<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 2, 1999
REGISTRATION NO. 333-73059
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 2
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
MEDICONSULT.COM, INC.
(Exact name of Registrant as specified in its Charter)
<TABLE>
<S> <C> <C>
DELAWARE 7375 84-1341886
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer Identification
incorporation or organization) Classification Code Number) Number)
</TABLE>
------------------------
33 REID STREET, 4(TH) FLOOR, HAMILTON HM 12, BERMUDA, (441) 296-0736
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
------------------------------
MR. ROBERT A. JENNINGS
CHIEF EXECUTIVE OFFICER
MEDICONSULT.COM, INC.
33 REID STREET, 4(TH) FLOOR
HAMILTON HM 12, BERMUDA
(441) 292-0474
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------------
COPIES TO:
<TABLE>
<S> <C>
LAWRENCE M. BELL, ESQ. ELLEN B. CORENSWET, ESQ.
GOLENBOCK, EISEMAN, ASSOR & BELL KENNETH MCVAY, ESQ.
437 MADISON AVENUE BROBECK, PHLEGER & HARRISON LLP
NEW YORK, NEW YORK 10022 1633 BROADWAY, 47(TH) FLOOR
(212) 907-7300 NEW YORK, NEW YORK 10019
(212) 581-1600
</TABLE>
------------------------
Approximate Date of Commencement of Proposed Sale to the Public: As soon as
practicable after this registration statement becomes effective.
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act,
check the following box. / /
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration number of the earlier effective
registration statement for the same offering. / /
If this form is a post-effective amendment filed pursuant to Rule 462 (c)
under the Securities Act, please check the following box and list the Securities
Act registration number of the earlier effective registration statement for the
same offering. / /
If this form is a post-effective amendment filed pursuant to Rule 462 (d)
under the Securities Act, please check the following box and list the Securities
Act registration number of the earlier effective registration statement for the
same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
------------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
TITLE OF EACH CLASS OF PROPOSED MAXIMUM AMOUNT OF
SECURITIES TO BE AGGREGATE OFFERING REGISTRATION
REGISTERED PRICE (1)(2) FEE (3)
<S> <C> <C>
Common stock............................................................................ $78,750,000 $21,893
</TABLE>
(1) Includes shares that the Underwriters have the option to purchase to cover
over-allotments, if any.
(2) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(o) of the Securities Act, as amended.
(3) Includes $20,381 previously paid.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SUCH SECTION 8(A), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THESE
SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME
THIS PROSPECTUS IS DELIVERED IN FINAL FORM. THIS PROSPECTUS IS NOT AN OFFER TO
SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES
IN ANY JURISDICTION WHERE THE OFFER OR SALE IS NOT PERMITTED.
<PAGE>
SUBJECT TO COMPLETION, DATED APRIL 2, 1999
PROSPECTUS
5,000,000 SHARES
[LOGO]
MEDICONSULT.COM, INC.
COMMON STOCK
------------------
Mediconsult.com, Inc. is a leading provider of patient-oriented healthcare
information and services on the World Wide Web. Our Web sites provide a trusted
source of comprehensive and easy to understand medical information and are
designed to empower consumers through increased education regarding medical
conditions and treatment alternatives.
We are offering and selling 4,425,000 shares of common stock and the Selling
Stockholders are offering and selling 575,000 shares of common stock. We will
not receive any of the proceeds from the sale of our common stock by the Selling
Stockholders. Our shares are listed for trading on the OTC Bulletin Board under
the symbol "MCNS." On March 11, 1999, the last sale price of our common stock on
the OTC Bulletin Board was $12.75. Our Common Stock has been approved for
quotation, subject to notice of issuance, on the Nasdaq National Market under
the symbol "MCNS."
------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 6 FOR A DISCUSSION OF CERTAIN FACTORS
THAT YOU SHOULD CONSIDER BEFORE YOU INVEST IN THE COMMON STOCK BEING SOLD
PURSUANT TO THIS PROSPECTUS.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER REGULATORY BODY
HAS APPROVED OR DISAPPROVED THESE SECURITIES OR PASSED UPON THE ADEQUACY OR
ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
<TABLE>
<CAPTION>
PER SHARE TOTAL
<S> <C> <C>
Public Price............................................................ $ $
Underwriting Discount...................................................
Proceeds to Mediconsult.................................................
Proceeds to the Selling Stockholders....................................
</TABLE>
The underwriters may purchase up to an additional 375,000 shares of common
stock from us and, if all such additional shares are purchased, up to 375,000
shares from the Selling Stockholders, at the public offering price less
underwriting discount to cover over-allotments.
The underwriters are severally underwriting the shares being offered. The
underwriters are offering the shares when, as and if delivered to and accepted
by them, subject to various prior conditions, including their right to reject
orders in whole or in part. The underwriters expect to deliver the shares
against payment in New York, New York on , 1999.
ING BARING FURMAN SELZ LLC VOLPE BROWN WHELAN & COMPANY
-----------------
THIS PROSPECTUS IS DATED , 1999.
<PAGE>
PROSPECTUS SUMMARY
THIS SUMMARY HIGHLIGHTS CERTAIN INFORMATION CONTAINED ELSEWHERE IN THIS
PROSPECTUS. YOU SHOULD READ THE ENTIRE PROSPECTUS CAREFULLY, ESPECIALLY THE
RISKS OF INVESTING IN OUR COMMON STOCK DISCUSSED UNDER "RISK FACTORS." EXCEPT AS
OTHERWISE NOTED, ALL INFORMATION IN THIS PROSPECTUS ASSUMES NO EXERCISE OF THE
UNDERWRITERS' OVER-ALLOTMENT OPTION AND GIVES EFFECT TO THE CONVERSION OF ALL
OUTSTANDING SHARES OF PREFERRED STOCK UPON CONSUMMATION OF THIS OFFERING. UNLESS
OTHERWISE NOTED, REFERENCES IN THIS PROSPECTUS TO "MEDICONSULT," "WE," "OUR" AND
"US" REFER TO MEDICONSULT.COM, INC., A DELAWARE CORPORATION, AND ITS
SUBSIDIARIES.
OUR BUSINESS
Mediconsult is a leading provider of patient-oriented healthcare information
and services on the World Wide Web. Our Web sites provide a trusted source of
comprehensive and easy to understand medical information and are designed to
empower consumers through increased education related to medical conditions and
treatment alternatives. Our Web sites also provide a destination on the Internet
where visitors can interact with others in a community environment. We
facilitate this environment through a well-organized, easy to navigate format
and an array of complementary services, including moderated on-line support
groups and discussion forums. By fostering communities centered around prevalent
medical conditions and health issues, we believe we create significant
opportunities for pharmaceutical and other healthcare companies to reach a
highly targeted consumer audience using Internet-based marketing and advertising
programs.
OUR WEB SITES
Since our inception in 1996, we have focused on becoming the leading
independent provider of medical information to consumers on the World Wide Web.
Our main Web site, MEDICONSULT.COM, includes comprehensive information on more
than 60 chronic medical conditions and health issues. We believe that in the
United States the chronic medical conditions covered on this Web site affect
more than 90 million people and represent a significant portion of healthcare
spending. We estimate that 62% of the visitors to MEDICONSULT.COM have been
diagnosed with or believe they have a chronic medical condition and that an
additional 21% are friends, family or caregivers. Our Web sites are intended to
educate patients on particular medical conditions, increase their awareness of
treatment options, describe the benefits of various treatments and generally
increase compliance with treatment protocols. Topics of greatest interest on
MEDICONSULT.COM include arthritis, asthma, attention deficit disorder, breast
cancer, depression, diabetes, eating disorders, fitness, heart disease,
hypertension, prostate cancer and smoking cessation. For most topics, visitors
can access a variety of resources, including:
- comprehensive and easy to understand medical information from a variety of
independent sources;
- a community of visitors with an interest or experience in the topic;
- an on-line moderated support group;
- our MediXpert service, which provides customized on-line medical reports
from medical specialists; and
- a selection of recommended books and other healthcare products for
purchase on-line.
1
<PAGE>
To improve the depth and breadth of our medical content and to increase
visitor traffic, we have recently completed strategic initiatives to purchase,
manage or sponsor the following Web sites:
- PHARMINFO.COM, a leading Web site providing information on pharmaceutical
products and clinical trials for pharmacists, physicians and consumers;
- CYBERDIET.COM, a Web site providing tailored nutritional information and
programs; and
- INCIID.ORG, a Web site providing information on infertility.
We also seek to increase our visitor traffic by licensing our content to,
and supporting Web sites established by, healthcare organizations and other
third parties. We believe that our Web sites collectively represent one of the
most highly trafficked consumer healthcare information sites on the Internet. In
January 1999 (on a pro forma basis as if acquired, managed or sponsored on the
first day of the month), our owned, managed and sponsored Web sites had more
than 1.3 million visitors viewing over 9.2 million pages of information.
MEDICONSULT.COM has received "best of web" awards from over 30 independent
organizations, including ENCYCLOPAEDIA BRITANNICA and POPULAR SCIENCE, and was
nominated for a "Webby" award in January 1999 by the International Academy of
Digital Arts and Sciences.
THE INTERNET HEALTHCARE USER
The Internet provides an effective method for consumers to access large
quantities of reliable and independent information on medical conditions,
treatments and potential outcomes. We believe that access to this information,
together with support groups and interaction with medical experts on-line, leads
to a greater understanding of health issues and improved patient compliance with
treatment protocols. Cyber Dialogue estimates that, for the 12 months ended July
1998, approximately 17 million adults in the United States searched on-line for
health-related information. Cyber Dialogue data indicates that these users are
better educated, have higher household incomes, are more often female and are
more experienced with the Internet than the general population of Internet
users. The demographics of the Internet healthcare user, combined with the
Internet's interactive nature, make the Internet an attractive medium for
targeted healthcare marketing and advertising programs.
CLIENT SERVICES
Our main source of revenue is through the development and implementation of
on-line marketing and advertising programs for pharmaceutical and other
healthcare companies. Due to recent regulatory changes regarding the type of
information that may be disclosed to consumers in pharmaceutical advertising and
increased demand for healthcare information by consumers, direct-to-consumer
(DTC) advertising of prescription pharmaceuticals has increased from $590
million in 1996 to an estimated $1.8 billion in 1998 and is projected to grow to
$7.5 billion in 2005. We believe that the Internet will capture an increasing
portion of this market as pharmaceutical companies recognize the value of this
medium for their products. We structure our programs to provide our clients with
a measurable return on investment by tracking the level of interest and
interactive responses of visitors. Our marketing programs use a broad range of
on-line strategies and resources to deliver a message consistent with our
clients' global marketing strategies, including one or more of the following:
- banner advertisements, visitor polls and surveys, and live events, to
build brand awareness;
- condition-specific content to educate the targeted visitor group;
- calls to action and other visitor interactions, such as requests for
product samples;
- design and development of customized Web sites focused on a particular
product, treatment or medical condition;
- development of product positioning strategies and initiation of on-line
program launches; and
- Web site management and support and visitor services.
2
<PAGE>
We are working with a number of pharmaceutical and other healthcare
companies to develop marketing and advertising programs. In June 1998, we
launched a comprehensive on-line program for the Habitrol smoking cessation
product of Novartis Consumer Health Canada. We are also developing programs for
a number of branded pharmaceutical products of Novartis Pharma, the worldwide
pharmaceutical division of Novartis. In addition, we have completed assessment
programs for Bristol Myers Squibb, Glaxo Wellcome and Astra Merck.
To broaden our marketing initiatives with the pharmaceutical industry, in
February 1999, we entered into a memorandum agreement to form a joint venture
with CommonHealth, the leading healthcare advertising firm worldwide and an
affiliate of Ogilvy & Mather and J. Walter Thompson. The joint venture is being
formed to offer innovative multimedia solutions to pharmaceutical and other
healthcare companies, based on our Internet expertise and CommonHealth's
experience in traditional media. Also, in order to enhance our content licensing
initiatives and generate additional revenue, we have entered into marketing
alliances with a number of organizations, including the healthcare division of
IBM, GeoAccess, a software development company focused on managed care
organizations, and the Ontario Hospital Association, an association of
approximately 185 not-for-profit hospitals.
OUR STRATEGY
Our strategy is to be the leading provider of healthcare information to
consumers on the Internet and to use this position to provide targeted marketing
and advertising programs for pharmaceutical and other healthcare companies. The
key elements of this strategy are to:
- enhance visitor experience and sense of on-line community;
- increase targeted traffic through strategic acquisitions and
relationships, and content licensing;
- broaden relationships with pharmaceutical advertisers; and
- build strong brand awareness.
RECENT DEVELOPMENTS
On February 26, 1999, we sold in a private placement an aggregate of 506,329
shares of our newly designated voting senior preferred stock and warrants
exercisable for five years to purchase 224,000 shares of the senior preferred
stock to Nazem & Company IV, L.P., Transatlantic Venture Fund C.V. (a joint
venture of Nazem & Company and Banque Nationale de Paris) and other individual
investors, for an aggregate of $3.2 million. The purchase price was, and the
conversion price of the senior preferred stock and exercise price of the
warrants is, $6.32 per share, an amount equal to 85% of the average bid and ask
price of our shares on the OTC Bulletin Board for the relevant 30-day period
preceding the closing of the private placement. The shares of senior preferred
stock are convertible at any time at the option of the holder into an equal
number of shares of common stock, subject to adjustment, and will be
automatically converted into an equal number of shares of common stock upon the
closing of this offering. If we offer our common stock to the public in this
offering at a price below $6.32 per share, the conversion price of the senior
preferred stock and the exercise price of the warrants will be lowered to a
price equal to 85% of the price to the public in this offering.
