parties thereto, with no existing or, to the knowledge of
HealthCore, claimed default or event of default, or event which with notice or
lapse of time or both would constitute a default or event of default, by
HealthCore or, to the knowledge of HealthCore, by any other party thereto, which
would have a Material Adverse Effect on HealthCore. HealthCore is not in
violation of any building, zoning, health, safety, environmental or other law,
rule or regulation the violation of which would have a Material Adverse Effect
on HealthCore and no notice from any Person has been served upon HealthCore
claiming any such violation.
(l) TAX MATTERS. HealthCore has timely filed all federal, state, county
and local Returns required to be filed by it through the date hereof, copies of
which have been delivered to Adatom, which Returns accurately reflect, in all
material respects, the taxes due for the periods indicated, and HealthCore has
paid in full all Taxes shown to be due by such Returns, and has established
adequate reserves with respect to any liabilities for Taxes accrued through
March 31, 1999, which are reflected on the HealthCore Balance Sheets. HealthCore
does not know of any unassessed deficiency for Taxes proposed or threatened
against HealthCore, and, to HealthCore's knowledge, no taxing authority has
raised any issue with respect to HealthCore which, if adversely determined,
would result in a liability for any Tax which has not been reserved against on
the HealthCore Balance Sheets. No extensions with respect to the dates on which
any Return was or is due to be filed by HealthCore nor any waivers or agreements
by HealthCore for the extension of time for the assessment or payment of any
Taxes are in force. HealthCore has not been, and, to HealthCore's knowledge,
currently is not being, audited by any federal, state or local tax authority.
(m) COMPLIANCE WITH LAWS. HealthCore is in compliance with all
applicable laws, rules and regulations, the violation of which could have a
Material Adverse Effect on its assets, properties, liabilities, condition
(financial or otherwise) or prospects, nor does HealthCore know of the
enactment, promulgation or adoption of any such law, rule or regulation which is
not yet effective.
(n) PERMITS AND LICENSES. Except as set forth in Section 5.2(n) of the
HealthCore Disclosure Schedule, HealthCore (including, without limitation, its
employees) duly obtained all Permits that were material in the conduct of its
business, and no violations have been recorded by any Governmental Entity in
respect of any such Permit.
(o) CONTRACTS AND AGREEMENTS. Section 5.2(o) of the HealthCore
Disclosure Schedule lists all written and oral Material Contracts to which
HealthCore is a party or by which it may be bound. Except as set forth in
Section 5.2(o) of the HealthCore Disclosure Schedule, as amended on the Closing
Date, all Material Contracts set forth on Schedule 3.2(a) hereof constitute
legal, valid and binding obligations of HealthCore and, to the knowledge of
HealthCore, of the other parties thereto, and are in full force and effect on
the date hereof, and HealthCore has paid in full all amounts due thereunder
which are due and payable and is not in default under any such Material Contract
nor, to the knowledge of HealthCore, is any other party
18
to any such Material Contract in default thereunder, nor does any condition
exist that, with notice or lapse of time, or both, would constitute a default or
event of default thereunder by HealthCore or, to the knowledge of HealthCore, by
any other Person. Except as set forth in Section 5.2(o) of the HealthCore
Disclosure Schedule, as amended on the Closing Date, no Material Contract set
forth on Schedule 3.2(a) of this Agreement requires the consent or approval of a
third party in connection with the performance by HealthCore of this Agreement
or the transactions contemplated to be performed by it hereunder.
(p) EMPLOYEE COMPENSATION AND BENEFITS AND RELATIONS.
(i) Section 5.2(p) of the HealthCore Disclosure Schedule lists all
current employees of HealthCore, setting forth their respective salaries,
whether they are employed under contract or at will, and the expiration date of
each contract.
(ii) Notwithstanding anything contained in this Agreement to the
contrary, HealthCore has no liabilities of any kind or nature to any of its
employees in connection with their employment by HealthCore other than (A) for
compensation payable to such employees accruing in the current pay period and
arising in the ordinary course, and (B) severance arrangements or contract
settlements entered into by HealthCore in connection with the sale or
liquidation of the HealthCore Business (as hereinafter defined) or as
contemplated by this Agreement.
(iii) Except as set forth in Section 5.2(p) of the HealthCore
Disclosure Schedule, as of the Closing Date all pension, retirement, savings,
disability, medical, dental or other health plans, life insurance (including any
individual life insurance policy as to which HealthCore makes premium payments
whether or not HealthCore is the owner, beneficiary or both of such policy) or
other death benefit plans, profit sharing, deferred compensation, stock option,
bonus or other incentive plans, vacation benefit plans, severance plans, or
other employee benefit plans or arrangements (whether written or arising from
custom) maintained by HealthCore shall have been terminated. Other than
HealthCore's 401(k) plan, HealthCore does not have any employee pension benefit
plan as defined in Section 3(2) of ERISA, or any employee welfare benefit plan
as defined in Section 3(1) of ERISA.
(iv) HealthCore has, in all material respects, complied with the
requirements, to the extent applicable, of COBRA with respect to the
continuation of employer-provided health benefits following a "qualifying event"
which would otherwise terminate such benefits, as provided in Section 4980B of
the Internal Revenue Code of 1986, as amended, and applicable regulations and
Internal Revenue Service rulings, notices and other pronouncements.
(v) HealthCore has not at any time during the last five years had,
or is there now threatened, a strike, picket, work stoppage, work slowdown, or
other labor trouble or dispute, and HealthCore does not know of any employee's
proposed resignation whose annual salary exceeds $25,000, other than as
contemplated by this Agreement. HealthCore has not been, and is currently not, a
party to any collective bargaining agreements.
19
(q) INSURANCE. Section 5.2(q) of the HealthCore Disclosure Schedule
lists all policies of property, theft, fire, liability, workers' compensation,
title, professional liability or life insurance or other insurance owned or
maintained by HealthCore or in which HealthCore is a named insured, or
additional insured, or on which HealthCore or is paying any premiums. Except as
set forth in Section 5.2(q) of the HealthCore Disclosure Schedule, all such
policies are in full force and effect as of the date hereof, and HealthCore is
not in default with respect to any provision contained in any such insurance
policy nor failed to give any notice or present any claim thereunder in due and
timely fashion. Section 5.2(q) of the HealthCore Disclosure Schedule sets forth
a summary of the claims history for HealthCore under such policies since January
1, 1999 and, except as set forth in Section 5.2(q) of the HealthCore Disclosure
Schedule, there are no claims outstanding by HealthCore under any such policies.
(r) LIABILITIES. There are no material Liabilities of HealthCore,
except (a) those accrued, reflected or otherwise provided for on the HealthCore
Balance Sheets, (b) those incurred in the ordinary course of HealthCore's
business since December 31, 1998, consistent with past practices, no one of
which exceeds $25,000, (c) reasonable Transaction Expenses incurred by
HealthCore, and (d) those listed in Section 5.2(r) of the HealthCore Disclosure
Schedule.
(s) ACTIONS AND PROCEEDINGS. Except as provided in Section 5.2(s) of
the HealthCore Disclosure Schedule, there are no Actions, pending or, to
HealthCore's knowledge, threatened against, or reasonably involving or
affecting, to HealthCore's knowledge, having performed no investigation,
HealthCore nor any of its assets, whether or not fully or partially covered by
insurance or which would give rise to any right of indemnification by any Person
from HealthCore, and there are, to HealthCore's knowledge, no outstanding
orders, writs, injunctions, awards, sentences or decrees of any court, private
body or group or Governmental Entity against, reasonably involving or affecting,
to HealthCore's knowledge, having performed no investigation, HealthCore.
(t) ABSENCE OF CHANGES. Except as set forth in Section 5.2(t) of the
HealthCore Disclosure Schedule, or in connection with the sale or liquidation of
the HealthCore Business, since December 31, 1998, HealthCore has carried on its
business in the ordinary course, and there has not been:
(i) except in the ordinary course, or as contemplated or permitted
by this Agreement, the incurrence of any obligation or liability (whether
matured, unmatured, absolute, accrued, contingent or otherwise) which exceeds
$50,000 in the aggregate, other than: (A) under the terms of that certain letter
amendment, dated April 26, 1999, between Polan and HealthCore, (B) under the
terms of the HealthCore Engagement Letter, and (C) to Xxxxx Xxxxxxxx
("Xxxxxxxx"), HealthCore's President, in severance of his employment with
HealthCore consisting of (x) cash in the amount of One Hundred Thousand
($100,000) Dollars, and (y) options to purchase up to one hundred thousand
(100,000) shares of HealthCore Common Stock at an exercise price of $.10 per
share.
(u) AFFILIATED TRANSACTIONS. For purposes of this Section 5.1(u), an
"Affiliate" means any HealthCore shareholder or any employee, officer or
director of HealthCore or any
20
spouse or family member (including in-laws) of, or any corporation or other
entity "controlled by" (as such term is defined in Rule 405 of the General Rules
and Regulations under the Securities Act), any such persons or in which any such
person has an equity or ownership interest exceeding five percent.