3
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Common stock offered by Mediconsult.......... 4,425,000 shares
Common stock offered by the Selling
Stockholders............................... 575,000 shares
Common stock to be outstanding after this
offering(1)(2)............................. 27,124,278 shares
Use of proceeds.............................. We intend to use the net proceeds of this
offering for working capital and other
general corporate purposes, and repayment of
stockholder advances of $0.5 million. See
"Use of Proceeds."
OTC Bulletin Board symbol.................... MCNS
</TABLE>
- ------------------------------
(1) Based on shares outstanding as of December 31, 1998 and 18,000 shares issued
for options exercised subsequent to December 31, 1998 and assumes the
automatic conversion upon the consummation of this offering of (a) all
outstanding junior preferred stock into 3,583,333 shares of common stock,
(b) the 8% payable in kind dividend which has accrued on the junior
preferred stock through December 31, 1998 into 71,666 shares of common
stock, but does not include shares accruing thereafter, and (c) all
outstanding senior preferred stock into 506,329 shares of common stock.
(2) Excludes (a) shares that the underwriters have the option to purchase to
cover over-allotments, if any; (b) an aggregate of 2,000,000 shares of
common stock issuable upon the exercise of currently exercisable options
with an exercise price of $0.003 per share; (c) 400,000 shares of common
stock issuable upon the exercise of warrants, with an exercise price of
$1.22 per share; (d) 224,000 shares of common stock issuable upon the
exercise of warrants, with an exercise price of $6.32 per share; and (e)
862,950 shares of common stock reserved for issuance under the 1996 Stock
Option Plan as of December 31, 1998, of which options to purchase 716,000
shares were outstanding at that date with a weighted average exercise price
of $1.38 per share.
4
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA
(in thousands, except per share data)
The following summary consolidated financial data should be read in
conjunction with the consolidated financial statements and notes thereto,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Unaudited Pro Forma Consolidated Financial Information"
included elsewhere in this prospectus. The statement of operations data for the
years ended December 31, 1996, 1997 and 1998 and the balance sheet data as of
December 31, 1998 are derived from our audited financial statements, and are
included elsewhere in this prospectus. The historical results are not
necessarily indicative of future results. The following table also sets forth
summary pro forma financial and other data of Mediconsult on a consolidated
basis for the fiscal year ended December 31, 1998, after giving affect to the
acquisition of CyberDiet, Inc., which is subject to an option held by
Mediconsult that we expect to exercise. The summary consolidated pro forma data
for the year ended December 31, 1998 are derived from the "Unaudited Pro Forma
Consolidated Financial Information," giving effect to the events described
therein, included elsewhere in this prospectus. The pro forma financial data are
not necessarily indicative of operating results or financial position that would
have been achieved had these events been consummated on the dates indicated and
should not be construed as representative of future operating results or
financial position.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------
PRO FORMA
CONSOLIDATED
STATEMENT OF OPERATIONS DATA: 1996 1997 1998 1998(1)(2)
--------- --------- --------- -------------
<S> <C> <C> <C> <C>
Revenues................................................................ $ -- $ 256 $ 1,031 $ 1,070
Operating expenses:
Product and content development....................................... -- 766 1,316 1,381
Marketing, sales and client services.................................. 436 1,130 1,812 1,813
General and administrative............................................ 404 792 1,013 1,027
Depreciation and amortization......................................... -- 133 170 1,076
Fair value of options granted to employees............................ -- 40 275 275
Fair value of options and warrants granted to consultants............. -- -- 1,354 2,448
--------- --------- --------- -------------
Total operating expenses............................................ 839 2,861 5,940 8,020
--------- --------- --------- -------------
Loss from operations.................................................... (839) (2,605) (4,909) (6,950)
Interest income (expense), net.......................................... (23) (20) -- (4)
--------- --------- --------- -------------
Net loss................................................................ $ (862) $ (2,625) $ (4,909) $ (6,954)
--------- --------- --------- -------------
--------- --------- --------- -------------
Basic and diluted net loss per share.................................... $ (0.08) $ (0.16) $ (0.27) $ (0.38)
Shares used to compute basic and diluted net loss per share............. 11,138 16,730 17,911 18,311
Pro forma basic and diluted net loss per share (2)...................... $ (0.27) $ (0.38)
Shares used to compute pro forma basic and diluted net loss per share
(2)................................................................... 17,911 18,311
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1998
-----------------------------------------------------
<S> <C> <C> <C>
PRO FORMA
PRO FORMA AS
BALANCE SHEET DATA: ACTUAL CONSOLIDATED(1)(2) ADJUSTED(1)(2)(3)
----------- ------------------- -------------------
Cash............................................................. $ 135 $ 3,305 $ 54,736
Working capital.................................................. (593) 2,524 54,468
Total assets..................................................... 1,142 7,036 58,467
Stockholders' equity............................................. 278 6,113 58,057
</TABLE>
- ------------------------------
(1) See "Unaudited Pro Forma Consolidated Financial Information" and related
notes thereto.
(2) Assumes the automatic conversion upon the consummation of this offering of
(a) all outstanding junior preferred stock into 3,583,333 shares of common
stock, (b) the 8% payable in kind dividend which has accrued on the junior
preferred stock through December 31, 1998 into 71,666 shares of common
stock, but does not include shares accruing thereafter, and (c) all
outstanding senior preferred stock into 506,329 shares of common stock. As
these conversions are anti-dilutive, pro forma basic and diluted net loss
per share equals basic and diluted net loss per share.
(3) As adjusted to reflect the sale of 4,425,000 shares of common stock offered
hereby at an assumed public offering price of $12.75 per share and the
receipt and application of the estimated net proceeds therefrom.
5
<PAGE>
RISK FACTORS
THIS OFFERING INVOLVES A HIGH DEGREE OF RISK. YOU SHOULD CAREFULLY CONSIDER
THE RISKS DESCRIBED BELOW AND THE OTHER INFORMATION IN THIS PROSPECTUS BEFORE
DECIDING TO INVEST IN SHARES OF OUR COMMON STOCK. IF ANY OF THE FOLLOWING RISKS
ACTUALLY OCCUR, OUR BUSINESS, FINANCIAL CONDITION AND RESULTS OF OPERATIONS
WOULD LIKELY SUFFER. IN SUCH CASE, THE MARKET PRICE OF OUR COMMON STOCK COULD
DECLINE, AND YOU MAY LOSE ALL OR A PART OF THE MONEY YOU PAY TO BUY OUR COMMON
STOCK.
WE HAVE ONLY BEEN IN BUSINESS FOR A SHORT PERIOD OF TIME, SO YOUR BASIS FOR
EVALUATING US IS LIMITED.
We began operations in April 1996 when we launched a limited, initial Web
site. We launched a more extensive Web site in September 1996. As a result,
there is a limited history of operations for evaluating our business. You must
consider the risks and difficulties frequently encountered by early stage
companies in new and rapidly evolving markets, including the Internet market and
the direct-to-consumer advertising market. Some of these risks and uncertainties
relate to our ability to:
- design, develop and implement effective marketing and advertising programs
for existing clients and new clients;
- maintain and expand our relationship with Novartis;
- attract additional pharmaceutical and other healthcare advertisers in
order to generate significant revenue;
- build our organizational and technical infrastructures to manage our
growth effectively;
- maintain our current strategic relationships and develop new ones;
- respond effectively to actions taken by our competitors;
- attract a larger audience to our Web sites;
- increase awareness of our brand and continue to develop visitor loyalty;
- integrate acquired and managed businesses, technologies and services; and
- attract, retain and motivate qualified personnel.
If we are unsuccessful in addressing these risks and uncertainties, our
business, financial condition and results of operations will be materially and
adversely affected.
WE HAVE LOST MONEY IN EVERY QUARTER AND YEAR, AND WE EXPECT THESE LOSSES TO
CONTINUE IN THE FUTURE.
Since we began our operations in 1996, we have lost money in every quarter
and year. As of December 31, 1998, we had an accumulated deficit of
approximately $8.4 million. We intend to increase the amount of our expenses
significantly in the future in order to expand our operations and our employee
base. We do not expect that we will generate sufficient revenue to cover these
expenses through at least the year 2000. If our revenue does not increase and we
cannot adjust our level of spending adequately, we may not generate sufficient
revenue to become profitable. Even if we do become profitable, we may not be
able to sustain or increase profitability on a quarterly or annual basis in the
future. Our ability to generate revenue depends primarily upon our ability to
attract visitors to our Web sites and to attract pharmaceutical and other
healthcare advertisers as clients.
WE ARE DEPENDENT ON NOVARTIS FOR A SIGNIFICANT PORTION OF OUR REVENUE.
Approximately 55% of our revenue for the year ended December 31, 1997 and
65% of our revenue for the year ended December 31, 1998 resulted from
engagements by various independent divisions of Novartis AG. We anticipate that
these and other divisions will account for a substantial portion of our revenue
for the foreseeable future. We currently have an agreement with one division of
Novartis, Novartis Consumer Health Canada, to manage its Habitrol smoking
cessation Web site, which we designed, developed and implemented. We are
evaluating and working with Novartis Pharma to design, develop and manage
additional Web sites. We are also discussing with Novartis other possible
6
<PAGE>
marketing and advertising programs. We cannot predict whether we will be engaged
to perform any services as a result of these discussions. Novartis may elect to
terminate our agreements or engagements or it may demand changes to the terms of
these agreements or engagements that are less favorable to us than existing
terms. We do not have written agreements with Novartis for most of these
engagements. If we lose Novartis as a customer or the relationship becomes less
favorable to us, our business, financial condition and results of operations
will be materially and adversely affected.
Novartis may also choose to change or limit the products that it advertises
on the Internet or on our Web sites. If they do, this change could materially
and adversely impact our advertising revenue. In addition, our relationship with
Novartis could be negatively affected by any business or financial developments
that impact Novartis, such as a delay or failure to obtain or maintain FDA
approval of pharmaceutical products, a general downturn in its business or a
reduction in its direct-to-consumer advertising budget.
WE MAY HAVE DIFFICULTY MANAGING OUR EXPANDING OPERATIONS.
We are currently engaged in a significant expansion of our operations. Also
to date, a portion of our software development and all of our technical support,
network and hardware operations have been outsourced to a third party. Our
network and technical support are currently being transferred to another third
party and we are in the process of evaluating the establishment of a facility in
Toronto, Canada, where our software development and technical and network
support would be located. In addition, we are considering establishing an office
in Parsippany, New Jersey in the near future, in connection with our proposed
joint venture with CommonHealth.
As part of our expansion, we will have to implement additional operational
and financial systems, procedures and controls to maintain appropriate
coordination among our technical, accounting, finance, marketing, sales and
editorial staffs. If these systems and controls are not adequate, we will have
significant difficulty managing the various business functions of our operations
from multiple locations. We will also need to recruit, train and retain a
significant number of employees, particularly employees with technical,
marketing, sales and healthcare backgrounds. Individuals with these backgrounds
are in high demand and we are not certain that we will be able to attract the
staff we need. In addition, many of our senior management personnel have
recently joined Mediconsult and have not yet become integrated into and
experienced with our operations, policies, personnel and advertising clients. In
connection with the transition of our technical operations, difficulties may
arise that could cause disruptions in the operation of our Web sites. Any of the
risks described above could have a material and adverse effect on our business,
financial condition and results of operations.
BECAUSE OUR BUSINESS MODEL IS UNPROVEN, WE MAY NOT BE SUCCESSFUL.
There are various ways to sell advertising on the Internet, the most common
means being through simple advertisements on Web sites, known as banner
advertisements. Our business depends upon the sale of in depth Internet-based
marketing and advertising programs to pharmaceutical and other healthcare
companies. Sales of these programs usually depend upon a prospective client
first deciding to engage in direct-to-consumer advertising, then deciding to
adopt an Internet-based marketing or advertising strategy and finally
implementing that strategy by developing a marketing program for a particular
drug or other healthcare product. This typically involves a significant
commitment of time and money from the client and, we believe, requires us to
establish a closer relationship with the client than in the case of banner
advertisements. Based on our experience, it typically takes six weeks to nine
months to finalize an agreement with a potential customer. In addition, our
business depends upon our ability to design, develop and implement a customized
marketing and advertising program calculated to achieve the specific client's
marketing objectives. Our business, financial condition and results of
operations will be materially and adversely affected if the business model we
have adopted is not attractive to advertisers and if we are unable to adapt to
other business models for generating Internet advertising revenue.
7
<PAGE>
We currently intend to sell advertising on our Web sites solely to
pharmaceutical and other healthcare companies. Accordingly, our target customer
base is limited. Most of our current or potential advertising clients have
little or no experience using the Internet for marketing and advertising and
have allocated only a limited portion of their marketing and advertising budgets
to the Internet. The adoption of Internet marketing and advertising by entities
that have historically relied upon traditional media for marketing and
advertising requires the acceptance of a new way of conducting business,
exchanging information and advertising products and services. These customers
may find Internet advertising to be less effective than traditional advertising
media for promoting their products and services. In addition, direct-to-consumer
pharmaceutical advertising is a relatively new concept and, as a result, we
cannot assure you that it will increase, or if so, to what extent it will
increase, generally or through the Internet.
WE WILL NOT BE SUCCESSFUL IF THE USE OF THE INTERNET FOR ADVERTISING DOES NOT
CONTINUE TO INCREASE.
A significant percentage of our revenue will be derived from Internet
marketing and advertising for the foreseeable future. Since the Internet
advertising market is new and rapidly evolving, we cannot yet gauge its
acceptance as an effective media by advertisers. Our business, financial
condition and results of operations will be materially and adversely affected if
the Internet advertising market develops more slowly than we expect. Moreover,
"filter" software programs that limit or prevent advertising from being
delivered to an Internet visitor's computer are available. Widespread adoption
of this software could adversely affect the commercial viability of Internet
advertising and as a result would materially and adversely affect our business,
financial condition and results of operations.
Advertisers may choose not to advertise on our Web sites or may pay less for
advertising on our Web sites if they do not perceive the visitor measurements of
our Web sites to be reliable. No standards have been widely accepted to measure
the effectiveness of Internet advertising or to measure the demographics of our
visitor base. Third parties currently provide these measurement services for us.
If they are unable to provide these services in the future, we would be required
to perform them ourselves or obtain them from another provider. This could cause
us to incur additional costs or cause interruptions in our business while we
replace these services. In addition, we are implementing additional systems
designed to record demographic data of visitors. If we do not implement these
systems successfully, we may not be able to accurately evaluate the demographic
characteristics of the visitors.
WE DEPEND ON THE CONTINUED GROWTH OF THE INTERNET FOR OUR SERVICES.
The Internet is relatively new and is rapidly evolving. Our business,
financial condition and results of operations will be materially and adversely
affected if Internet usage does not continue to grow. Internet usage may be
inhibited for a number of reasons:
- demands placed on the Internet infrastructure and the potential decline in
performance and reliability as usage grows;
- security and authentication concerns with respect to the transmission over
the Internet of confidential information, like credit card numbers and
medical information, and attempts by unauthorized computer visitors, known
as hackers, to penetrate online security systems; and
- privacy concerns, including those related to the placement by Web sites of
certain information to gather visitor information, known as cookies, on a
visitor's hard drive without the visitor's knowledge or consent.
We must adapt as the Internet continues to evolve. To be successful, we must
adapt to the changing technologies in our rapidly evolving market by continually
enhancing our Web sites and introducing new services to address our customers'
changing demands. This will entail a continuous level of development and capital
spending and we could incur substantial additional costs if we need to modify
our services or infrastructure. Our business, financial condition and results of
operations will be
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materially and adversely affected if we incur significant costs to adapt, or
cannot adapt, to these changes.
YOU SHOULD NOT RELY ON OUR QUARTERLY OPERATING RESULTS AS AN INDICATION OF HOW
WE WILL DO IN THE FUTURE.
Our quarterly operating results may vary significantly in the foreseeable
future due to a number of factors that could affect our revenue, expenses or
prospects during any particular quarter. These factors include:
- the demand for direct-to-consumer healthcare advertising on the Internet
in general and on our Web sites in particular;
- visitor traffic levels on our Web sites;
- our ability to retain our significant clients, particularly Novartis;
- our ability to attract and retain other advertisers that are seeking
in-depth Internet-based marketing and advertising programs;
- changes in rates paid for Internet advertising resulting from competition
or other factors;
- technical difficulties or system downtime affecting the Internet or the
operation of our Web sites;
- the amount and timing of our costs related to our marketing and sales
efforts;
- costs we may incur as we expand our operations;
- seasonality in advertising sales and Internet usage;
- our ability to price our marketing and advertising programs profitably;
- costs related to the acquisition and integration of other businesses,
technologies and services; and
- economic conditions specific to the healthcare and pharmaceutical
industries and to the Internet.
The timing of our advertising sales is one of the most significant factors
affecting quarterly results. The time between the date of initial contact with a
potential advertiser and the execution of a contract with the advertiser
typically ranges from six weeks for smaller agreements to nine months for larger
agreements. These contracts are also subject to delays over which we have little
or no control, including customers' budgetary constraints, their internal
acceptance reviews, whether or when regulatory approval of their products is
given by the FDA or other regulatory authority, the possibility of cancellation
or delay of projects by advertisers and any post-approval actions taken by the
FDA or other regulatory authority, including product recalls. During the selling
process, we may expend substantial funds and management resources and yet not
obtain adequate advertising revenue. Once a contract is executed, a significant
portion of our revenue is derived from customized Web site development and
implementation projects, rather than from recurring fees. As a result, we cannot
predict with certainty when we will perform the work neccessary to receive
payment for these projects.
In any given quarter, we may not be able to adjust spending in a timely
manner to compensate for any unexpected shortfall in our revenue. Any
significant shortfall would have an immediate material and adverse effect on our
business, financial condition and results of operations. Since we have a limited
operating history, we cannot yet determine whether seasonal factors will affect
our quarterly operating results. Traffic levels on Web sites have typically
fluctuated during the summer and year-end vacation and holiday periods, and this
could result in a decrease in user traffic on our Web sites during these
periods.
Similar seasonal or other patterns may develop in the Internet advertising
industry. Due to all of the foregoing factors, and the other risks discussed in
this section, you should not rely on quarter-to-quarter comparisons of our
results of operations as an indication of future performance. It is
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possible that in some future periods our operating results will be below the
expectations of public market analysts and investors. In this event, the price
of our common stock would likely fall.
THERE ARE MANY COMPETITORS IN THE HEALTHCARE SEGMENT OF THE INTERNET MARKET AND
WE MAY NOT BE ABLE TO COMPETE EFFECTIVELY AGAINST THEM.
There are many companies that provide Internet and non-Internet based
marketing and advertising services to the healthcare industry. All of these
companies compete with us for advertisers, and Internet healthcare companies
also compete with us for visitor traffic. We expect competition to continue to
increase as there are no substantial barriers to entry in our market. Increased
competition could result in reductions in the fees we receive for our marketing
and advertising services, lower margins, loss of clients, reduced visitor
traffic to our Web sites, or loss of market share. Any of these occurrences
could materially and adversely affect our business, financial condition and
results of operations. Competition is also likely to increase significantly, not
only as new entities enter the market, but also as current competitors expand
their services. Our principal competitors include:
- advertising agencies and consulting firms, such as Young & Rubicam and
Agency.com, that develop marketing and advertising programs for
pharmaceutical and other healthcare companies;
- Web sites that deliver consumer healthcare information, either as their
sole focus or as part of a more broadly-based site, such as Health Oasis,
InteliHealth, iVillage, OnHealth, Thrive Online and WebMD;
- general purpose consumer on-line service providers, such as America Online
and Microsoft Network;
- Web site development firms, such as USWeb/CKS; and
- publishers and distributors of television, radio and print, such as CBS,
Disney, NBC and Time Warner.
Our ability to compete depends on a number of factors, many of which are
outside of our control. These factors include quality of content, ease of use,
timing and market acceptance of new and enhanced services, and level of sales
and marketing efforts.
Many of our existing competitors, as well as a number of potential new
competitors, have longer operating histories, greater name recognition, existing
relationships with pharmaceutical and other healthcare companies and
significantly greater financial, technical and marketing resources than we do.
This may allow them to devote greater resources than we can to the development
and promotion of their services. These competitors may also engage in more
extensive development efforts, undertake more far-reaching marketing campaigns,
adopt more aggressive pricing policies and make more attractive offers to
existing and potential employees, advertisers and alliance partners. Our
competitors may develop services that are equal or superior to those we provide
or that achieve greater market acceptance and brand recognition than we achieve.
In addition, current and potential competitors have established or may establish
cooperative relationships among themselves or with third parties to increase
their ability to address the needs of advertisers. It is possible that new
competitors may emerge and rapidly acquire significant market share. We may not
be able to compete successfully or competitive pressures may have a material
adverse effect on our business, results of operations and financial condition.
If advertisers perceive the Internet generally or our Web sites to be a
relatively limited or ineffective advertising medium, advertisers may be
reluctant to devote a significant portion of their advertising budget to
Internet advertising or to advertise on our Web sites.
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WE MUST CONTINUALLY ENHANCE AND DEVELOP THE CONTENT AND FEATURES OF OUR WEB
SITES TO ATTRACT VISITOR TRAFFIC AND ADVERTISERS.
We produce only a portion of the editorial content available on our Web
sites and rely on third-party firms and organizations for most of our content.
Much of the information on our Web sites is easily available from other sources.
Other Web sites may present the same or similar content in a superior manner to
our Web sites, which would adversely affect our visitor traffic. To remain
competitive, we must continue to enhance and improve our content. In addition,
we must continually improve the responsiveness, functionality and features of
our Web sites and develop other products and services attractive to visitors and
advertisers. Changes to our Web sites may contain undetected programming errors
that require significant design modifications, which may result in a loss of
consumer confidence and user support and a decrease in the value of our brand
name. We plan to develop and introduce new features, functions, content,
products and services that will require the development or licensing of
increasingly complex technologies. We may not succeed in developing or
introducing features, functions, products and services that will attract
visitors and advertisers, which would be likely to materially and adversely
affect our business, financial condition and results of operations.
WE NEED TO CREATE A MEDICONSULT BRAND IDENTITY TO BE SUCCESSFUL.
In order to build and align our brand awareness, we must succeed in our
marketing efforts, provide high-quality services and increase the number of
visitors to our Web sites. In addition, healthcare consumers must, among other
things, perceive us as offering relevant, reliable healthcare information from
trustworthy sources. We intend to increase significantly our marketing
expenditures as part of our brand-building efforts. If these efforts are
unsuccessful and we cannot increase our brand identity and increase revenue, our
business, financial condition and results of operations will be materially and
adversely affected.
WE ARE SUBJECT TO THE RISKS OF INTEGRATING AND SUCCESSFULLY FUNDING OUR JOINT
VENTURES AND ACQUISITIONS.
We have in the past developed joint ventures with and acquired complementary
businesses, technologies, services or products, including topic-specific Web
sites, and may continue to do so in the future. In February 1999, we executed a
memorandum of agreement outlining the principal terms of a joint venture with
CommonHealth, a healthcare advertising agency specializing in traditional media
advertising, to offer multimedia solutions to pharmaceutical and other
healthcare companies. We and CommonHealth have agreed on the outline of a
business plan and are in the process of developing more formal documentation for
the joint venture. We intend to commit a significant amount of personnel and
financial resources to the joint venture. The joint venture may not be
successfully established. If the joint venture is established, the operation of
the joint venture could be a significant distraction for our management and
require significant resources. In addition, issues may arise between the parties
as to whether the joint venture or one of the venturers has the right to market
and perform particular services for specific clients.
We recently acquired PHARMINFO.COM, a Web site providing information on
pharmaceutical products and clinical trials for pharmacists, physicians and
consumers. We also entered in agreements to manage CYBERDIET.COM, a Web site
providing tailored nutritional information and programs, and INCIID.ORG, a Web
site providing information on infertility. We have an option to acquire
CYBERDIET.COM as well. We may not receive a positive return on our investment in
these Web sites and may not realize other benefits anticipated from these
transactions. We may have difficulty assimilating these Web sites and their
operations with our existing Web sites, and this could result in a loss of
visitor traffic and revenue.
We may not be able to identify suitable acquisition candidates or joint
venture and alliance partners in the future. Even if we do identify suitable
candidates, we may not be able to enter into
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transactions with these candidates on commercially acceptable terms. If we make
other acquisitions or enter into these other arrangements, we could have
difficulty in integrating the acquired products, services or technologies into
our operations. These difficulties could disrupt ongoing business, distract
management and employees, increase our expenses and materially and adversely
affect our business, financial condition and results of operations. We may incur
significant amortization charges from the goodwill resulting from acquisitions.
We may also incur indebtedness or issue equity securities to pay for future
acquisitions or management or sponsorship rights. The issuance of equity
securities could be dilutive to our existing stockholders.
ASPECTS OF OUR WEB SITES MAY SUBJECT US TO REGULATORY OVERSIGHT AND OTHER
CONCERNS.
Under the "MediXpert" service we offer through MEDICONSULT.COM, visitors pay
a fee and ask a licensed physician particular medical questions. A number of
states have enacted laws which prohibit what is known as the corporate practice
of medicine. These laws are designed to prevent interference in the medical
decision-making process from anyone who is not licensed in that state. Although
we have attempted to structure this service in a manner that will not constitute
the practice of medicine, if the specialist is deemed to be practicing medicine,
the specialist may be required to be licensed as a physician in the jurisdiction
where the visitor resides, or we may be forced to cease providing the
"MediXpert" service. In addition, if our specialists are deemed to be practicing
medicine without a license, we may be subject to a lawsuit alleging the aiding
or abetting of the unlicensed practice of medicine or potentially a medical
malpractice lawsuit. We have attempted to design the "MediXpert" service to
avoid the claim that we or our specialists are practicing medicine. The
specialists provide general information in response to hypothetical questions.
No medical opinions or diagnoses are provided and no patient-specific
recommendations are made. We instruct the specialist to recommend that a visitor
consult with his/her physician, and state that all information provided is for
educational purposes only. Based on these limitations, we believe that the
services provided by our specialists do not constitute practicing medicine. In
the event that some state or other regulatory agency determines that we or our
specialists are practicing medicine without a license, we will be required to
revise or terminate this portion of our business and we could be subject to
possible liability.
Numerous state and federal laws also govern the delivery of healthcare
services and goods. Healthcare licensing laws and laws prohibiting the offer,
payment or receipt of remuneration to induce referrals to entities providing
healthcare services or goods, many of which are being actively enforced, apply
to Internet healthcare applications as well. In the event some state or federal
regulatory agency determined that our relationship with one or more of our
advertisers that deliver healthcare services or goods violate any such laws,
then we could be subjected to fines and other costs and could be required to
revise or terminate that portion of our business. Our pharmaceutical clients are
also subject to review by the FDA for compliance with regulations governing the
information that can be provided to consumers on a pharmaceutical product. These
regulations, for example, limit recommended uses to the specific uses approved
by the FDA. The FDA also monitors compliance with DTC advertising regulations.