(i) Except as specifically set forth (including dollar amounts) in
Section 5.2(u) of the HealthCore Disclosure Schedule or disclosed in the
HealthCore SEC Documents, as of the date hereof, no Affiliate is indebted to, or
is a creditor of, HealthCore.
(ii) Except as set forth on Section 5.2(u) of the HealthCore
Disclosure Schedule or disclosed in the HealthCore SEC Documents, during the
past three (3) years, HealthCore has not, directly or indirectly, purchased,
leased from or otherwise acquired any property or obtained any services from, or
sold, leased to or otherwise disposed of any property or furnished any services
to, or otherwise dealt with, any Affiliate nor is HealthCore a party to any
contract, agreement, license, commitment or other arrangement, written or oral,
express or implied, with an Affiliate except as disclosed on the HealthCore
Disclosure Schedule.
(v) BROKERS OR FINDERS. No agent, broker, investment banker, financial
advisor or other Person retained by or on behalf of HealthCore is or will be
entitled to any broker's or finder's fee or any other commission or similar fee
in connection with any of the transactions contemplated by this Agreement.
(w) ENVIRONMENTAL MATTERS. Except as set forth in Section 5.2(w) of the
HealthCore Disclosure Schedule: (i) HealthCore has obtained and is in material
compliance with the terms and conditions of all permits, licenses and other
authorizations required under applicable Environmental Laws; (ii) to
HealthCore's knowledge, no asbestos in a friable condition or equipment
containing polychlorinated biphenyls or leaking underground or above-ground
storage tanks is contained in or located at any facility owned, leaned or
controlled by HealthCore; (iii) HealthCore is in material compliance with all
applicable Environmental Laws, and has fully disclosed to Adatom all known
material past and present non-compliance with Environmental Laws, and all known
past discharges of emissions, leaking or releases known to HealthCore of any
substance or waste regulated under or defined by Environmental Laws that could
reasonably be expected to form the basis of any claim, action, suit, proceeding,
hearing or investigation under any applicable Environmental Laws; and (iv)
HealthCore has not received notice of any past or present events, conditions,
circumstances, activities, practices, incidents, actions or plans that have
resulted in or threaten to result in any common law or legal liability, or
otherwise form the basis of any claim, action, suit, proceeding, hearing or
investigation under any applicable Environmental Laws; provided, however, that
clauses (i) through (iv) address only those matters that would have a Material
Adverse Effect with respect to HealthCore.
(x) INVESTMENT COMPANY ACT. HealthCore either (i) is not an "investment
company," or a company "controlled" by an "affiliated company" with respect to
an "investment company," required to register under the Investment Company Act
of 1940, as amended (the "Investment Company Act") or (ii) satisfies all
conditions for an exemption from the Investment Company Act, and, accordingly,
HealthCore is not required to be registered under the Investment Company Act.
21
(y) COMPLIANCE WITH SECURITIES LAWS, RULES AND REGULATIONS. HealthCore
has complied with all applicable state and federal securities laws, rules and
regulations in connection with the offer and sale of any and all of its
securities.
ARTICLE VI
COVENANTS
6.1 COVENANTS OF ADATOM. Adatom hereby covenants and agrees that,
except as expressly contemplated or permitted by this Agreement, from the date
hereof through earlier of the Closing Date or the Termination Date (as
hereinafter defined) it shall comply with the following covenants:
(a) ORDINARY COURSE. Adatom shall carry on its businesses in the usual,
regular and ordinary course in substantially the same manner as heretofore
conducted and use its commercially reasonable, good faith efforts to preserve
intact its current business organizations, keep available the services of its
current officers and employees and preserve its relationships with material
customers, suppliers, contractors, distributors, licensors, licensees and others
having business dealings with it to the end that its goodwill and ongoing
business shall not be impaired in any material respect at the Closing Date.
Without limiting the generality of the foregoing, and except as contemplated by
this Agreement, or as otherwise required by law, Adatom shall not:
(i) (A) declare, set aside or pay any dividends on, or make any
other distributions in respect of, any of its capital stock, (B) split, combine
or reclassify any of its capital stock or issue or authorize the issuance of any
other securities in respect of, in lieu of or in substitution for shares of its
capital stock, or (C) purchase, redeem or otherwise acquire any shares of
capital stock of Adatom or any other securities thereof or any rights, warrants
or options to acquire any such shares or other securities;
(ii) except as contemplated by this Agreement or the Transaction
Documents, authorize for issuance, issue, deliver, sell or agree or commit to
issue, sell or deliver (whether through the issuance or granting of options,
warrants, commitments, subscriptions, rights to purchase or otherwise), pledge
or otherwise encumber any shares of its capital stock, any other voting
securities or any securities convertible into, or any rights, warrants or
options to acquire, any such shares, voting securities or convertible securities
or any other securities or equity equivalents (including without limitation
stock appreciation rights) other than (A) issuances upon exercise of employee
and director stock options issued pursuant to employee and non-employee director
stock option plans outstanding on the date hereof and listed in Section 5.1(b)
of the Adatom Disclosure Schedule; (B) the securities contemplated to be issued
by Adatom pursuant the terms of that certain engagement letter (the "Adatom
Engagement Letter"), dated April 27, 1999, between Adatom and Jesup & Xxxxxx, a
copy of which is attached hereto as Exhibit B, (C) to Xxxxxxx Xxxxxx ("Xxxxxx"),
the President of Adatom, or an XXX of Xxxxxx, securities of Adatom in connection
with the discharge of Adatom's existing indebtedness to Xxxxxx (the "Shareholder
Indebtedness"), (D) to the Brokers pursuant to contracts between the Brokers and
Adatom, and (E) to Polan under the terms of the Letter Agreement (as hereinafter
defined);
22
(iii) except with respect to bonuses made in the ordinary course
of business consistent with past practice, and except as contemplated by this
Agreement, adopt or amend in any material respect any bonus, profit sharing,
compensation, severance, termination, stock option, stock appreciation right,
pension, retirement, employment or other employee benefit agreement, trust, plan
or other arrangement for the benefit or welfare of any director, officer or
employee of Adatom or increase in any manner the compensation or fringe benefits
of any director, officer or employee of Adatom or pay any benefit not required
by any existing agreement or place any assets in any trust for the benefit of
any director, officer or employee of Adatom (in each case, except with respect
to employees in the ordinary course of business consistent with past practice);
(iv) amend its Articles of Incorporation, By-laws or equivalent
organizational documents or alter through merger, liquidation, reorganization,
restructuring or in any other fashion the corporate structure of Adatom;
(v) sell, lease, license, mortgage or otherwise encumber (except
to secure the incurrence of Debt permitted hereunder) or subject to any Lien or
otherwise dispose of any of its material properties or assets;
(vi) acquire or agree to acquire (x) by merging or consolidating
with, or by purchasing a substantial portion of the stock or assets of, or by
any other manner, any business or any corporation, partnership, joint venture,
association or other business organization or division thereof or (y) any assets
that are material, individually or in the aggregate, to Adatom taken as a whole;
(vii) incur any Debt in excess of Seven Hundred Fifty Thousand
($750,000) Dollars (inclusive of Debt incurred in connection with the Jesup
Convertible Notes), exclusive of the sums loaned to Adatom by HealthCore
pursuant to the terms of the Note, issue or sell any debt securities or warrants
or other rights to acquire any debt securities of Adatom other than as
contemplated in the Adatom Engagement Letter, or permitted in accordance with
the terms of this Agreement, guarantee any debt securities of another person,
enter into any "keep well" or other agreement to maintain any financial
condition of another Person or enter into any arrangement having the economic
effect of any of the foregoing, or make any loans, advances or capital
contributions to, or investments in, any other Person, other than to Adatom;
(viii) change any accounting principle used by it, unless required
by the Financial Accounting Standards Board; and
(ix) except as set forth in Section 6.1(b)(ii) hereof, enter into
any transaction or series of transactions with any Affiliate of Adatom other
than on terms and conditions substantially as favorable to Adatom as would be
obtainable by Adatom at the time of such transaction with a Person that is not
an Affiliate of Adatom.
23
(b) SHAREHOLDER INDEBTEDNESS. Adatom shall discharge all of Adatom's
monetary obligations to Adatom's shareholders, employees and the Adatom
Affiliates, including, without limitation, the Shareholder Indebtedness.
(c) XXXXX EMPLOYMENT AGREEMENT; ISSUANCE OF ADATOM SHARES. Immediately
prior to the Closing, Adatom shall enter into the employment agreement with
Polan heretofore executed by Polan, only, in accordance with the terms of that
certain letter agreement (the "Letter Agreement"), dated as of the date hereof,
between Adatom and Xxxxx a copy of which is attached hereto as Exhibit C (the
"Xxxxx Employment Agreement"), and shall, as contemplated by, and in accordance
with the terms of, the Letter Agreement, issue to Xxxxx immediately prior to the
Closing such number of shares of Adatom Common Stock which in the Merger shall
be convertible (in accordance with the provisions of Section 2.1(a) hereof) into
three hundred fifty thousand (350,000) shares of the HealthCore Common Stock
(such shares being the "Xxxxx Adatom Shares").
(d) NO SOLICITATION. Adatom shall not authorize or permit any of their
respective Agents to, (i) solicit, initiate, encourage (including by way of
furnishing information) or take any other action to facilitate, any inquiry or
the making of any proposal which constitutes, or may reasonably be expected to
lead to, any acquisition or purchase of a substantial amount of assets of, or
any equity interest in, or any tender offer (including a self tender offer) or
exchange offer, merger, consolidation, business combination, sale of
substantially all assets, sale of securities, recapitalization, liquidation,
dissolution or similar transaction involving Adatom (other than the transactions
contemplated by this Agreement) or any other material corporate transaction, the
consummation of which would or could reasonably be expected to impede, interfere
with, prevent or materially delay the Merger (each a "Transaction Proposal," and
collectively, the "Transaction Proposals") or agree to or endorse any
Transaction Proposal or (ii) propose, enter into or participate in any
discussions or negotiations regarding any of the foregoing, or furnish to any
other Person any information with respect to its business, properties or assets
or any of the foregoing, or otherwise cooperate in any way with, or assist or
participate in, facilitate or encourage, any effort or attempt by any other
Person to do or seek any of the foregoing.
6.2 COVENANTS OF HEALTHCORE. HealthCore hereby covenants and agrees
that, except as expressly contemplated or permitted by this Agreement, from the
date hereof through earlier of the Closing Date or the Termination Date it shall
comply with the following covenants:
(a) CLOSING CASH AMOUNT. HealthCore shall use its commercially
reasonable, good faith efforts to secure a minimum of Three Million ($3,000,000)
Dollars in cash, calculated based upon the same formula set forth in Section
3.2(a) hereof;
(b) SALE OR LIQUIDATION OF THE HEALTHCORE BUSINESS. HealthCore shall
endeavor to consummate the sale or liquidation, in HealthCore's sole discretion,
of HealthCore's existing health discount card business and any other business
being conducted by HealthCore (the "HealthCore Business"), the agreements
relating to such sale or liquidation to be in form and substance reasonably
acceptable to Adatom, and shall, in connection therewith, (i) terminate all of
HealthCore's existing employment relationships with all of its employees,
including, but not
24
limited to, its key executives, Xxxxx and Xxxxxxxx, and (ii) terminate, cancel
or assign all material contractual commitments and other material obligations
arising in connection with the HealthCore Business (including HealthCore's
office lease). In addition, HealthCore shall take all commercially reasonable
steps necessary to achieve the maximum valuation of the HealthCore Business in
any such sale or liquidation thereof;
(c) STOCK OPTION PLAN. HealthCore shall adopt a Stock Option Plan (the
"Stock Option Plan") in form and substance reasonably satisfactory to Adatom
covering an amount of shares of HealthCore Common Stock equal to ten (10%)
percent of the Surviving Corporation's issued and outstanding capital stock on a
fully-diluted basis immediately following the Closing, for issuance of options
to employees, contractors and directors of the Surviving Corporation.
(d) ORDINARY COURSE. Except as contemplated by this Agreement, or
otherwise required by law, HealthCore shall not:
(i) (A) declare, set aside or pay any dividends on, or make any
other distributions in respect of, any of its capital stock, (B) split, combine
or reclassify any of its capital stock or issue or authorize the issuance of any
other securities in respect of, in lieu of or in substitution for shares of its
capital stock or (C) purchase, redeem or otherwise acquire any shares of capital
stock of HealthCore or any other securities thereof or any rights, warrants or
options to acquire any such shares or other securities;
(ii) except as contemplated by this Agreement, authorize for
issuance, issue, deliver, sell or agree or commit to issue, sell or deliver
(whether through the issuance or granting of options, warrants, commitments,
subscriptions, rights to purchase or otherwise), pledge or otherwise encumber
any shares of its capital stock, any other voting securities or any securities
convertible into, or any rights, warrants or options to acquire, any such
shares, voting securities or convertible securities or any other securities or
equity equivalents (including without limitation stock appreciation rights)
other than (A) issuances upon exercise of employee and director stock options
issued pursuant to employee and non-employee director stock option plans
outstanding on the date hereof and listed in Section 5.2(b) of the HealthCore
Disclosure Schedule, (B) the securities contemplated to be issued by HealthCore
pursuant the terms of the HealthCore Engagement Letter, and (C) options or
warrants issued in consideration for the settlement of certain obligations of
HealthCore to its employees and third party creditors of HealthCore up to an
aggregate maximum of Thirty Thousand (30,000) shares;
(iii) except with respect to annual bonuses accrued or reflected
on the HealthCore Unaudited Balance Sheet, and except as contemplated by this
Agreement, adopt or amend in any material respect any bonus, profit sharing,
compensation, severance, termination, stock option, stock appreciation right,
pension, retirement, employment or other employee benefit agreement, trust, plan
or other arrangement for the benefit or welfare of any director, officer or
employee of HealthCore or increase in any manner the compensation or fringe
benefits of any director, officer or employee of HealthCore or pay any benefit
not required by any existing agreement or place any assets in any trust for the
benefit of any director, officer or employee of HealthCore, other than (A)
options or warrants issued in consideration for the
25
settlement of certain obligations of HealthCore to its employees and third party
creditors of HealthCore up to an aggregate maximum of Thirty Thousand (30,000)
shares, and (B) severance packages not in excess of an aggregate of Eighty
Thousand ($80,000) Dollars other than to Xxxxx and Xxxxxxxx;
(iv) amend its Certificate of Incorporation, By-laws or equivalent
organizational documents or alter through merger, liquidation, reorganization,
restructuring or in any other fashion the corporate structure of HealthCore;
(v) sell, lease, license, mortgage or otherwise encumber or
subject to any Lien or otherwise dispose of any of its material properties or
assets;
(vi) acquire or agree to acquire (x) by merging or consolidating
with, or by purchasing a substantial portion of the stock or assets of, or by
any other manner, any business or any corporation, partnership, joint venture,
association or other business organization or division thereof or (y) any assets
that are material, individually or in the aggregate, to HealthCore taken as a
whole;
(vii) incur any Debt, issue or sell any debt securities or
warrants or other rights to acquire any debt securities of HealthCore, guarantee
any debt securities of another person, enter into any "keep well" or other
agreement to maintain any financial condition of another Person or enter into
any arrangement having the economic effect of any of the foregoing, or make any
loans, advances or capital contributions to, or investments in, any other
Person, other than to HealthCore;
(viii) change any accounting principle used by it, unless required
by the SEC or the Financial Accounting Standards Board; and
(ix) enter into any transaction or series of transactions with any
Affiliate of HealthCore or otherwise that would be required to be disclosed
pursuant to Item 404 of Regulation S-K other than on terms and conditions
substantially as favorable to HealthCore as would be obtainable by HealthCore at
the time of such transaction with a Person that is not an Affiliate of
HealthCore.
(e) NO SOLICITATION. HealthCore shall not authorize or permit any of
its Agents to, (i) solicit, initiate, encourage (including by way of furnishing
information) or take any other action to facilitate, any inquiry or the making
of any Transaction Proposal, or agree to or endorse any Transaction Proposal, or
(ii) propose, enter into or participate in any discussions or negotiations
regarding any of the foregoing, or furnish to any other Person any information
with respect to its business, properties or assets or any of the foregoing, or
otherwise cooperate in any way with, or assist or participate in, facilitate or
encourage, any effort or attempt by any other Person to do or seek any of the
foregoing; provided, however, that the foregoing clauses (i) and (ii) shall not
prohibit HealthCore from (A) furnishing information pursuant to an appropriate
confidentiality letter concerning HealthCore and its businesses, properties or
assets to a third party who the Board of Directors of HealthCore has a
reasonable basis for determining is likely to make a Qualified Transaction
Proposal, (B) engaging in discussions or negotiations with such
26
a third party who has made a Qualified Transaction Proposal, or (C) following
receipt of a Qualified Transaction Proposal, taking and disclosing to its
shareholders a position contemplated by Rule 14e-2(a) under the Exchange Act or
changing the HealthCore Recommendation, but in each case referred to in the
foregoing clauses (A) through (C) only after the Board of Directors of
HealthCore concludes in good faith following receipt of a written opinion
addressed to HealthCore from outside counsel to HealthCore that such action is
reasonably necessary for the Board of Directors of HealthCore to comply with its
fiduciary obligations to shareholders under applicable law. If the Board of
Directors of HealthCore receives a Transaction Proposal, then HealthCore shall
immediately inform Adatom of the terms and conditions of such proposal and the
identity of the Person making it and shall keep Adatom fully informed of the
status and details of any such Transaction Proposal and of all steps it is
taking in response to such Transaction Proposal. For purposes of this Agreement,
the term "Qualified Transaction Proposal" shall mean a Transaction Proposal that
the Board of Directors of HealthCore determines in good faith, after
consultation with its outside financial advisor, is reasonably capable of being
consummated, is not subject to any material contingencies relating to financing
and will result in a transaction materially more favorable to the shareholders
of HealthCore, from a financial point of view, than the Merger.