If the FDA adopts regulations specifically aimed at pharmaceutical advertising
on the Internet or takes action with respect to a particular client's
advertising program, our existing marketing and advertising programs for clients
and future opportunities could be materially and adversely affected.
OUR KEY PERSONNEL ARE VERY IMPORTANT TO OUR SUCCESS.
Our future success depends on the services of our senior management
personnel. We do not have key person life insurance on any of our personnel.
Loss of any one or more of our senior management personnel would have a material
adverse effect on our business, financial condition and results of operations.
To be successful, we will also need to attract and retain individuals with
expertise in the areas of marketing and sales and technology. In addition, the
successful staffing and integration of our planned in-house programming
operations will depend on our ability to attract and retain qualified
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employees. Although we do not currently have a full-time Chief Financial
Officer, we are in the process of recruiting for this position. There is no
assurance as to when we will engage a Chief Financial Officer. Competition for
qualified personnel is intense, and the loss of key personnel, or the inability
to attract, train and retain the additional highly skilled personnel required
for the expansion of our activities, would materially and adversely affect our
business, financial condition and results of operations.
WE ARE CONTROLLED BY ONE OF OUR EXISTING STOCKHOLDERS, WHOSE INTERESTS MAY
DIFFER FROM OTHER STOCKHOLDERS.
Mr. Robert A. Jennings, our Chief Executive Officer, currently owns as an
individual and through affiliated entities controls 59.9% of the outstanding
shares of our common stock, and after the offering will own 48.9% of the
outstanding shares of our common stock. Accordingly, pursuant to Delaware
corporate law, Mr. Jennings will nearly control the election of all of our
directors and, in general, have sufficient voting power to determine (without
the consent of our other stockholders) the outcome of any corporate transaction
or other matter submitted to the stockholders for approval. These include
mergers, consolidations and the sale of all or substantially all of our assets,
and also the power to prevent or cause a change in control. The interests of Mr.
Jennings may differ from the interests of other stockholders.
WE ARE SUBJECT TO RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS.
Our business is conducted through operations and employees in Bermuda,
Canada and the United States. Our international operations and activities
subject us to a number of risks, which include the risk of complying with
multiple complex regulatory requirements, like European Community regulations
affecting Internet operations, and the risks of political and economic
instability, difficulty in managing foreign operations, potentially adverse
taxes, higher expenses and difficulty in collection of account receivables. In
addition, we receive most of our revenue in U.S. dollars, but a substantial
portion of our payroll and other expenses are paid in the currency of the
country where our employees reside or operations are located. Because our
financial results are reported in U.S. dollars, they are affected by changes in
the value of the various foreign currencies that we use to make payments in
relation to the U.S. dollar. We do not cover known or anticipated operating
exposures through foreign currency exchange option or forward contracts.
THE INTERNET IS SUBJECT TO MANY GOVERNMENTAL REGULATIONS WHICH MAY IMPACT OUR
ABILITY TO CONDUCT BUSINESS.
There is, and will be, an increasing number of laws and regulations
pertaining to the Internet. These laws or regulations may relate to liability
for information received from or transmitted over the Internet, online content
regulation, user privacy, taxation and quality of products and services. In
addition, the applicability to the Internet of existing laws governing
intellectual property ownership and infringement, copyright, trademark, trade
secret, obscenity, libel, employment, personal privacy and other issues is
uncertain and developing. Any new law or regulation, or the adverse application
or interpretation of existing laws, may decrease the growth in the use of the
Internet or our Web sites. This could decrease the demand for our services,
increase our cost of doing business or otherwise have a material adverse effect
on our business, financial condition or results of operations.
WE MAY BE SUBJECT TO CLAIMS BASED ON THE CONTENT WE PROVIDE ON THE INTERNET.
Because visitors to our Web sites may distribute our content to other
people, third parties might sue us for defamation, negligence, product
liability, copyright, or trademark infringement, or other matters. These types
of claims have been brought, sometimes successfully, against other on-line
services in the past. We may also incur liability for the content on other Web
sites that are linked to our Web sites or for content and materials that may be
posted by visitors in chat rooms or bulletin boards. Our
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e-mail services may also subject us to potential claims resulting from
unsolicited e-mail, lost or misdirected messages, illegal or fraudulent use of
e-mail or interruptions or delays in e-mail service. We also enter into
agreements with commerce partners that entitle us to receive a share of any
revenue from the purchase of goods and services through direct links from our
Web sites to their Web sites. These arrangements may subject us to additional
claims, including product liability or personal injury related to these products
and services, because we provide access to these products or services, even if
we do not provide the products or services ourselves.
SATISFACTORY PERFORMANCE OF OUR WEB SITES IS CRITICAL TO OUR BUSINESS AND
REPUTATION.
The performance of our Web sites is critical to our business and reputation
and to our ability to attract visitors and advertisers to our Web sites. We are
dependent upon the continuous, reliable and secure operation of Internet servers
and related hardware and software. To the extent that service is interrupted or
delayed, we could experience a decrease in traffic and revenue. We do not at
present have any back up "off-site" systems or a formal disaster recovery plan,
nor do we have insurance coverage for business interruption. Substantially all
of our communications hardware and some of our other computer hardware
operations are located in Cambridge, Massachusetts and Toronto, Canada. Fire,
floods, earthquakes, power loss, telecommunications failures, break-ins and
similar events could damage these systems. Computer viruses, electronic
break-ins or other similar disruptive problems could also adversely affect our
Web sites.
Our Web sites must accommodate a high volume of traffic and deliver
information that is updated frequently. Our Web sites have in the past and may
in the future experience slower response times or decreased traffic for a
variety of reasons. In addition, our visitors depend on Internet service
providers, online service providers and other Web site operators for access to
our Web sites. Many of them have experienced significant outages in the past and
could experience outages, delays and other difficulties due to system failures
unrelated to our systems in the future.
The on-going enhancement of our Web site is dependent upon the success of
development efforts that will be performed by in-house employees and by
contractors. To the extent that these development efforts are delayed or
unsuccessful, we will incur additional development expenses and may not remain
competitive in the design and use of our Web sites.
A LACK OF SECURITY OVER THE INTERNET MAY IMPACT OUR BUSINESS.
A significant barrier to electronic commerce and confidential communications
over the Internet has been the need for secure transmission of confidential
information. Internet usage could decline if any well-publicized compromise of
security occurred. We may incur significant costs to protect against the threat
of security breaches or to alleviate problems caused by such breaches.
Experienced programmers could attempt to penetrate our network security.
Programmers who are able to penetrate our network security could misappropriate
proprietary information or cause interruptions in our services, and we could be
required to expand capital and resources to protect against or to alleviate
problems caused. Purposeful security breaches could have a material adverse
effect on our business, results of operation and financial condition.
WE ARE DEPENDENT ON OUR INTELLECTUAL PROPERTY.
Trademarks, copyrights and other proprietary rights are important to our
success and our competitive position. Third parties may infringe or
misappropriate our trademarks, copyrights and other proprietary rights, which
could have a material and adverse effect on our business, financial condition
and results of operations. In addition, we do not know how extensive our
intellectual property protection is since the validity, enforceability and scope
of protection of proprietary rights in Internet-related industries is uncertain
and still evolving.
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We license some of our content from third parties. It is possible that we
could become subject to infringement actions based upon the content obtained
from these third parties. In addition, others may use this content and we may be
subject to claims from our licensors. These claims, with or without merit, could
subject us to costly litigation and the diversion of our financial resources and
technical and management personnel. We have entered into confidentiality
agreements with our key employees and independent consultants and we have
instituted procedures to control access to and distribution of our technology,
documentation and other proprietary information and the proprietary information
of others from which we have licensed content or technology. Despite our efforts
to protect our proprietary rights, parties may attempt to disclose, obtain or
use our content or technologies. There can be no assurance that the steps we
have taken will prevent misappropriation of our content or technologies.
YEAR 2000 PROBLEMS MAY DISRUPT OUR BUSINESS.
It is generally anticipated that many organizations will experience
operational difficulties at the beginning of the year 2000 as a result of the
fact that many currently installed computer systems and software products are
coded to accept only two digit entries in the date code field. The costs of
defending and resolving year 2000-related disputes, and any liability of
Mediconsult for year 2000-related damages, including consequential damages,
could have a material adverse effect on our business, financial condition and
results of operations. Based on our assessment to date, we believe that our
internal systems are year 2000 compliant and will not produce erroneous results,
fail to function, or interrupt performance. Despite our testing, our systems may
contain undetectable errors or defects associated with the year 2000 and
operational difficulties may result. To the extent that our assessment is
finalized without identifying any additional material non-compliant information
technology systems or non-information technology systems that we operate or that
are operated by third parties, the most reasonably likely worst case year 2000
scenario is a systemic failure beyond our control, such as a prolonged Internet,
telecommunications or electrical failure. Such a failure could prevent us from
operating our business, prevent visitors from accessing our Web sites, or change
the behavior of consumers accessing our Web sites. We believe that the primary
business risks, in the event of such a failure, would include lost advertising
revenue, increased operating costs, loss of visitors to our Web site, or other
business interruptions of a material nature, as well as claims of mismanagement,
misrepresentation, or breach of contract, any of which could have a material
adverse effect on our business, results of operations and financial condition.
We have not made any contingency plans to address such risks.
WE CURRENTLY HAVE NO SPECIFIC USE FOR A SUBSTANTIAL PORTION OF THE NET PROCEEDS
FROM THIS OFFERING.
Our management will have broad discretion with respect to how the net
proceeds of this offering will be spent. Except to repay amounts advanced by a
stockholder, market our Web sites and brand name and hire new personnel, we
currently do not have any specific plans for the use of the net proceeds from
this offering. Accordingly, we will have broad discretion as to the use of the
net proceeds, including uses with which the stockholders may not agree.
FUTURE SALES OF OUR COMMON STOCK BY OUR EXISTING STOCKHOLDERS COULD HAVE AN
ADVERSE EFFECT ON THE MARKET PRICE OF OUR COMMON STOCK.
The market price of our common stock could decline as a result of sales by
our existing stockholders of a large number of shares of common stock in the
market after this offering, or the perception that these sales may occur. These
sales also might make it more difficult for us to sell equity securities in the
future at a time and at a price that we deem appropriate. Please see
"Description of Securities--Registration Rights" and "Shares Eligible for Future
Sale."
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OUR STOCK PRICE IS VOLATILE AND COULD CONTINUE TO BE VOLATILE.
Following this offering, investment interest in Mediconsult may not lead to
the development of an active or liquid trading market. The market price of our
common stock has fluctuated in the past and is likely to continue to be volatile
and subject to wide fluctuations. In addition, the stock market has experienced
extreme price and volume fluctuations. The stock prices and trading volumes for
many Internet companies fluctuate widely for reasons that may be unrelated to
their business or results of operations. The market price of our common stock
may decline below the offering price. General economic, market and political
conditions could also materially and adversely affect the market price of our
common stock and investors may be unable to resell their shares of common stock
at or above the offering price.
INVESTORS WILL EXPERIENCE IMMEDIATE AND SUBSTANTIAL DILUTION.
Investors purchasing common stock in this offering will incur immediate
dilution of net tangible book value per share of common stock. For a more
detailed discussion of this dilution, see "Dilution."
IT MAY BE DIFFICULT FOR A THIRD PARTY TO ACQUIRE US.
Provisions of our certificate of incorporation, our by-laws and Delaware law
could make it more difficult for a third party to acquire us, even if it would
be beneficial to our stockholders.
FORWARD LOOKING STATEMENTS; MARKET DATA
A number of statements made in this prospectus, including under the captions
"Prospectus Summary," "Risk Factors," "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Business" are
forward-looking statements. These forward-looking statements are not historical
facts. Because these forward-looking statements involve risks and uncertainties,
there are important factors that could cause actual results to differ materially
from those expressed or implied by these forward-looking statements, including
those discussed under "Risk Factors."
This prospectus contains market data related to Mediconsult and the
Internet. This data has been included in the studies prepared by the Internet
market research firms of Cyber Dialogue, Jupiter Communications and Media
Metrix. This market data includes projections that are based on a number of
assumptions. The assumptions include that: (1) no catastrophic failure of the
Internet will occur; (2) the number of people who use the Internet and the total
number of hours spent online will increase significantly over the next five
years; (3) the value of online advertising dollars spent for each hour a visitor
is online will increase; (4) the speed at which content can be downloaded from
the Internet will increase dramatically; and (5) Internet security and privacy
concerns will be adequately addressed.
This prospectus also contains market data related to DTC advertising. This
data has been included in the studies prepared by Consumer Health Information
Corporation and Med Ad News. This market data includes projections that are
based on a number of assumptions. The assumptions include that: (1) there will
be no adverse changes in existing DTC advertising regulations; (2) DTC
advertising spending will continue to be accepted by pharmaceutical companies as
an attractive vehicle for advertising; (3) the number of pharmaceutical products
covered by DTC advertising will continue to increase; and (4) advertisers will
increasingly use the Internet as a forum for DTC advertising.
If any one or more of these assumptions turns out to be incorrect, actual
results may differ from the projections given by these firms. These markets may
not grow at the rates projected by the firms named above or at all. The failure
of these markets to grow at such projected rates could have a material adverse
effect on our business, financial condition and results of operations, and the
market price of our common stock.
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USE OF PROCEEDS
The net proceeds to us from the sale of the shares offered by us under this
prospectus, after deducting underwriting discounts and the estimated offering
expenses payable by us, are estimated to be approximately $51,944,438 (and an
additional $4,446,563 if the underwriters' over-allotment option is exercised in
full), assuming a public offering price of $12.75 per share. We will not receive
any proceeds from the sale of common stock by the Selling Stockholders.