(f) HEALTHCORE RECOMMENDATION. The Board of Directors of HealthCore
shall not withdraw or modify or propose to withdraw or modify in a manner
adverse to Adatom, the HealthCore Recommendation, unless the Board of Directors
of HealthCore concludes in good faith following receipt of a written opinion
addressed to it from outside counsel to HealthCore that such action is necessary
for the Board of Directors of HealthCore to comply with its fiduciary
obligations to shareholders under applicable law. HealthCore shall use its best
efforts to solicit from its shareholders proxies in favor of the approval and
adoption of this Agreement and the transactions contemplated hereby, and to
secure the vote or the consent of the shareholders required by the DGCL to
approve and adopt this Agreement and the transactions contemplated hereby.
6.3 MUTUAL COVENANTS OF ADATOM AND HEALTHCORE.
(a) PRE-CLOSING COVENANTS. Adatom and HealthCore each hereby covenant
and agree that, except as expressly contemplated or permitted by this Agreement,
from the date hereof through earlier of the Closing Date or the Termination
Date, it shall comply with the following:
(i) CONFIDENTIALITY. Each party shall, and shall use its best
efforts to cause its Affiliates and its and their respective Agents (as
hereinafter defined) to keep secret and hold in strictest confidence any and all
documents and information relating to the other party and its respective
Affiliates furnished to such first party (whether before or after the date
hereof) in connection with the transactions contemplated hereunder, other than
the following: (A) information that has become generally available to the public
other than as a result of a disclosure by such first party, its Affiliates or
its Agents; (B) information that becomes available to such first party or an
Agent of such party on a nonconfidential basis from a third party having no
obligation of confidentiality to a party to this Agreement and which has not
itself received such information directly or indirectly in breach of any such
obligation of confidentiality; (C)
27
information that such first party is required to disclose by applicable law,
judicial order or pursuant to any listing agreement with, or the rules or
regulations of, any securities exchange or automated quotation system on which
securities of such party or any such Affiliate are listed or traded; provided
that the first party shall notify the other party as promptly as practicable
(and, if possible, prior to making such disclosure) and shall use its reasonable
best efforts to limit the scope of such disclosure and seek confidential
treatment of the information to be disclosed; and (D) disclosures made by such
first party as shall be reasonably necessary in connection with obtaining the
HealthCore Required Consents or the Adatom Required Consents, as the case may
be.
(ii) PUBLICITY. Except as otherwise required by applicable law or
the rules or regulations of any securities exchange or automated quotation
system on which the securities of such party or any Affiliate of such party are
listed or traded, until the earlier of (A) the date on which this Agreement
ceases to be in effect or (B) the Closing Date, no party shall issue or cause
the publication of any press release or other public announcement with respect
to the transactions contemplated by this Agreement without the consent of the
other party and in any event each party agrees that it will give the other party
reasonable opportunity to review and comment upon any such release or
announcement prior to publication of the same.
(iii) ACCESS TO INFORMATION. Upon reasonable notice, each party
shall afford to the other party and its Agents, access, during normal business
hours during the period prior to the Closing Date, to all its properties, books,
Contracts, commitments and records and, during such period, each party shall
promptly furnish or otherwise make available to the other party (A) a copy of
each report, schedule, registration statement and other document filed or
received by any of them during such period pursuant to the requirements of
Federal and applicable state securities laws and (B) all other information
concerning its business, properties and personnel as the other party may
reasonably request.
(iv) SATISFACTION OF CONDITIONS. Subject to the terms and
conditions of this Agreement, each party hereto agrees to use its reasonable
best efforts, subject to their respective fiduciary duties, to cause the
conditions set forth in Article VII of this Agreement to be satisfied, and to
take, or cause to be taken, all action and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations to
consummate and make effective as promptly as practicable the transactions
contemplated by this Agreement, including cooperating fully with the other
party.
(v) INFORMATION SUPPLIED. Each of Adatom and HealthCore agree that
none of the information supplied or to be supplied by it for inclusion or
incorporation by reference in (a) the Registration Statement on Form S-4 to be
filed with the SEC by HealthCore in connection with the issuance of shares of
HealthCore Common Stock in the Merger (including the joint proxy statement and
prospectus (the "Prospectus/Proxy Statement") constituting a part thereof) (the
"S-4 Registration Statement") will, at the time the S-4 Registration Statement
becomes effective under the Securities Act, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, not misleading, and (b) the
Prospectus/Proxy Statement and any amendment or supplement thereto will, at the
date of mailing to stockholders and at the times of the meetings of
28
stockholders of Adatom and HealthCore to be held in connection with the Merger,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
(vi) STOCKHOLDER MEETINGS. Adatom will take, in accordance with
its articles of incorporation and bylaws, all action necessary to convene a
meeting of holders of Adatom Common Stock (the "Stockholders Meeting"), to be
held as promptly as practicable after the S-4 Registration Statement is declared
effective, to consider and vote upon the approval of the Merger, and shall take
all lawful action to solicit such approval. HealthCore will take, in accordance
with its certificate of incorporation and bylaws, all action necessary to
convene a meeting of holders of HealthCore Common Stock and HealthCore Class B
Common Stock (the "HealthCore Stockholders Meeting"), to be held as promptly as
practicable after the S-4 Registration Statement is declared effective, to
consider and vote upon the approval of the Merger and the transactions
contemplated thereby, including, without limitation, (A) the issuance of the
HealthCore Common Stock in the Merger, (B) the election to the Board of
Directors of those individuals described in Section 1.5 hereof, (C) the approval
of the termination of the Escrow Agreement in accordance with the terms of the
Termination Agreements, and (D) adoption of the Stock Option Plan, and
HealthCore's Board of Directors, subject to fiduciary obligations under
applicable law or as otherwise permitted under this Agreement, will recommend
the HealthCore Recommendation, will not withdraw or modify the HealthCore
Recommendation and will take all lawful action to solicit such approval.
(vii) FILINGS; OTHER ACTIONS; NOTIFICATION.
(A) Adatom and HealthCore shall promptly prepare and file
with the SEC the Prospectus/Proxy Statement, and HealthCore shall prepare and
file with the SEC the S-4 Registration Statement as promptly as practicable.
Adatom and HealthCore each shall use its reasonable best efforts to have the S-4
Registration Statement declared effective under the Securities Act as promptly
as practicable after such filing, and promptly thereafter mail the
Prospectus/Proxy Statement to the respective stockholders of each of Adatom and
HealthCore. HealthCore shall also use its reasonable best efforts to obtain
prior to the effective date of the S-4 Registration Statement all necessary
state securities law or "blue sky" permits and approvals required in connection
with the Merger and to consummate the other transactions contemplated by this
Agreement.
(B) Adatom and HealthCore each shall use all reasonable
efforts to cause to be delivered to the other party and its directors a letter
of its independent auditors, dated (i) the date on which the S-4 Registration
Statement shall become effective and (ii) the Closing Date, and addressed to the
other party and its directors, in form and substance customary for "comfort"
letters delivered by independent public accountants in connection with
registration statements similar to the S-4 Registration Statement.
29
(viii) ACCOUNTING AND TAXATION.
(A) Neither Adatom nor HealthCore shall nor shall they permit
either of their respective Affiliates to, take or cause to be taken any action,
whether before or after the Effective Time, that would disqualify the Merger as
a "reorganization" within the meaning of Section 368(a) of the Internal Revenue
Code of 1989, as amended (the "Code"). Each of Adatom and HealthCore agrees to
use its reasonable best efforts to cure any impediment to the qualification of
the Merger as a "reorganization" within the meaning of Section 368(a) of the
Code.
(B) Adatom shall instruct its accountants to deliver and
shall use its reasonable best efforts to cause such accountants to deliver to
HealthCore letters dated as of the Closing Date, addressed to HealthCore,
containing such matters as are customarily contained in auditors' letters
regarding information about Adatom included in the Proxy/Registration Statement,
which auditors' letters shall be in form and substance reasonably satisfactory
to HealthCore.
(C) All Returns required to be filed by or with respect to
each party (or any of them) after the date hereof and on or before the Effective
Time shall be prepared and timely filed, in a manner consistent with prior years
and applicable laws and regulations other than such Returns for which the
failure to file would not have a Material Adverse Effect with respect to such
party.
(ix) AFFILIATES. Attached hereto as Exhibit D is a list of names
and addresses of those Persons who may, in the opinion of Adatom (after
consultation with outside legal counsel), "Affiliates" of Adatom within the
meaning of Rule 145 under the Securities Act. Adatom shall exercise its best
efforts to deliver or cause to be delivered to HealthCore, prior to the
Effective Time, from each affiliate of Adatom identified in the foregoing list,
a letter in the form attached as Exhibit E (the "Adatom Affiliates Letter"). The
certificates representing HealthCore Common Stock received by such Affiliates
shall bear a customary legend regarding applicable Securities Act restrictions.
(x) OTHER ACTIONS. HealthCore and Adatom shall not take any action
that would or is reasonably likely to result in any of the representations and
warranties of HealthCore or Adatom, as the case may be, set forth in this
Agreement being untrue in any material respect as of the date made, or in any of
the conditions to the Closing set forth in Article VII of this Agreement not
being satisfied.
(xi) REGISTRATION RIGHTS AGREEMENTS. Simultaneously with the
Closing, the Surviving Corporation shall enter into a registration rights
agreement with each of Xxxxx and Xxxxxxxx (collectively, the "Registration
Rights Agreements") in form and substance reasonably satisfactory to Xxxxx and
Xxxxxxxx, as the case may be, and Adatom, and each of their respective counsel,
covering the shares of stock in the Surviving Corporation issued or issuable (A)
to Xxxxx (x) in connection that certain Letter Amendment, dated April 27, 1999,
between Polan and HealthCore, (y) upon the exercise (or conversion in accordance
with the provisions of the
30
Termination Agreement contemplated to be executed by Polan, as the case may be)
of warrants to purchase shares to HealthCore Common Stock heretofore issued to
Xxxxx, and (z) currently held in escrow in accordance with the terms of the
Escrow Agreement (the "Xxxxx Escrowed Shares"); and (B) Xxxxxxxx upon the
exercise of options to purchase shares of HealthCore Common Stock issued in
connection with the severance of Xxxxxxxx'x employment with HealthCore (the
aggregate shares described in clause (A) and (B) hereof being the "Registration
Shares"). The Registration Rights Agreement shall provide that (A) Xxxxx and
Xxxxxxxx shall have piggy-back registration rights for the Registration Shares
with respect to all registration statements filed by the Surviving Corporation
other than registration statements on Forms S-4 and S-8, it being acknowledged
and agreed that the Xxxxx Adatom Shares shall be registered on the S-4
Registration Statement, and (B) in the event a registration statement subject to
piggy-back registration as described in clause (A) above has not been declared
effective by the SEC with one hundred twenty (120) days following the Closing,
Xxxxx and Xxxxxxxx shall have the right to demand registration of such shares on
any appropriate form registration statement other than, and specifically
excluding, on a Form S-1 registration statement, pursuant to the terms of the
Registration Rights Agreements; provided, however, that with respect to the
Xxxxx Escrowed Shares, Polan shall only be permitted to demand such registration
thereof in accordance with clause (B) above in the event the Xxxxx Escrowed
Shares shall have been released from escrow prior to the registration of all of
the other Registration Shares allocable to Xxxxx. The Registration Rights
Agreement shall further provide that any and all registration statements on
which any or all of the Registration Shares are included shall be updated and
kept current for a minimum period of one (1) year following the date on which
such registration statement is declared effective by the SEC.
(xii) XXXXXX EMPLOYMENT AGREEMENT. Simultaneously with the
Closing, the Surviving Corporation shall enter into an employment agreement with
Xxxxxx on terms mutually agreeable to Xxxxxx and the Surviving Corporation,
including, without limitation, (A) an annual salary of Two Hundred Thousand
($200,000) Dollars, (B) an annual bonus equal to One Hundred Thousand ($100,000)
Dollars (which bonus shall be based upon certain goals set forth in the
Surviving Corporation's business plan), and (C) the use during the term of his
employment of a luxury automobile leased by the Surviving Corporation.
(xiii) ADVICE OF CHANGES; SEC DOCUMENTS. Each party shall confer
on a regular and frequent basis with the other, report on operational matters
and promptly advise the other orally and in writing of (A) any material notice
or other communication from any third party alleging that the consent of such
third party is or may be required in connection with the transactions
contemplated by this Agreement; (B) any material notice or other communication
from any regulatory authority or national securities exchange in connection with
the transactions contemplated by this Agreement; (C) any claims, actions,
proceedings or investigations commenced or, to the best of such party's
knowledge, threatened, involving or affecting such party, or any of its property
or assets, or, to the best of such party's knowledge, any employee, consultant,
director or officer, in his or her capacity as such, of such party, which, if
pending on the date hereof, would have been required to have been disclosed in a
HealthCore SEC Document or the Adatom Disclosure Schedule, as the case may be,
or which relates to the consummation of the Merger or the other transactions
contemplated by this Agreement; and (D) any change or event that would have a
Material Adverse Effect with respect to such party. Each
31
party shall promptly provide the other (or its counsel) copies of all filings
made by such party with any Governmental Entity in connection with this
Agreement and the transactions contemplated hereby.
(XIV) COMPLIANCE WITH LAWS. Each party agrees to conduct its
business in compliance with all applicable laws and regulations except where
failure to comply would not have a Material Adverse Effect on such party.
(XV) REGULATORY MATTERS. Each party agrees to promptly, and in any
event no later than ten business days after the date hereof, prepare and file
all applications, notices, consents and other documents necessary or advisable
to obtain the state regulatory approvals specified in the Adatom Disclosure
Schedule or the HealthCore Disclosure Schedule, as the case may be, promptly
file all supplements or amendments thereto and use all reasonable efforts to
obtain the regulatory approvals specified in the Adatom Disclosure Schedule or
the HealthCore Disclosure Schedule, as the case may be, as promptly as
practicable. Each party shall provide to the other party and its counsel (A) the
opportunity to review in advance and comment on all such filings with regulatory
authorities and rating agencies relating to this transaction and all written
communications with respect thereto a reasonable time prior to such filings or
written communications, (B) prompt notice of all contacts by such regulatory
authorities and rating agencies, and (C) with respect to any regulatory approval
or review required by any state, the right to approve any filings, written
communications and the substance of any oral communications and to participate
in any meetings. Each party will keep the other party informed of the status of
matters relating to obtaining the regulatory approvals specified in the Adatom
Disclosure Schedule and will promptly furnish such party with copies of all
written communications with respect thereto.
(b) NASDAQ LISTING AND TRADE SYMBOLS. HealthCore and Adatom shall use
their respective best efforts to cause the HealthCore Common Stock to be issued
in the Merger to be approved for listing on the NASDAQ Small Cap Market, subject
to official notice of issuance, prior to the Closing Date. HealthCore and Adatom
shall use their respective best efforts to maintain HealthCore's current NASDAQ
Small-Cap listing under its trading symbols "HMSI", "HMSIU", and "HMSIW".
(c) POST-CLOSING COVENANTS. Adatom hereby covenants and agrees
subsequent to the Closing of the Merger, the Surviving Corporation shall comply
with the following:
(i) SPECIAL MEETING OF SHAREHOLDERS. In the event two-thirds (2/3)
of the shareholders of HealthCore eligible to vote thereon fail to approve the
termination of the Escrow Agreement and the approval and adoption of the
Termination Agreements (as such terms are defined in Section 6.5 hereof) the
Board of Directors of the Surviving Corporation shall call a special meeting of
the shareholders as soon as reasonably practicable following the Closing Date,
and shall recommend that the shareholders of the Surviving Corporation vote in
favor of (A) the termination of the Escrow Agreement, and (B) the approval and
adoption of the Termination Agreement.
32
(ii) S-8 REGISTRATION. The Surviving Corporation shall use its
best efforts, but in no event later than thirty (30) days following the Closing,
to file with the SEC a registration statement on Form S-8 (or any successor or
other appropriate forms) to register all shares of the Surviving Corporation
eligible for registration thereunder, including, without limitation, and if
eligible to be placed on a Form S-8, the Xxxxx Shares, and the shares issued to
Xxxxxxxx upon his exercise of options to purchase such shares described
hereinabove.
6.4 COVENANTS OF XXXXX. In order to induce Adatom to execute and
deliver this Agreement, Xxxxx hereby irrevocably covenants and agrees that,
except as expressly contemplated or permitted by this Agreement, (i)
simultaneously with the Closing, Polan shall elect to convert all of the shares
of HealthCore Class B Common Stock held by him into HealthCore Common Stock in
accordance with the relevant provisions of HealthCore's Certificate of
Incorporation, (ii) Xxxxx shall vote all of the shares of stock in HealthCore
entitled to be voted on the Merger beneficially owned by him in favor of the
consummation of the Merger and the other transactions contemplated by this
Agreement (iii) from the execution of this Agreement and until the Closing Date
or earlier termination hereof, Xxxxx shall not sell or otherwise transfer more
than fifty thousand (50,000) shares of HealthCore Common Stock or HealthCore
Class B Common Stock.