We intend to use a significant portion of the net proceeds to recruit, train
and manage an expanded marketing, sales and technical staff and to significantly
expand the marketing of our Web sites and brand name. We also intend to use $0.5
million to repay advances from our majority stockholder and $0.7 million for the
establishment of our in-house technical operations. The balance of the net
proceeds will be used for working capital and other general corporate purposes.
Management will have significant flexibility in applying the net proceeds of
this offering. Pending any such use, as described above, we intend to invest the
net proceeds in investment grade interest-bearing instruments.
PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY
We have applied for listing on the Nasdaq National Market. Our common stock
is currently quoted on the OTC Bulletin Board. The following table sets forth,
for the periods indicated, the high and low closing sale prices per share of the
common stock as reported on the OTC Bulletin Board.
<TABLE>
<CAPTION>
PRICE RANGE OF
COMMON STOCK
--------------------
HIGH LOW
--------- ---------
<S> <C> <C>
Year Ended December 31, 1997
First Quarter.............................................................................. $ 2.10 $ 1.61
Second Quarter............................................................................. 2.44 1.32
Third Quarter.............................................................................. 3.00 1.70
Fourth Quarter............................................................................. 1.70 1.05
Year Ended December 31, 1998
First Quarter.............................................................................. $ 2.10 $ 1.00
Second Quarter............................................................................. 1.92 1.25
Third Quarter.............................................................................. 1.68 0.64
Fourth Quarter............................................................................. 9.56 0.49
Year Ending December 31, 1999
First Quarter (through March 11, 1999)..................................................... $ 12.75 $ 6.19
</TABLE>
On March 11, 1999, the reported last sale price of the common stock on the
OTC Bulletin Board was $12.75
We have not declared or paid any cash dividends on our capital stock since
inception and do not expect to pay any cash dividends for the foreseeable
future. We currently intend to retain future earnings, if any, to finance the
expansion of our business.
17
<PAGE>
CAPITALIZATION
The following table sets forth (a) the historical capitalization as of
December 31, 1998 on an actual basis, (b) the pro forma consolidated
capitalization adjusted to give effect to (i) the issuance of $3.2 million of
senior preferred stock, (ii) the conversion of the outstanding junior preferred
stock and senior preferred stock into shares of common stock upon the
consummation of this offering, (iii) the issuance of 400,000 shares of common
stock for the acquisition of CyberDiet, which is subject to an option held by
Mediconsult that we expect to exercise, and (iv) 18,000 shares issued in respect
of options exercised subsequent to December 31, 1998, and (c) the pro forma
consolidated capitalization, as further adjusted to give effect to the sale of
the shares of common stock offered by this prospectus and the receipt and
application of the estimated net proceeds therefrom. This should be read in
conjunction with "Selected Financial Data," "Management's Discussion and
Analysis of Financial Condition and Results of Operations," "Certain
Transactions" and our financial statements and notes thereto included elsewhere
in this prospectus.
<TABLE>
<CAPTION>
DECEMBER 31, 1998
-------------------------------------------------
<S> <C> <C> <C>
PRO FORMA
PRO FORMA AS
ACTUAL CONSOLIDATED(1) ADJUSTED(1)(2)
-------------- ----------------- --------------
<CAPTION>
(IN THOUSANDS)
<S> <C> <C> <C>
Advances from stockholder.................................... $ 514 $ 514 $ --
Stockholders' equity:
Preferred stock, 5,000,000 shares authorized:
Senior preferred stock, $0.001 par value, 1,000,000
shares authorized, no shares issued or outstanding
actual, pro forma and pro forma as adjusted............ -- -- --
Junior preferred stock, $0.001 par value, 1,000,000
shares authorized, 430,000 shares issued and
outstanding actual; no shares issued and outstanding
pro forma and pro forma as adjusted.................... 4,300 -- --
Common stock, $0.001 par value; 50,000,000 shares
authorized, 18,519,950 shares issued and outstanding
actual; 23,099,278 shares issued and outstanding pro
forma; 27,524,278 shares issued and outstanding pro forma
as adjusted.............................................. 19 23 27
Additional paid-in capital................................. 5,243 16,539 68,479
Deferred compensation...................................... (884) (884) (884)
Accumulated deficit........................................ (8,399) (9,565) (9,565)
------- ------- -------
Total stockholders' equity............................... 278 6,113 58,057
------- ------- -------
Total capitalization..................................... $ 792 $ 6,627 $ 58,057
------- ------- -------
------- ------- -------
</TABLE>
- ------------------------------
(1) Excludes (a) an aggregate of 2,000,000 shares of common stock issuable upon
the exercise of currently exerciseable options with an exercise price of
$0.003 per share; (b) 400,000 shares of common stock issuable upon the
exercise of warrants, with an exercise price of $1.22 per share; (c) 224,000
shares of common stock issuable upon the exercise of warrants, with an
exercise price of $6.32 per share; (d) shares issuable in respect of the 8%
payable in kind dividend on the junior preferred stock accruing from and
after January 1, 1999; and (e) 862,950 shares of common stock reserved for
issuance under the 1996 Stock Option Plan as of December 31, 1998, of which
options to purchase 716,000 shares were outstanding at the date with a
weighted average exercise price of $1.38 per share.
(2) As adjusted to reflect the sale of 4,425,000 shares of common stock offered
hereby at an assumed public offering price of $12.75 per share and the
receipt and application of the estimated net proceeds therefrom.
18
<PAGE>
DILUTION
Our adjusted net tangible book value as of December 31, 1998 was
approximately $2.6 million, or $0.11 per share of common stock, calculated as
follows. Net tangible book value per share is equal to our total tangible assets
minus total liabilities divided by the number of shares of common stock
outstanding at February 26, 1999, after giving effect to the conversion of all
outstanding shares of junior preferred stock into 3,654,999 shares of common
stock and the issuance, application of net proceeds from and conversion of all
outstanding shares of senior preferred stock into 506,329 shares of common
stock, upon the closing of this offering. After giving effect to the sale of the
4,425,000 shares of common stock offered by this prospectus and deducting
underwriting discounts and commissions and estimated offering expenses payable
by us, our pro forma net tangible book value would have been approximately $54.5
million, or $2.01 per share of common stock. This represents an immediate
increase in net tangible book value of $1.90 per share to existing stockholders
and an immediate dilution of $10.74 per share to new investors. Dilution is
determined by subtracting pro forma net tangible book value per share after the
offering from the amount of cash paid by a new investor for a share of common
stock. The following table illustrates this dilution:
<TABLE>
<S> <C> <C>
Assumed public offering price per share............................ $ 12.75
Net tangible book value per share as of December 31, 1998...... $ 0.11
Increase in net tangible book value per share attributable to
new investors................................................ $ 1.90
Pro forma net tangible book value per share after the offering..... $ 2.01
---------
Dilution per share to new investors................................ $ 10.74
---------
---------
</TABLE>
Based on the same assumptions used in the table set forth above, the
following table sets forth on a pro forma basis, after giving effect to the
conversion of the outstanding junior preferred stock and senior preferred stock
into shares of common stock as of December 31, 1998 and the issuance of 18,000
shares of common stock subsequent to December 31, 1998, the number of shares of
common stock purchased from us, the total consideration paid and the average
price per share paid by existing stockholders and by new investors:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
----------------------- ------------------------ PRICE PER
NUMBER PERCENT AMOUNT PERCENT SHARE
------------ --------- ------------- --------- -----------
<S> <C> <C> <C> <C> <C>
Existing stockholders (1)(2)...................... 22,699,278 83.7% $ 15,678,058 21.7% $ 0.69
New investors..................................... 4,425,000 16.3 56,418,750 78.3 12.75
------------ --------- ------------- ---------
Total......................................... 27,124,278 100.0% $ 72,096,808 100.0%
------------ --------- ------------- ---------
------------ --------- ------------- ---------
</TABLE>
- ------------------------------
(1) Excludes (a) an aggregate of 2,000,000 shares of common stock issuable upon
the exercise of currently exerciseable options with an exercise price of
$0.003 per share, (b) 400,000 shares of common stock issuable upon the
exercise of warrants, with an exercise price of $1.22 per share; (c) 224,000
shares of common stock issuable upon the exercise of warrants, with an
exercise price of $6.32 per share; and (d) 862,950 shares of common stock
reserved for issuance under the 1996 Stock Option Plan as of December 31,
1998, of which options to purchase 716,000 shares were outstanding at that
date with a weighted average exercise price of $1.38 per share.
(2) The sale of 575,000 shares of common stock in this offering (375,000
additional shares if the underwriters over-allotment option is exercised in
full) by the Selling Stockholders includes 100,000 shares issuable upon the
exercise of a warrant, and will cause the number of shares owned by existing
stockholders to be reduced to 22,224,278, or 81.9% of the total number of
shares of common stock outstanding after this offering.
19
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
The following unaudited pro forma consolidated financial information is
based on Mediconsult's and CyberDiet's historical financial statements included
elsewhere herein. The Unaudited Pro Forma Financial Information gives effect to
(a) the acquisition of CyberDiet, which is subject to an option held by
Mediconsult that we expect to exercise, as if such transaction had occurred on
January 1, 1998 for the pro forma consolidated statements of operations and
December 31, 1998 for the pro forma balance sheet and (b) other adjustments
relating to (i) the issuance of $3.2 million of senior preferred stock, net of
issuance cost, and (ii) the conversion of the outstanding junior preferred stock
and senior preferred stock into shares of common stock upon the consummation of
this offering. The pro forma adjustments are described in the accompanying notes
and are based upon available information and certain assumptions that we believe
are reasonable. The Unaudited Pro Forma Consolidated Financial Information is
presented for informational purposes only and does not purport to represent what
our financial position or results of operations would actually have been if this
transaction had occurred on the date specified or to project our financial
position or results of operations at any future date or for any future periods.
The Unaudited Pro Forma Consolidated Financial Information should be read in
conjunction with Mediconsult's consolidated historical financial statements, and
the notes thereto, included elsewhere herein. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
MEDICONSULT ACQUISITION OTHER PRO FORMA
HISTORICAL CYBERDIET ADJUSTMENTS(1) ADJUSTMENTS(2) CONSOLIDATED
----------- ------------- --------------- -------------- ------------
<S> <C> <C> <C> <C> <C>
Revenues...................................... $ 1,031 $ 39 $ -- $ -- $ 1,070
Operating expenses:
Product and content development............. 1,316 65 -- -- 1,381
Marketing, sales and client services........ 1,812 1 -- -- 1,813
General and administrative.................. 1,013 14 -- 1,027
Depreciation and amortization............... 170 906(1) 1,076
Fair value of options granted to
employees................................. 275 -- -- -- 275
Fair value of options and warrants granted
to consultants............................ 1,354 -- -- 1,094 2,448
----------- --- ----- ------- ------------
Total operating expenses.................. 5,940 80 906 1,094 8,020
----------- --- ----- ------- ------------
Loss from operations.......................... (4,909) (41) (906) (1,094) (6,950)
Interest income (expense)..................... -- (4) -- -- (4)
----------- --- ----- ------- ------------
Net loss...................................... $ (4,909) $ (45) $ (906) $ (1,094) $ (6,954)
----------- --- ----- ------- ------------
----------- --- ----- ------- ------------
</TABLE>
See Notes to Unaudited Pro Forma Consolidated Financial Statements.
20
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
MEDICONSULT ACQUISITION OTHER PRO FORMA
HISTORICAL CYBERDIET ADJUSTMENTS(1) ADJUSTMENTS(2)(3) CONSOLIDATED(4)
----------- ------------- --------------- ----------------- --------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash.......................... $ 135 $ 10 $ -- $ 3,160 $ 3,305
Accounts receivable........... 136 6 -- -- 142
----------- ------ ------ ------ --------------
Total current assets...... 271 16 -- 3,160 3,447
----------- ------ ------ ------ --------------
Non-current assets:
Tangible assets............... 53 -- -- -- 53
Intangible assets............. 819 -- 2,718 -- 3,536
----------- ------ ------ ------ --------------
Total non-current
assets.................. 872 -- 2,718 -- 3,589
----------- ------ ------ ------ --------------
Total assets.............. $ 1,142 $ 16 $ 2,718 $ 3,160 $ 7,036
----------- ------ ------ ------ --------------
----------- ------ ------ ------ --------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued
liabilities................. $ 243 $ 5 $ -- $ -- $ 248
Advances from stockholder..... 514 -- -- -- 514
Unearned revenue.............. 107 -- -- -- 107
Other current liabilities..... -- 54 -- -- 54
----------- ------ ------ ------ --------------
Total current
liabilities............. 864 59 -- -- 923
----------- ------ ------ ------ --------------
Stockholders' Equity:
Preferred stock............... 4,300 -- -- (4,300) --
Common stock.................. 19 -- -- 4 23
Additional paid-in capital.... 5,243 71 2,604 8,622 16,539
Deferred compensation......... (884) -- -- -- (884)
Retained earnings (8,399) (113) 113 (1,166) (9,565)
----------- ------ ------ ------ --------------
Total stockholders'
equity.................. 278 (43) 2,718 3,160 6,113
----------- ------ ------ ------ --------------
Total liabilities and
stockholders' equity.... $ 1,142 $ 16 $ 2,718 $ 3,160 $ 7,036
----------- ------ ------ ------ --------------
----------- ------ ------ ------ --------------
</TABLE>
See Notes to Unaudited Pro Forma Consolidated Financial Statements.