6.5 COVENANTS OF THE ADATOM SHAREHOLDERS. In order to induce HealthCore
to execute and deliver this Agreement, each of the shareholders of Adatom
irrevocably covenants and agrees to vote the shares of stock in the Surviving
Corporation held thereby (i) in favor of the consummation of the Merger and the
other transactions contemplated by this Agreement, and (ii) in the event
two-thirds (2/3) of the shareholders of HealthCore entitled to vote thereon fail
to approve and adopt the Termination Agreements (as hereinafter defined), in
favor of terminating that certain Amended and Restated Escrow Agreement (the
"Escrow Agreement"), dated July 31, 1997, among HealthCore, American Stock
Transfer and Trust Company and the stockholders of HealthCore who have executed
the Escrow Agreement, in accordance with the terms of the Termination Agreements
(each a "Termination Agreement", and collectively, the "Termination
Agreements")) in substantially the form attached hereto as Exhibit F to be
executed by each of the holders of the shares of HealthCore Common Stock held in
escrow pursuant to the Escrow Agreement (such holders being the "Escrow
Shareholders").
ARTICLE VII
CONDITIONS PRECEDENT
7.1 CONDITIONS TO THE OBLIGATIONS OF ADATOM TO EFFECT THE MERGER. The
obligations of Adatom to consummate the transactions contemplated hereby are
subject to the satisfaction of the following conditions, the imposition of which
is solely for the benefit of Adatom and any one or more of which may be
expressly waived by Adatom, in its sole discretion, except as otherwise required
by law:
(a) ACCURACY OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties of HealthCore contained herein shall have been true and correct in
all material respects when made, and shall be true and correct in all material
respects at and as of the Closing Date as though made on and as of the Closing
Date (except to the extent that any such
33
representation and warranty had by its terms been made as of a specific date, in
which case such representation and warranty shall have been true and correct in
all material respects as of such specific date), other than inaccuracies in the
representations and warranties contained in Sections 5.2 (j), (k), (l), (o),
(p), (q) and/or (t), arising as a result of, or in connection with, HealthCore's
sale or liquidation of the HealthCore Business as contemplated by this
Agreement. Adatom shall have received a certificate dated the Closing Date
signed by an executive officer of HealthCore certifying to the fulfillment of
this condition.
(b) PERFORMANCE OF AGREEMENTS. HealthCore shall have performed in all
material respects all obligations and agreements and complied in all material
respects with all covenants and conditions contained in this Agreement to be
performed and complied with by it at or prior to the Closing Date. Adatom shall
have received a certificate dated the Closing Date signed by an executive
officer of HealthCore certifying to the fulfillment of this condition.
(c) NO MATERIAL ADVERSE CHANGE. Since the date hereof, except as
contemplated by this Agreement, no change or event shall have occurred which has
had or could reasonably be expected to have a Material Adverse Effect with
respect to HealthCore; it being understood that HealthCore shall sell or
liquidate the HealthCore Business in accordance with Section 6.2(b) of this
Agreement.
(d) SALE OR LIQUIDATION OF HEALTHCORE BUSINESS. HealthCore shall have
consummated the sale or liquidation, or have entered into a binding contract for
the sale (which contract shall be in a form reasonably satisfactory to Adatom),
of the HealthCore Business, and shall, in connection therewith, (i) have
terminated all of HealthCore's existing employment relationships with all of its
employees, including, but not limited to, its key executives, Xxxxx and
Xxxxxxxx, and (ii) terminate, cancel or assign all material contractual
commitments and other material obligations arising in connection with the
HealthCore Business.
(e) RESIGNATION OF OFFICERS AND DIRECTORS. Each officer and director of
HealthCore shall have tendered his or her resignation, or have been terminated
by HealthCore.
(f) MINIMUM CLOSING CASH AMOUNT. The Closing Cash Amount, as calculated
in accordance with the terms of Section 3.2(a) hereof, shall be no less than Two
Million ($2,000,000) Dollars.
(g) HEALTHCORE LOCK-UP AGREEMENTS. Xxxxx and Xxxxxxxx shall each have
executed a lock-up agreement in form and substance reasonably satisfactory to
Xxxxx and Xxxxxxxx, as the case may be, and Adatom, and each of their respective
counsel (collectively, the "HealthCore Lock-up Agreements") covering any and all
shares of HealthCore Common Stock owned directly by, or issuable (upon exercise
of options or warrants to purchase the same) to, (i) Xxxxx as of the Closing
Date (such shares being the "Xxxxx Shares"), and (ii) Xxxxxxxx in severance of
his employment relationship with HealthCore (the "Xxxxxxxx Shares"). The
HealthCore Lock-Up Agreements shall provide that the shares covered thereby
shall be subject to a six (6) month lock-up, prohibiting the sale, assignment or
transfer thereof during such six (6) month period; provided that,
notwithstanding the foregoing, Polan shall be permitted to transfer up to a
maximum of one hundred twenty-five thousand (125,000) Xxxxx Shares at any time
upon the expiration of two (2) months following the Closing Date.
34
(h) RECAPITALIZATION OF HEALTHCORE CAPITAL STRUCTURE. HealthCore shall
have recapitalized its capital structure such that the holders of shares of
HealthCore Class B Common Stock shall have converted the HealthCore Class B
Common Stock into shares of HealthCore Common Stock.. As a result of the
foregoing, immediately prior to the Closing the capitalization of HealthCore
shall consist of HealthCore Common Stock, the rights set forth in Section 5.2(b)
hereof or in Section 5.2(b) of the HealthCore Disclosure Schedule, and the Stock
Option Plan.
7.2 CONDITIONS TO THE OBLIGATIONS OF HEALTHCORE TO EFFECT THE MERGER.
The obligations of HealthCore under this Agreement to consummate the
transactions contemplated hereby are subject to the satisfaction of the
following conditions, the imposition of which is solely for the benefit of
HealthCore and any one or more of which may be expressly waived by HealthCore,
in its sole discretion, except as otherwise required by law:
(a) ACCURACY OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Adatom contained herein shall have been true and correct in all
material respects when made, and shall be true and correct in all material
respects at and as of the Closing Date as though made on and as of the Closing
Date (except to the extent that any such representation and warranty had by its
terms been made as of a specific date in which case such representation and
warranty shall have been true and correct as of such specific date). HealthCore
shall have received a certificate dated the Closing Date signed by an executive
officer of Adatom certifying to the fulfillment of this condition.
(b) PERFORMANCE OF AGREEMENTS. Adatom shall have performed in all
material respects all obligations and agreements and complied in all material
respects with all covenants and conditions contained in this Agreement or
otherwise contemplated hereby to be performed and complied with by it at or
prior to the Closing Date. HealthCore shall have received a certificate dated
the Closing Date signed by an executive officer of Adatom certifying to the
fulfillment of this condition.
(c) NO MATERIAL ADVERSE CHANGE. Since December 31, 1998, no change or
event shall have occurred which has had or could reasonably be expected to have
a Material Adverse Effect with respect to Adatom, other than losses sustained by
Adatom in connection with the operation of its business.
(d) ADATOM LOCK-UP AGREEMENT. Each of the Adatom shareholders shall
have executed the Adatom Lock-up Agreement covering the Adatom Newly Issued
Shares.
(e) FAIRNESS OPINION. HealthCore shall have received a fairness opinion
from an investment banking firm mutually agreeable to HealthCore and Adatom
rendering an opinion that the Merger is fair and reasonable from a financial
point of view to HealthCore's shareholders as of the date the Board of Directors
of HealthCore approves this Agreement and as of the date the HealthCore Proxy is
mailed to HealthCore's shareholders.
7.3 CONDITIONS TO THE OBLIGATIONS OF HEALTHCORE AND ADATOM TO EFFECT
THE MERGER. The respective obligations of each party to effect the Merger shall
be subject to the satisfaction prior to the Closing Date of the following
conditions:
35
(a) SHAREHOLDER APPROVAL. This Agreement, the Merger and the
transaction contemplated hereby and thereby, other than the termination of the
Escrow Agreement in accordance with the terms of the Termination Agreements,
shall have been approved and adopted by the affirmative vote of a majority of
the outstanding shares of HealthCore entitled to vote on the Merger, which
majority (i) shall not include the vote of the shares of the Common Stock of
HealthCore owned directly by Polan, and (ii) notwithstanding the foregoing,
shall include Xxxxx'x vote as proxy of the shares of the Common Stock of
HealthCore held by the Escrow Shareholders; the proxies to vote such shares
having been granted pursuant to the terms of the Exchange Agreements.
(b) APPRAISAL RIGHTS. The holders of no more than five (5%) percent of
the outstanding shares of HealthCore entitled to vote on the Merger shall have
exercised their appraisal rights under Section 262 of the DGCL.
(c) S-4 REGISTRATION STATEMENT. The S-4 Registration Statement shall
have become effective under the Securities Act. No stop order suspending the
effectiveness of the S-4 Registration Statement shall have been issued, and no
proceeding for that purpose shall have been initiated or threatened by the SEC.
(d) BLUE SKY LAWS. HealthCore shall have received all state securities
or "Blue Sky" permits and other authorizations necessary to issue the shares of
HealthCore Common Stock.
(e) NO INJUNCTIONS OR RESTRAINTS. No temporary restraining order,
preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition (an "Injunction")
restraining or preventing the consummation of the Merger or subjecting any party
or any of its Affiliates to substantial damages as a result of the consummation
of the Merger shall be in effect; provided, however, that the party invoking
this condition shall have used reasonable best efforts to have vacated such
Injunction.
(f) GOVERNMENTAL AND REGULATORY CONSENTS. All filings required to be
made prior to the Effective Time with, and all consents, approvals, permits and
authorizations required to be obtained prior to the Effective Time from,
Governmental Entities, including, without limitation, those set forth in the
Adatom Disclosure Schedule, in connection with the execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby by
Adatom will have been made or obtained (as the case may be).
ARTICLE VIII
SURVIVAL AND INDEMNIFICATION
8.1 SURVIVAL. All representations and warranties made in this Agreement
shall survive the delivery of this Agreement for a period of one (1) year
following the Closing Date. Notwithstanding the foregoing, any claim for
indemnification that is asserted by written notice as
36
provided in Section 8.4 within the survival period shall survive until resolved
pursuant to a final non-appealable judicial determination or otherwise.
8.2 INDEMNIFICATION OF HEALTHCORE. The Surviving Corporation shall
indemnify, defend and hold the HealthCore Former Shareholders from and against
any and all loss, damage, cost or expense, including reasonable attorneys' fees
and expenses (collectively, "Losses"), caused by any misrepresentation, breach
of warranty or failure to fulfill any covenant or agreement made by Adatom
contained herein (the aggregate monetary sum of such indemnification obligations
being the "Adatom Indemnification Amount").
8.3 INDEMNIFICATION OF ADATOM. The Surviving Corporation shall
indemnify, defend and hold harmless the Adatom Former Shareholders from and
against any and all Losses caused by any misrepresentation, breach of warranty
or failure to fulfill any covenant or agreement made by HealthCore contained
herein (the aggregate monetary sum of such indemnification obligations being the
"HealthCore Indemnification Amount").
8.4 BASKET; LIMITATION OF LIABILITY. The Surviving Corporation's
obligation to indemnify the Adatom Former Shareholders or the HealthCore Former
Shareholders, as the case may be, from and against any Losses shall not arise
unless and until the Adatom Former Shareholders or the HealthCore Former
Shareholders, as the case may be, shall have suffered aggregate Losses in excess
of One Hundred Thousand ($100,000) Dollars (the "Indemnification Threshold"). In
the event the Losses suffered by the Adatom Former Shareholders or the
HealthCore Former Shareholders, as the case may be, exceed the Indemnification
Threshold, the Surviving Corporation shall only be obligated to indemnify the
Adatom Former Shareholders or the HealthCore Former Shareholders, as the case
may be, from and against aggregate Losses in excess of the Indemnification
Threshold. In no event shall the Surviving Corporation's obligation to indemnify
the Adatom Former Shareholders and the HealthCore Former Shareholders exceed, in
each case, the aggregate sum of Five Hundred Thousand ($500,000) Dollars.
8.5 NET INDEMNIFICATION AMOUNT. Notwithstanding anything contained
herein to the contrary, the Surviving Corporation's indemnification obligations
hereunder shall, subject to the provisions of Section 8.4 hereof, be limited to
the difference (such difference being the "Net Indemnification Amount"), if any,
as at the Indemnification Adjustment Date, between the Surviving Corporation's
obligation to indemnify (i) the Adatom Former Shareholders pursuant to Section
8.2 hereof (the aggregate monetary sum of such indemnification obligations being
the "Adatom Indemnification Amount"), and (ii) the HealthCore Former
Shareholders pursuant to Section 8.2 hereof (the aggregate monetary sum of such
indemnification obligations being the "HealthCore Indemnification Amount"). The
Net Indemnification Shares shall be issuable, in accordance with the provisions
of Section 3.2(b) hereof, to (i) the Adatom Former Shareholders in the event the
Adatom Indemnification Amount is greater than the HealthCore Indemnification
Amount, or to (ii) the HealthCore Former Shareholders in the event the
HealthCore Indemnification Amount is greater than the Adatom Indemnification
Amount.
37
8.6 GENERAL PROVISIONS RELATED TO INDEMNIFICATION.
(a) The party entitled to indemnification shall take all reasonable
steps to mitigate all indemnifiable liabilities and damages upon and after
becoming aware of any event which reasonably could be expected to give rise to
any liabilities and damages that are indemnifiable hereunder. No party shall be
entitled to indemnification to the extent of any available insurance relating to
any indemnifiable claim.
(b) The party seeking indemnification shall give written notice to the
indemnifying party of the facts and circumstances giving rise to any claim for
indemnification as soon as reasonably possible but in any event within thirty
(30) days after obtaining knowledge of the basis for a claim for indemnification
hereunder. With respect to each third party claim subject to this Article 8 (a
"Third Party Claim"), the party seeking indemnification shall give prompt
written notice to the indemnifying party of the Third Party Claim.
ARTICLE IX
TERMINATION AND AMENDMENT
9.1 TERMINATION. This Agreement may be terminated and the Merger
contemplated hereby may be abandoned at any time prior to the Effective Time
whether before or after approval by the shareholders of Adatom and HealthCore:
(a) by mutual written consent of HealthCore and Adatom;
(b) by either HealthCore or Adatom if there has been a material breach
of any representation, warranty, covenant or agreement on the part of Adatom, on
the one hand, or HealthCore, on the other hand, as the case way be, set forth in
this Agreement which breach, if not a willful breach has not been cured within
ten (10) Business Days following receipt by the breaching party of written
notice of such breach;
(c) by either HealthCore or Adatom if the Merger shall not have been
consummated before the Termination Date (or such later date as may be agreed to
by HealthCore and Adatom); provided, however, that neither party may terminate
this Agreement under this Section 9.1(c) if the failure has been caused by such
party's material breach of this Agreement;
(d) by either HealthCore or Adatom if this Agreement shall fail to
receive the requisite vote for approval and adoption by the shareholders of
HealthCore at the HealthCore Shareholders' Meeting;
(e) by either HealthCore or Adatom if (i) the Board of Directors of
HealthCore shall have recommended to the shareholders of HealthCore a Qualified
Transaction Proposal; (ii) a tender offer (not including a self-tender offer) or
exchange offer for shares of capital stock of HealthCore, which would result in
the beneficial ownership by any Person or any "group" (as defined in Section
13(d) of the Exchange Act and the rules and regulations promulgated thereunder)
of more than 25% of the outstanding shares of any class of capital stock of
HealthCore, is commenced, and the Board of Directors of HealthCore recommends
that the shareholders of HealthCore tender their shares in such tender or
exchange offer; or (iii) any Person shall have acquired beneficial ownership or
the right to acquire beneficial ownership of,
38
or any "group" shall have been formed which beneficially owns, or has the right
to acquire "beneficial ownership" of, more than 25% of the then outstanding
shares of any class of capital stock of HealthCore; or
(f) by HealthCore or Adatom if a court of competent jurisdiction or
other Governmental Entity shall have issued an order, decree or ruling or taken
any other action restraining, enjoining or otherwise prohibiting the
consummation of the Merger and such order, decree, ruling or other action shall
have become final and nonappealable.
9.2 EFFECT OF TERMINATION. In the event this Agreement is terminated
and the Merger abandoned pursuant to Section 9.1, all further obligations of the
parties hereunder shall terminate except that the obligations set forth in
Sections 6.3(a)(i) and this Section 9.2 shall survive, the Note shall become due
and payable in accordance with the terms thereof; provided that, if this
Agreement is so terminated by a party because one or more of the conditions to
such party's obligations hereunder is not satisfied as a result of the other
party's willful or knowing failure to comply with its obligations under this
Agreement, the terminating party's right to pursue all legal remedies for breach
of contract or otherwise, including, without limitation, damages relating
thereto, shall also survive such termination unimpaired.
ARTICLE X
GENERAL PROVISIONS
10.1 CERTAIN DEFINITIONS. As used in this Agreement, the following
terms shall have the meanings set forth in this Section 10.1:
(a) "Affiliate" means, with respect to any Person, any other Person
that, directly or indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with, such first Person.
(b) "Agent" means, with respect to any Person, such Person's officers,
directors, employees, attorneys, accountants, investment bankers, financial
advisors or other representatives or agents.