21
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
(1) Represents the preliminary allocation of the excess of the purchase price
over the assets and liabilities to be acquired and the related amortization
in connection with the probable acquisition of CyberDiet. Mediconsult is in
the process of completing its valuation of the assets and liabilities of
CyberDiet, pending the completion of its valuation. Mediconsult has assumed
for purposes of pro forma information that the fair values of assets and
liabilities will approximate underlying book values. The purchase price was
determined based on the quoted market price of the 400,000 shares of common
stock of Mediconsult.com, Inc. on February 25, 1999, when substantial
agreement was reached on the terms of the acquisition. Purchase price
($2,675,000) in excess of the assumed fair value of net assets acquired
($(43,083)) has been allocated to intangible assets and amortized over three
years. This resulted in adjustments to record $2,718,083 of intangible
assets and annual amortization of $906,044. The final allocation of purchase
price may differ materially from amounts assumed in the accompanying pro
forma information.
(2) Represents the approximate fair value of the 200,000 warrants with an
exercise price of $1.22 per share delivered to Arnhold and S. Bleichroeder,
Inc. upon the initial filing of this prospectus, which will be recorded as
an expense in the Company's statement of operations for 1999.
(3) Represents the (i) issuance and conversion of $3.2 million of senior
preferred stock into shares of common stock upon the consummation of this
offering, (ii) the conversion of $4.3 million of junior preferred stock into
shares of common stock upon the consummation of this offering and (iii) the
conversion of cumulative dividends payable on the junior preferred stock
into 71,666 common shares.
(4) Excludes (a) an aggregate of 2,000,000 shares of common stock issuable upon
the exercise of currently exercisable options with an exercise price of
$0.003 per share; (b) 200,000 shares of common stock issuable upon the
exercise of warrants, with an exercise price of $1.22 per share; (c) 224,000
shares of common stock issuable upon the exercise of warrants, with an
exercise price of $6.32 per share; (d) shares issuable in respect of the 8%
payable in kind dividend on the junior preferred stock accruing from and
after January 1, 1999; and (e) 862,950 shares of common stock reserved for
issuance under the 1996 Stock Option Plan as of December 31, 1998, of which
options to purchase 716,000 shares were outstanding at the date with a
weighted average exercise price of $1.38 per share.
22
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
(in thousands, except per share data)
The following selected consolidated financial data should be read in
conjunction with the consolidated financial statements and notes thereto,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," and "Unaudited Pro Forma Consolidated Financial Information"
included elsewhere in this prospectus. The statement of operations data for the
years ended December 31, 1996, 1997 and 1998 and the balance sheet data as of
December 31, 1997 and 1998 are derived from our audited financial statements,
and are included elsewhere in this prospectus. The balance sheet data as of
December 31, 1996 is derived from our audited financial statements not included
in this prospectus. Our historical results are not necessarily indicative of
future financial results. The following table also sets forth selected
consolidated pro forma financial and other data of Mediconsult on a consolidated
basis for the fiscal year ended December 31, 1998, after giving effect to the
acquisition of CyberDiet, Inc., which is subject to an option held by
Mediconsult that we expect to exercise. The selected consolidated pro forma data
for the fiscal year ended December 31, 1998 are derived from the "Unaudited Pro
Forma Consolidated Financial Information," giving effect to the events described
therein, included elsewhere in this prospectus. The pro forma financial data are
not necessarily indicative of operating results or financial positions that
would have been achieved had these events been consummated on the dates
indicated and should not be construed as representative of future operating
results or financial position.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------
PRO FORMA
CONSOLIDATED(1)(2)
STATEMENT OF OPERATIONS DATA: 1996 1997 1998 1998
--------- --------- --------- ---------------
<S> <C> <C> <C> <C>
Revenues............................................... $ -- $ 256 $ 1,031 $ 1,070
Operating expenses:
Product and content development...................... -- 766 1,316 1,381
Marketing, sales and client services................. 436 1,130 1,812 1,813
General and administrative........................... 404 792 1,013 1,027
Depreciation and amortization........................ 133 170 1,076
Fair value of options granted to employees........... -- 40 275 275
Fair value of options and warrants granted to
consultants........................................ -- -- 1,354 2,448
--------- --------- --------- ---------------
Total operating expenses........................... 839 2,861 5,940 8,020
--------- --------- --------- ---------------
Loss from operations................................... (839) (2,605) (4,909) (6,950)
Interest income (expense), net......................... (23) (20) -- (4)
--------- --------- --------- ---------------
Net loss............................................... $ (862) $ (2,625) $ (4,909) $ (6,954)
--------- --------- --------- ---------------
--------- --------- --------- ---------------
Basic and diluted net loss per share................... $ (0.08) $ (0.16) $ (0.27) $ (0.38)
Shares used to compute basic and diluted net loss per
share................................................ 11,138 16,730 17,911 18,311
Pro forma basic and diluted net loss per share (2)..... $ (0.27) $ (0.38)
Shares used to compute pro forma basic and diluted net
loss per share (2)................................... 17,911 18,311
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------------------
PRO FORMA
CONSOLIDATED(1)(2)
BALANCE SHEET DATA: 1996 1997 1998 1998
--------- --------- --------- ---------------
<S> <C> <C> <C> <C>
Cash................................................... $ 393 $ 401 $ 135 $ 3,305
Working capital........................................ 292 373 (593) 2,524
Total assets........................................... 760 752 1,142 7,036
Stockholders' equity................................... 525 566 278 6,113
</TABLE>
- ------------------------------
(1) See "Unaudited Pro Forma Consolidated Financial Information" and related
notes thereto.
(2) Assumes the automatic conversion upon the consummation of this offering of
(a) all outstanding junior preferred stock into 3,583,333 shares of common
stock, (b) the 8% payable in kind dividend which has accrued on the junior
preferred stock through December 31, 1998 into 71,666 shares of common
stock, but does not include shares accruing thereafter, and (c) all
outstanding senior preferred stock into 506,329 shares of common stock. As
these conversions are antidilutive, pro forma basic and diluted net loss per
share equals basic and diluted net loss per share.
23
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION AND ANALYSIS OF OUR FINANCIAL CONDITION AND RESULTS
OF OPERATIONS SHOULD BE READ IN CONJUNCTION WITH THE ACCOMPANYING FINANCIAL
STATEMENTS AND THE NOTES TO THOSE STATEMENTS INCLUDED ELSEWHERE IN THIS
PROSPECTUS. THE FOLLOWING DISCUSSION CONTAINS FORWARD-LOOKING STATEMENTS THAT
INVOLVE RISKS AND UNCERTAINTIES. PLEASE SEE "RISK FACTORS" AND "FORWARD-LOOKING
STATEMENTS; MARKET DATA."
OVERVIEW
Mediconsult is a leading provider of patient-oriented healthcare information
and services on the World Wide Web. Our Web sites provide a trusted source of
comprehensive and easy to understand medical information and are designed to
empower consumers through increased education related to medical conditions and
treatment alternatives. Our Web sites also provide a destination on the Internet
where visitors can interact with others in a community environment. We
facilitate this environment through a well-organized, easy to navigate format
and an array of complementary services, including moderated on-line support
groups and discussion forums. By fostering communities centered around over 60
prevalent medical conditions and health issues, we believe we create significant
opportunities for pharmaceutical and other healthcare companies to reach a
highly targeted consumer audience using Internet-based marketing and advertising
programs.
BACKGROUND
For the period from the inception of our operations in April 1996 through
January 1997, our operating activities related primarily to the initial
development of our MEDICONSULT.COM Web site and operating infrastructure, and
also the recruitment of employees. Since the formal launch of MEDICONSULT.COM in
1997, we have focused on developing content, organizing the content in an easy
to navigate format, and improving the functionality of MEDICONSULT.COM. We
continue to refine our strategy of creating targeted on-line marketing and
advertising programs for large pharmaceutical and other healthcare
organizations, and are developing and implementing these types of programs for
our clients. We structure our programs to provide our advertisers with a
measurable return on investment by tracking the level of interest and
interactive responses of visitors. Our programs utilize a broad range of on-line
strategies and resources to deliver a message consistent with the advertisers'
global marketing strategy.
REVENUE SOURCES
Our main source of revenue is through client services related to the
development and support of on-line marketing and advertising programs for
pharmaceutical and other healthcare companies. These services typically include
the design, development and management of customized Web sites relating to a
particular pharmaceutical or other health-related product. Client services also
include marketing research, focus group testing and on-line testing of visitors'
preferences. Revenue from client services is recognized over the period that the
services are performed. Revenue from support services, principally the
management of Web sites that we develop for our clients, is recognized ratably
over the management periods, generally on a monthly basis. Payments received
from clients prior to the performance of client services are recorded as
unearned revenue.
We also provide advertising services involving the sale of advertising space
on the Web sites we own, manage or sponsor. These services can be provided
separately or as part of a more comprehensive suite of client services.
Advertising services include banner advertisements, polls, surveys, registration
programs, coupons and other interactive forms of advertising. Revenue from
advertising sales is recognized ratably over the period in which the
advertisement is displayed, if no significant obligations remain. In certain
cases, advertising revenue from the sale of advertising space is related to the
delivery
24
<PAGE>
of impressions or click-throughs from pages viewed by visitors to our Web sites.
In these cases, we may guarantee a minimum number of impressions or
click-throughs by visitors over a specified period of time. To the extent that
revenue is related to the number of impressions or click-throughs, we defer
recognition of this revenue until the required impressions or click-throughs are
achieved. Payments received from advertisers prior to displaying their
advertisements are recorded as deferred revenue. We do not engage in barter
transactions with respect to our advertising services.
We also derive revenue from licensing our MEDICONSULT.COM content and
providing Web site support to healthcare and other organizations. These
organizations make our content available to visitors to their Web sites or to
Web sites of their clients. Revenue from content licensing is recognized over
the period of the license. In certain cases, we design and develop these Web
sites. The portion of licensing revenue related to up-front customized design
work is recognized over the period that the work is performed. In certain cases,
we derive additional revenue from the management of the Web site or its content.
Revenue from management services is recognized ratably over the period the
services are performed, generally on a monthly basis. We also may retain the
right to place advertising on a Web site that hosts our content.
Although we have certain electronic commerce alliances with merchants of
healthcare-oriented books and products, revenue from these revenue-sharing
arrangements has not been material. Revenue from our share of the proceeds from
our electronic commerce partners' sales is recognized by us upon notification
from our commerce partners of sales attributable to our Web sites.
MARKETING AND SALES INITIATIVES
In late 1997, we initiated our first significant marketing and advertising
program. We were engaged by Novartis Consumer Health Canada to develop a
comprehensive on-line smoking cessation program for its Habitrol brand, focused
on Canadian consumers. We developed the Web site for this program during early
1998, for which we received payment as services were performed. We received
revenue for maintaining and upgrading this program (beginning with its launch in
June 1998), and receive monthly advertising revenue for referring visitor
traffic to the Habitrol Web site. We are currently expanding the Habitrol
program to provide French and professional healthcare versions of the Web site.
We have also generated revenue from developing programs for a number of
branded pharmaceutical products for Novartis Pharma, the worldwide
pharmaceutical division of Novartis. We are developing the Web sites for these
programs and receiving payment as the services are performed. In 1998, revenue
from Novartis represented $0.7 million or 65% of our total revenue. We have also
completed assessment programs for Bristol Myers Squibb, Glaxo Wellcome and Astra
Merck. The loss of Novartis as a customer or any changes to the existing
relationship that are less favorable to us, or any significant reduction in
traffic on or through the Novartis Web sites that we manage, will materially and
adversely affect our business, financial condition and results of operations.
To date, our revenue has been generated primarily by our internal sales
organization and, to a lesser extent, by third party advertising
representatives. As of December 31, 1998, we had an internal marketing, sales
and program design organization of 14 professionals. We believe that we need to
significantly increase the size of our internal marketing and sales organization
to execute successfully our growth strategy and, accordingly, we intend to hire
additional marketing and sales professionals in 1999.
To complement our direct sales force, in February 1999, we entered into a
memorandum of agreement outlining the principal terms of a 50/50 joint venture
with CommonHealth LLP, the leading healthcare advertising firm worldwide.
CommonHealth is an affiliate of Ogilvy & Mather and J. Walter Thompson. The
joint venture is being formed to offer innovative multimedia solutions to
pharmaceutical and other healthcare companies, based on our Internet expertise
and CommonHealth's experience in traditional media. It is currently contemplated
that each party will perform services on behalf of the joint
25
<PAGE>
venture, and will each charge the joint venture for work performed by it at its
normal rates. The joint venture may also recruit its own employees, some of whom
may come from Mediconsult and some of whom may come from CommonHealth. Profits
of the joint venture will be shared equally by the parties, and losses of the
joint venture will be shared in proportion to each party's billings to the joint
venture.
In order to enhance our content licensing initiatives and generate
additional revenue, we have entered into marketing alliances with a number of
companies and organizations. These include the healthcare division of IBM,
GeoAccess, a software development company focused on the managed care sector,
and the Ontario Hospital Association, an association of approximately 185
not-for-profit hospitals.
VISITOR TRAFFIC
To improve the depth and breadth of our medical content and to increase
visitor traffic, we have recently completed strategic initiatives to purchase,
manage or sponsor the following Web sites:
- PHARMINFO.COM, a leading Web site providing information on pharmaceutical
products and clinical trials for pharmacists, physicians and consumers. We
acquired PHARMINFO.COM in December 1998, in exchange for 100,000 shares of
our common stock. The fair value of these shares of common stock was $0.8
million, which was capitalized and will be amortized over two years.
- CYBERDIET.COM, a Web site providing tailored nutritional information and
programs. In February 1999, we entered into a memorandum of agreement
outlining the principal terms of an exclusive management arrangement with
CyberDiet, Inc., the owner of CYBERDIET.COM, granting to Mediconsult the
sole right to place advertisements on the Web site, to link traffic, and
to manage the content on the Web site. We have an option to purchase
CyberDiet, Inc., and this company has under certain circumstances the
right to cause us to purchase it, in exchange for 400,000 shares of our
common stock. We expect to exercise this option.