(c) "Business Day" means any day other than a day on which (i) banks in
the State of New York are authorized or obligated to be closed or (ii) the
NASDAQ National Market is closed.
(d) "Debt" of any Person means, without duplication, (i) all
indebtedness of such Person for borrowed money (whether on-balance sheet or
off-balance sheet); (ii) all obligations of such Person evidenced by notes,
bonds, debentures or other similar instruments; (iii) all obligations of such
Person as lessees under leases that have been or should be, in accordance with
GAAP, recorded as capital leases; (iv) all obligations, contingent or otherwise,
of such Person under banker's acceptance, letter of credit or similar
facilities; (v) all Debt of others referred to in clauses (i) through (iv) above
guaranteed directly or indirectly in any manner by such Person; and (vi) all
Debt of others referred to in clauses (i) through (v) above secured by (or for
which the holder of such Debt has an existing right, contingent or otherwise, to
be secured
39
by) any Lien on property (including, without limitation, accounts and contract
rights) owned by such Person, even though such Person has not assumed or become
liable for the payment of such Debt.
(e) "Governmental Entity" and "Governmental Entities" shall mean any
foreign, federal, state, municipal or other governmental or regulatory
department, commission, board, bureau, agency or instrumentality.
(f) "Material Adverse Effect" means, with respect to any Person, any
change or effect that is or is reasonably likely to be materially adverse to the
business, assets, properties, operations or condition (financial or otherwise)
of such Person taken as a whole or adversely affects the ability of such Person
to consummate the transactions contemplated by this Agreement in any material
respect. For the purposes of this Agreement, where "Material" can be expressed
as a monetary sum, any sum in excess of One Hundred Twenty-Five Thousand
$125,000 Dollars shall be deemed to "Material".
(g) "Person" means any individual, corporation, partnership, firm,
group (as such term is used in Section 13(d)(3) of the Exchange Act), joint
venture, association, trust, limited liability company, unincorporated
organization, estate, trust or other entity.
(h) "SEC" means the Securities and Exchange Commission.
(i) "Subsidiary"' of any Person means any corporation, partnership,
joint venture or other legal entity of which such Person (either directly or
through or together with any other Subsidiary of such Person), owns, directly or
indirectly, 50% or more of the stock or other equity interests the holders of
which are generally entitled to vote for the election of the board of directors
or similar governing body of such corporation, partnership, joint venture or
other legal entity.
(j) "Termination Date" shall mean September 30, 1999.
10.2 NOTICES. All notices and other communications hereunder shall be
in writing and shall be deemed given when delivered personally, upon a receipt
of a transmittal confirmation if sent by facsimile or like transmission, and on
the next Business Day when sent by Federal Express, Express Mail or similar
overnight courier service to the parties at the following addresses or facsimile
numbers (or at such other address or facsimile number for a party as shall be
specified by like notice):
If to HealthCore:
HealthCore Medical Solutions, Inc.
000 Xxxxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attn: Xx. Xxxx Xxxxx, Chief Executive Officer
Facsimile: (000) 000-0000
40
with a copy to:
HealthCore Medical Solutions, Inc.
00000 Xxxx Xxxxx Xxx.
Xxxxxxxxx, XX 00000
Facsimile: (000) 000-0000
Attn: Xxxxx X. Xxxxxxxx, President
and to:
Xxxxxxx Xxxxxx & Green, P.C.
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Attn: Xxxx X. Xxxxxx, Esq.
Facsimile: (000) 000-0000
If to Adatom:
Adatom, Inc.
000 Xxxxxxxx Xxxxx, Xxxxx 000
Xxxxxxxxx, Xx 00000
Attn: Mr. Xxxxxxx Xxxxxx, President
Facsimile: (000) 000-0000
with a copy to:
McCutchen, Doyle, Xxxxx & Enersen, LLP
Three Embarcadero Center
Xxx Xxxxxxxxx, XX 00000
Attention: Xxxx Xxxxx, Esq.
Facsimile: (000) 000-0000
10.3 INTERPRETATION. When a reference is made in this Agreement to
Sections, such reference shall be to a Section of this Agreement unless
otherwise indicated. The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. Whenever the words "include,"
"includes" or "including" are used in this Agreement, they shall be deemed to be
followed by the words "without limitation." The phrase "made available" in this
Agreement shall mean that the information referred to has been made available if
requested by the party to whom such information is to be made available. Dollar
amounts referred to in this Agreement shall not be deemed to establish any
standard of materiality.
10.4 WAIVERS AND AMENDMENTS. This Agreement may be amended, superseded,
canceled, renewed or extended, and the terms hereof may be waived, only by
written instruments signed by the parties to this Agreement, or in the case of a
waiver, by the party waiving compliance. Except where a specific period for
action or inaction in provided herein, no delay
41
on the part of a party in exercising any right, power or privilege hereunder
shall operate as a waiver thereof. Neither any waiver on the part of a party of
any such right, power or privilege, nor any single or partial exercise of any
such right, power or privilege, shall preclude any further exercise thereof or
the exercise of any other such right, power or privilege.
10.5 EXPENSES AND OTHER PAYMENTS.
(a) Any brokers fees and/or commissions payable in connection with the
Merger shall be paid immediately following the Closing by the Surviving
Corporation, other than any required equity payments to the Brokers which shall
be includable in the number of shares of Adatom Common Stock outstanding prior
to the Closing as provided in Section 3.1(b) hereof, which equity payments shall
be included within the aggregate number of shares of HealthCore Common Stock
received by the Adatom shareholders in accordance with the provisions of
Articles II and III hereof. The out-of-pocket expenses (including, without
limitation, professionals' fees and expenses and investment banking fees and
expenses and fees and expenses relating to the fairness opinion referred to
herein) incurred by each party in connection with the Merger and the
transactions contemplated thereby (collectively, the "Transaction Expenses")
shall be deemed to be a liability of, and shall be paid by, the Surviving
Corporation following the Closing; it being understood that the aggregate sum of
any and all reasonable Transaction Expenses paid by HealthCore prior to the
Closing shall be deemed to be included in the Closing Cash Amount. In the event
the Merger is not consummated other than by reason of a termination pursuant to
Section 9.1(b) hereof, each party shall bear that portion of the Transaction
Expenses incurred by it in connection with the Merger and the transactions
contemplated thereby and hereby. In the event this Agreement is terminated (i)
by HealthCore pursuant to Section 9.1(b), Adatom shall reimburse HealthCore for
all of HealthCore's Transaction Expenses, including, without limitation, all of
its reasonable legal, accounting and investment banking fees and expenses
relating to the Merger, or (ii) by Adatom pursuant to Section 9.1(b), HealthCore
shall reimburse Adatom for all of Adatom's Transaction Expenses, including,
without limitation, all of its reasonable legal, accounting and investment
banking fees and expenses relating to the Merger (other than fees, if any,
payable to the Brokers).
(b) Any payment required to be made pursuant to Section 10.5(a) shall
be made an promptly as practicable but not later than ten (10) Business Days
after termination of this Agreement and shall be made by wire transfer of
immediately available funds to an account designated by the party entitled to
receipt of such payment.
10.6 ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by either of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other party. Subject to the preceding sentence, this Agreement
will be binding upon, inure to the benefit of and be enforceable by the parties
and their respective successors and assigns.
42
10.7 ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES. This Agreement
(including the documents and the instruments referred to herein) (a) constitutes
the entire agreement and supersedes all prior agreements and understandings,
both written and oral, between the parties with respect to the subject matter
hereof and (b) is not intended to confer upon any person other than the parties
hereto any rights or remedies hereunder.
10.8 GOVERNING LAW. This Agreement shall be governed and construed in
accordance with the laws of the State of New York applicable to agreements made
and to be performed entirely within such state.
10.9 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be an original and all of which, when taken
together, shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by their respective officers thereunto duly authorized as of the date
first above written.
HEALTHCORE MEDICAL SOLUTIONS, INC.
/s/ Xxxx X. Xxxxx
By: ______________________________________
Name: Xxxx X. Xxxxx
Title: Chairman and CEO
ADATOM, INC.
/s/ Xxxxxxx Xxxxxx
By: ______________________________________
Name: Xxxxxxx Xxxxxx
Title: President
ACCEPTED AND AGREED WITH RESPECT TO SECTION 6.4
HEREOF ONLY:
/s/ Xxxx X. Xxxxx
-----------------------------------------------
Xxxx X. Xxxxx
43
ACCEPTED AND AGREED WITH RESPECT TO SECTION 6.5
HEREOF ONLY:
/s/ Xxxxxxx Xxxxxx
-----------------------------------------------
Xxxxxxx Xxxxxx
/s/ Xxxxx-Chich Xxxx
-----------------------------------------------
Xxxxx-Chich Chen
/s/ Xxxxxxx Xxxxxxxxxxx
-----------------------------------------------
Xxxxxxx Xxxxxxxxxxx
-----------------------------------------------
Xxxxx Xxxxxxx
44