- INCIID.ORG, a Web site providing information on infertility. In February
1999, we entered into an exclusive sponsorship agreement with the
InterNational Counsel of Infertility Information Dissemination, a
not-for-profit organization, relating to INCIID.ORG and granting to
Mediconsult the sole right to place advertisements on the Web site, to
link traffic, and to manage the content on the Web site. In connection
with this agreement, we have committed to pay INCIID $0.5 million per year
beginning in 1999, for three years in equal quarterly installments, in
cash or common stock as we determine with respect to each quarter.
We believe that our Web sites collectively represent one of the most highly
trafficked consumer healthcare information sites on the Internet. In January
1999 (on a pro forma basis as if acquired, managed or sponsored on the first day
of the month), our owned, managed and sponsored Web sites had more than 1.3
million visitors viewing over 9.2 million pages of information.
CORPORATE
Mediconsult was originally incorporated under the laws of the State of
Colorado in October 1989. In April 1996, we purchased Mediconsult.com Limited, a
Bermuda corporation (MCL), through a merger in which MCL became a wholly-owned
subsidiary. In December 1996, we consummated a reincorporation merger pursuant
to which we became a Delaware corporation. Mediconsult conducts its business
primarily through MCL, its Bermudian subsidiary. In addition to MCL, Mediconsult
has established subsidiaries in the United States, Canada and the United
Kingdom. Our operations are conducted by MCL, which has obtained an exemption
from all Bermudian income taxes until the year 2016. MCL has, however, entered
into service agreements with other subsidiaries of Mediconsult for
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their employees to provide services to MCL. These subsidiaries will be subject
to income taxes in their jurisdictions.
STOCK OPTIONS AND WARRANTS
Stock options granted to consultants and employees are expensed over their
vesting period, based on their fair value at the date of grant, under Statement
of Financial Accounting Standards No. 123 "ACCOUNTING FOR STOCK-BASED
COMPENSATION." As more fully described below in "Results of Operations," we have
recorded compensation expense in connection with the vesting of stock options
during the years ended December 31, 1997 and 1998, as well as deferred
compensation expense for the value of options granted that were not vested as of
such dates. We currently expect to amortize $0.9 million in 1999 and $27,693 in
2000 as deferred compensation expense in respect of options outstanding at
December 31, 1998. In addition, pursuant to an agreement with Arnhold and S.
Bleichroeder, Inc. to provide us with investment advisory services, we have
issued to this firm warrants to purchase an aggregate of 400,000 shares of
common stock with an exercise price of $1.22 per share, which was the closing
price of our common stock on the contract date. Of this amount, warrants for
200,000 shares of common stock were delivered upon initial filing of this
prospectus and warrants for 200,000 shares of common stock are deliverable in
2000, if certain conditions are met. Delivery of the warrants will result in the
recognition of an expense in the statement of operation equal to the fair value
of the warrants on the date of delivery.
RESULTS OF OPERATIONS
REVENUE. Revenue consists of fees received for the design, development and
implementation of on-line marketing and advertising programs, including Web site
development and implementation, advertising services, licensing our content and
Web site support. We did not have any revenue for the period from April 23, 1996
(the initial launch of MEDICONSULT.COM) to December 31, 1996. Revenue was $0.3
million for the year ended December 31, 1997 and $1.0 million for the year ended
December 31, 1998. The period-to-period growth in revenue was primarily
attributable to an increase in the number of clients and the number of marketing
and advertising programs developed and implemented for those clients.
PRODUCT AND CONTENT DEVELOPMENT. Product and content development costs
include expenses incurred by us to develop, enhance, manage, monitor and operate
our Web sites. These costs have consisted primarily of salaries and fees paid to
employees and consultants to develop and maintain the software and information
contained on our MEDICONSULT.COM Web site. For the period ended December 31,
1996, these costs consisted primarily of third party software development
expenses, which were deferred and amortized over the years ended December 31,
1997 and 1998. For the year ended December 31, 1997, these costs were $0.8
million and for the year ended December 31, 1998, these costs were $1.3 million.
For 1997 and 1998, these costs related primarily to the development of
healthcare content.
MARKETING, SALES AND CLIENT SERVICES. Marketing, sales and client services
costs include expenses incurred by us to obtain and maintain client
relationships. These costs included salaries and fees paid to employees and
consultants, and programming costs. In 1996, the marketing, sales and client
services costs were $0.4 million. In 1997, we began a process of developing
prototype marketing and advertising programs, and in the fourth quarter of 1997
began the development of our first client marketing program. For the year ended
December 31, 1997, marketing, sales and client services costs were $1.1 million.
For the year ended December 31, 1998, these costs were $1.8 million, consisting
primarily of costs associated with the development and implementation of
specific client marketing programs and of new prototype marketing and
advertising programs.
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GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
consist primarily of salaries and related costs for general corporate functions,
including finance, accounting and legal expenses, and fees for other
professional services. For the year ended December 31, 1996, general and
administrative expenses were $0.4 million. These expenses were $0.8 million for
the year ended December 31, 1997, and $1.0 million for the year ended December
31, 1998. The increase in general and administrative expenses was primarily
attributable to increased salaries and related expenses associated with hiring
additional personnel to support the growth of our operations.
FAIR VALUE OF OPTIONS GRANTED TO EMPLOYEES AND CONSULTANTS. We have
recorded compensation expense in connection with the vesting of employee stock
options of $40,235 during the year ended December 31, 1997, and $0.3 million
during the year ended December 31, 1998. In addition, for the year ended
December 31, 1998, we recorded compensation expense of $1.4 million for a stock
option granted to a consultant. Compensation expense represents the amortization
of deferred compensation which is measured based on the fair value of the
options granted. These amounts are amortized over the vesting period of the
applicable options. Compensation expense in respect of the options granted to a
consultant is related to an option for 2,000,000 shares of common stock granted
pursuant to a Strategic Consulting Interim Agreement with Treacy & Co., LLC, a
company controlled by Michael Treacy, a director of Mediconsult, as payment for
marketing consulting services. These services included marketing, sales and
client services advice, strategic planning and seconding Mr. Swanson to act in
the capacity of Vice President, Sales. We have recorded deferred compensation
for the value of the options granted that are not yet vested of $0.1 million as
of December 31, 1997 and $0.9 million as of December 31, 1998.
QUARTERLY RESULTS OF OPERATIONS DATA
The following table sets forth certain unaudited quarterly consolidated
statement of operations data for each of the eight quarters ended December 31,
1998. In the opinion of management, this data has been prepared substantially on
same basis as the audited financial statements appearing elsewhere in this
prospectus, and includes all necessary adjustments, consisting only of normal
recurring adjustments necessary for fair presentation of this data. The
quarterly data should be read in conjunction with the financial statements and
the notes to these statements appearing elsewhere in this prospectus. The
results of operations for any quarter are not necessarily indicative of the
results of operations for any future period.
We have a limited operating history upon which to evaluate our business and
predict revenue and planned operating expenses. Our quarterly operating results
may to vary significantly in the foreseeable future due to a variety of factors,
many of which are outside of our control. The timing of our advertising sales is
one of the most significant factors affecting quarterly results. The time
between the date of initial contact with a potential advertiser and the
execution of a contract with the advertiser typically ranges from six weeks for
smaller agreements to nine months for larger agreements. These contracts are
also subject to delays over which we have little or no control, including
customers' budgetary constraints, their internal acceptance reviews, whether or
when regulatory approval of their products is given by the FDA or other
regulatory authority, the possibility of cancellation or delay of projects by
advertisers and any post-approval actions taken by the FDA or other regulatory
authority, including product recalls. During the selling process, we may expend
substantial funds and management resources and yet not obtain adequate
advertising revenue. Once a contract is executed, a significant portion of our
revenue is derived from customized Web site development and implementation
projects, rather than from recurring fees. As a result, we cannot predict with
certainty when we will perform the work neccessary to receive payment for these
projects. In addition, traffic levels on Web sites have
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typically fluctuated during the summer, and during year-end and holiday periods,
and we could experience a decrease in visitor traffic to our Web sites during
these periods.
<TABLE>
<CAPTION>
QUARTER ENDED
--------------------------------------------------------------------------------------
MAR. 31, JUN. 30, SEP. 30, DEC. 31, MAR. 31, JUN.30, SEP. 30, DEC. 31,
1997 1997 1997 1997 1998 1998 1998 1998
--------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(in thousands)
STATEMENT OF OPERATIONS DATA:
Revenues................................ $ 16 $ 88 $ 69 $ 84 $ 206 $ 215 $ 238 $ 372
Operating expenses:
Product and content development....... 235 141 178 212 250 260 401 405
Marketing, sales and client
services............................ 232 236 284 379 189 492 234 896
General and administrative (1)........ 210 211 257 247 210 263 228 481
Fair value of options granted to
employees........................... -- -- -- 40 39 30 26 180
Fair value of options granted to
consultants......................... -- -- -- -- -- -- -- 1,354
--------- --------- --------- --------- --------- --------- --------- ---------
Total operating expenses............ 677 588 719 878 688 1,045 889 3,317
--------- --------- --------- --------- --------- --------- --------- ---------
Loss from operations.................... (661) (501) (649) (794) (482) (830) (651) (2,945)
Interest income (expense), net.......... (10) (10) -- -- -- -- -- --
--------- --------- --------- --------- --------- --------- --------- ---------
Net loss................................ $ (671) $ (511) $ (649) $ (794) $ (482) $ (830) $ (651) $ (2,945)
--------- --------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- --------- ---------
</TABLE>
(1) Includes $133 in 1997 and $170 in 1998 of depreciation expense.
LIQUIDITY AND CAPITAL RESOURCES
Since inception, we have financed our operations primarily through the
private placement of equity securities and advances from our principal
stockholder. As of December 31, 1998, we had $0.1 million in cash and cash
equivalents. In February 1999, we received $3.2 million in proceeds from a
private placement of equity securities to certain unrelated investors.
We have incurred substantial costs to design, develop and implement
Internet-based marketing and advertising programs for our clients, to build
brand awareness and to grow our business. As a result, we have incurred
operating losses and negative cash flows from operations in each quarter since
we commenced operations. As of December 31, 1998, we had an accumulated deficit
of $8.4 million. These losses have been funded primarily through advances by our
majority stockholder, an entity controlled by Robert A. Jennings, our Chairman
and Chief Executive Officer. These advances aggregated $4.8 million as of
December 31, 1998. Of this amount, $4.3 million is evidenced by junior preferred
stock of Mediconsult, which will be converted into common stock upon
consummation of this offering. The balance constitutes an interest free advance
of $0.5 million repayable upon demand and is expected to be repaid from the
proceeds of this offering.
To date, we have experienced negative cash flows from operating activities.
For the period ended December 31, 1996, net cash used in operating activities
was $1.0 million. For the year ended December 31, 1997, net cash used in
operating activities was $2.5 million. For the year ended December 31, 1998, net
cash used in operating activities was $2.7 million. Net cash used in operating
activities for these periods was primarily attributable to our net losses during
these periods. Net cash used reflected several factors, including (1) increased
operating expenses as our business volume increased; (2) a higher level of
accounts receivable due to growth of marketing and advertising program revenue;
and (3) increases in accounts payable, accrued expenses and deferred revenues,
which partially
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offset the increases. For the year ended December 31, 1998, the increase in net
cash used in operating activities was primarily attributable to our net
operating loss of $4.9 million. The net loss for 1998 was offset by certain
non-cash items of $1.7 million in the aggregate. This amount was comprised of
deferred compensation expense of $1.6 million related to stock options granted
to consultants and employees and the value of services received in exchange for
common stock of $0.1 million.
For the period ended December 31, 1996, net cash used in investing
activities was $0.2 million. For the year ended December 31, 1997, net cash used
in investing activities was $0.1 million. For the year ended December 31, 1998,
net cash used in investing activities was $30,225. All net cash used in
investing activities related to capital expenditures, primarily the acquisition
of equipment.
For the period ended December 31, 1996, net cash provided by financing
activities was $1.6 million. For the year ended December 31, 1997, net cash
provided by financing activities was $2.6 million. For the year ended December
31, 1998, net cash provided by financing activities was $2.4 million. Net cash
proceeds from financing activities in 1996 was primarily attributable to the
issuance of common stock and to a lesser extent from unsecured advances from our
majority stockholder. Net cash proceeds from financing activities in 1997 and
1998 was primarily attributable to net proceeds we received from unsecured
advances from the majority stockholder in the aggregate amount of $2.6 million
in 1997 and $2.2 million in 1998. By September 30, 1998, $4.3 million of the
cash advances from our majority stockholder made prior to that date had been
converted into junior preferred stock. The junior preferred stock will convert
into common stock upon the closing of this offering.
As of December 31, 1998, we had no principal capital commitments
outstanding. We have spent $0.4 million on capital expenditures since inception.
We estimate that our capital expenditures will be $0.7 million for 1999,
principally for improvements to our technical infrastructure, including the
transfer of our main production and development equipment operations from a
third party to our own facility.
In connection with our planned 50/50 joint venture with CommonHealth, we
expect to advance approximately $0.3 million to the joint venture as our share
of its initial capitalization. Under our agreement with CommonHealth, we may
borrow this amount from CommonHealth. If we do borrow this amount, we must repay
it from 25% of our half of the net profits of the joint venture, if any, and, in
any event within three years from the formation of the joint venture or sooner
if the joint venture is terminated.
In connection with our sponsorship and management of INCIID.ORG, we have
committed to pay INCIID $0.5 million per year beginning in 1999 for three years
in equal quarterly installments, in cash or common stock as we determine with
respect to each quarter.
On February 26, 1999, we sold in a private placement an aggregate of 506,329
shares of our newly designated senior preferred stock and warrants exercisable
for five years to purchase 224,000 shares of such senior preferred stock to
Nazem & Company IV, L.P., Transatlantic Venture Fund C.V. (a joint venture of
Nazem & Company and Banque Nationale de Paris) and other individual investors,
for an aggregate of $3.2 million. The purchase price was, and the conversion
price of the senior preferred stock and exercise price of the warrants is, $6.32
per share, an amount equal to 85% of the average bid and ask price of our shares
on the OTC Bulletin Board for the relevant 30-day period preceding the closing.
The shares of senior preferred stock are convertible at any time at the option
of the holder into an equal number of shares of common stock, subject to
adjustment, and will be automatically converted into an equal number of shares
of common stock upon the closing of this offering. The senior preferred stock
has voting rights on an as-converted basis. In connection with such private
placement, we agreed to provide the holders of senior preferred stock or common
stock issuable upon the conversion of senior preferred stock demand and piggy
back registration rights, the right to tag-along with our founders in certain
sales of their shares, and the right to nominate a member of our board of
directors so long as they maintain at least 50% of their original share
position. If we offer our
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common stock to the public in this offering at a price below $6.32 per share,
the conversion price of the senior preferred stock and the exercise price of the
warrants will be lowered to a price equal to 85% of the price to the public in
this offering. In connection with this investment, and for so long as the
investors hold at least 50% of their original share position, we agreed not to
effect any material change in the direction of our business unless approved by
at least two-thirds of the board of directors and then only after consultation
with the investors.
In March 1999, we entered into a source code license agreement with
TVisions, relating to the proprietary software that we use to operate
MEDICONSULT.COM and certain other of our Web Sites. We paid TVisions the sum of
$260,000 as payment in full for this license.
Our ability to generate significant revenue is uncertain. We incurred net
losses of approximately $0.9 million for the year ended December 31, 1996, $2.6
million for the year ended December 31, 1997 and $4.9 million for the year ended
December 31, 1998. We expect losses from operations and negative cash flow to
continue for the foreseeable future and at least through the year 2000 as a
result of our expansion plans and our expectation that our operating expenses
will increase significantly in the next several years. The rate at which these
losses will be incurred may increase from current levels. Although we have
experienced revenue growth in recent periods, our revenue may not remain at its
current level or increase in the future. If our revenue does not increase and if
our spending levels are not adjusted accordingly, we may not generate sufficient
revenue to achieve profitability, which would have a material adverse effect on
our business, financial condition and results of operations. Even if we achieve
profitability, we may not sustain or increase profitability on a quarterly or
annual basis in the future.
Our working capital requirements depend on numerous factors. We have
experienced a substantial increase in our expenditures since our inception
consistent with growth in our operations and staffing, and anticipate that this
will continue for the foreseeable future. We anticipate incurring additional
expenses to increase our marketing and sales efforts, for content development
and for technology and infrastructure development. Additionally, we will
continue to evaluate possible investments in businesses, products and
technologies, the expansion of our marketing and sales programs and more
aggressive brand promotions. If we experience a shortfall in revenue in relation
to our expenses, or if our expenses precede increased revenue, our business,
financial condition and results of operation and could be materially and
adversely affected.
We currently anticipate that our available cash resources combined with the
net proceeds from this offering will be sufficient to meet our anticipated needs
for working capital and capital expenditures through at least the year 2000. We
may need to raise additional funds, however, in order to fund more rapid
expansion, to develop new or enhance existing services or products, to respond
to competitive pressures or to acquire complementary products, businesses or
technologies. There can be no assurance that any required additional financing
will be available on terms favorable to us, or at all. If additional funds are
raised by the issuance of our equity securities, stockholders may experience
dilution of their ownership interest and these securities may have rights senior
to those of the holders of the common stock. If additional funds are raised by
the issuance of debt by us, we may be subject to certain limitations on our
operations, including limitations on the payment of dividends. If adequate funds
are not available or not available on acceptable terms, we may be unable to fund
our expansion, successfully promote our brand name, take advantage of
acquisition opportunities, develop or enhance services or respond to competitive
pressures, any of which could have a material adverse effect on our business,
financial condition and results of operations.
Although a significant portion of our revenue is derived from activities
conducted outside the United States, fees paid to us have been and are expected
to continue to be paid in U.S. dollars. However, a substantial portion of our
payroll is paid and it is expected that rent under leases of office facilities
outside the United States will be paid, in currencies other than U.S. dollars.
Because our
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financial results are reported in U.S. dollars, they are affected by changes in
the value of the various foreign currencies in which we make payments in
relation to the U.S. dollar. We do not cover known or anticipated operating
exposures through foreign currency exchange option or forward contracts. The
primary currency for which we have foreign currency exchange rate exposure is
the Canadian dollar. Our financial instruments, including cash, accounts
receivable, accounts payable and accrued liabilities and advances from
shareholder are carried at cost which approximates their fair value because of
the short-term maturity of these instruments.
IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS
In March 1998, the Accounting Standards Executive Committee (AcSEC) issued
Statement of Position (SOP) 98-1, "ACCOUNTING FOR THE COSTS OF COMPUTER SOFTWARE
DEVELOPED OR OBTAINED FOR INTERNAL USE." This SOP provides guidance on
accounting for the costs of computer software developed or obtained for internal
use. SOP 98-1 identifies the characteristics of internal-use software and
provides examples to assist in determining when computer software is for
internal use and whether it should be expensed or capitalized. The SOP is
effective for financial statements for fiscal years beginning after December 15,
1998. We believe that we currently comply with the provisions of this standard
and, therefore, believes that the adoption of this standard will not have a
significant impact on our business, financial condition and results of
operations.
The AcSEC SOP 98-5, "REPORTING COST OF START-UP ACTIVITIES," effective for
fiscal years beginning after December 15, 1998, requires costs of start-up
activities and organization costs to be expensed as incurred. Currently, we
expense these costs as incurred and, consequently, we believe that the adoption
of this SOP will not have an impact on our business, financial condition and
results of operations.
YEAR 2000
Some computers, software and other equipment include programming code in
which calendar year data is abbreviated to only two digits. As a result of this
design decision, some of these systems could fail to operate or fail to produce
correct results if "00" is interpreted to mean 1900, rather than 2000. These
problems are widely expected to increase in frequency and severity as the year
2000 approaches and are commonly referred to as the year 2000 problem.
Significant uncertainty exists in the software and Internet industries
concerning the scope and magnitude of problems associated with the year 2000
problem.
INTERNAL INFRASTRUCTURE. We believe that we have identified substantially
all of the major computers, software applications and related equipment used in
connection with our internal operations to determine if they will be year 2000
compliant. Based on our assessment to date, we presently believe that our
internal computer systems are year 2000 compliant. Nevertheless, we continue to
test our internal systems, on a system by system basis, as we complete our
ongoing compliance efforts with respect to non-information technology systems.
SYSTEMS OTHER THAN INFORMATION TECHNOLOGY SYSTEMS. In addition to computers
and related systems, the operation of our offices and facilities equipment, such
as fax machines, photocopiers, telephone switches, security systems, elevators
and other common devices may be affected by the year 2000 problem. We have
completed the assessment of potential effect of, and costs of remediating, any
year 2000 problem related to this equipment. We do not have extensive facilities
and office equipment at this time. We estimate that our total cost of completing
any required modifications, upgrades or replacements of these internal systems
will not be material.
SUPPLIERS. We have been gathering information from and have initiated
communications with our service and content providers to identify and, to the
extent possible, resolve issues involving the year 2000 problem. However, we
have limited or no control over the actions of our service and content
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providers. Thus, while we expect that we will be able to resolve any significant
year 2000 problems with our systems, we cannot guarantee that our service and
content providers will resolve any or all year 2000 problems with their systems
before the occurrence of a material disruption to our business. Any failure of
these third-parties to resolve year 2000 problems with their systems in a timely
manner could have a material adverse effect on our business, financial condition
and results of operations.
MOST LIKELY CONSEQUENCES OF YEAR 2000 PROBLEMS. We expect to identify and
resolve all year 2000 problems that could materially adversely affect our
business, financial condition or operating results. However, we believe that it
is not possible to determine with complete certainty that all year 2000 problems
affecting us have been identified or corrected. The number of devices that could
be affected and the interactions among these devices are simply too numerous. In
addition, we cannot accurately predict how many failures related to the year
2000 problem will occur or the severity, duration or financial consequences of
such failures. As a result, we expect that we could possibly suffer the
following consequences:
- a significant number of operational inconveniences and inefficiencies for
us, our service and content providers and our visitors that may divert our
time and attention and financial and human resources from our ordinary
business activities; and
- a lesser number of serious system failures that may require significant
efforts by us, our service and content providers or our visitors to
prevent or alleviate material business disruptions.
In addition, there can be no assurance that governmental agencies, utility
companies, Internet access companies, third-party service providers and others
outside of our control will be year 2000 compliant. The failure of these
entities to be year 2000 compliant could result in a systemic failure beyond our
control, such as a prolonged Internet, telecommunications or electrical failure,
which could also prevent us from operating our business, prevent visitors from
accessing our Web sites, or change the behavior of consumers accessing our Web
sites, which could have a material adverse effect on our business, financial
condition and results of operations.
CONTINGENCY PLANS. As discussed above, we are engaged in an ongoing year
2000 assessment and have not yet developed any contingency plans. The results of
our year 2000 simulation testing and the responses received from third-party
vendors and service providers will be taken into account in determining the
nature and extent of any contingency plans.
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DESCRIPTION OF BUSINESS
OVERVIEW
Mediconsult is a leading provider of patient-oriented healthcare information
and services on the World Wide Web. Our Web sites provide a trusted source of
comprehensive and easy to understand medical information and are designed to
empower consumers through increased education related to medical conditions and
treatment alternatives. Our Web sites also provide a destination on the Internet
where visitors can interact with others in a community environment. We
facilitate this environment through a well-organized, easy to navigate format
and an array of complementary services, including moderated on-line support
groups and discussion forums. By fostering communities centered around prevalent
medical conditions and health issues, we believe we create significant
opportunities for pharmaceutical and other healthcare companies to reach a
highly-targeted consumer audience using Internet-based marketing and advertising
programs.
Our address is 33 Reid Street, 4th Floor, Hamilton, Bermuda. Our telephone
number is (441) 292-0474. Our main Web site is WWW.MEDICONSULT.COM. Information
contained on our Web sites is not, and should not be deemed to be, a part of
this prospectus.
INDUSTRY BACKGROUND
As consumers have become more proactive in their personal healthcare
decisions, they have increasingly searched for information about medical
conditions, treatment alternatives and medical outcomes. The Internet enables
consumers to access large quantities of this information quickly and easily.
THE RAPID GROWTH OF THE INTERNET. The growth of the Internet as a new means
of communicating, accessing information and engaging in commerce has been rapid
and is expected to accelerate. Jupiter Communications estimates that the number
of Internet users worldwide will grow from approximately 85 million at the end
of 1997 to approximately 250 million by the end of 2002. This growth is being
driven by a number of factors, including a growing base of PCs in the home and
workplace, improvements in network infrastructure, more convenient, faster and
inexpensive Internet access, technological advances in PCs and modems, increased
quantity and quality of content available on the Internet and the overall
increased public awareness of the Internet. Due to its large audience, the
Internet represents a significant channel for advertisers. Jupiter
Communications estimates that the amount of Internet advertising in the United
States will grow from approximately $300 million in 1996 to approximately $7.7
billion by 2002.
THE INTERNET HEALTHCARE USER. Health and medical information is one of the
fastest growing areas of interest on the Internet. Cyber Dialogue estimates that
for the 12 months ended July 1998, approximately 17 million adults in the United
States searched on-line for health-related information, an increase of 119%
since July 1996. Cyber Dialogue data indicates that these users are better
educated, have higher household incomes, are more often female and are more
experienced with the Internet than the general population of Internet users.
THE INTERACTIVE NATURE OF THE INTERNET. The Internet provides an effective
method for consumers to access large quantities of reliable and independent
information on medical conditions, treatment alternatives and medical outcomes.
We believe that access to this information, together with support groups and
interaction with medical experts on-line, lead to a greater understanding of
health issues and improved patient compliance with pharmaceutical protocols. The
Internet also provides an attractive vehicle for pharmaceutical and other
healthcare companies to increase consumers' awareness of diagnosed and
undiagnosed medical conditions and treatment options. The Internet allows
pharmaceutical companies to easily provide information targeted to visitors'
needs, which may lead to improved patient compliance with prescribed drug
therapies. Consumer Health Information Corporation estimates that 10% of
prescriptions are never filled, 33% are not properly refilled and
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50% are not taken as prescribed, resulting in poorer health outcomes for
patients and increased expenditures to the overall healthcare system.
DIRECT-TO-CONSUMER ADVERTISING ON THE INTERNET. The Internet's interactive
nature, coupled with the demographics of the Internet healthcare user, makes the
Internet an attractive vehicle for direct-to-consumer (DTC) advertising of
prescription pharmaceuticals. Due to recent regulatory changes regarding the
type of information that may be disclosed to consumers in pharmaceutical
advertising and increased demand for healthcare information by consumers, DTC
advertising of prescription pharmaceuticals has increased from approximately
$590 million in 1996 to an estimated $1.8 billion in 1998 and is projected to
grow to $7.5 billion in 2005. We believe that the Internet will capture an
increasing portion of this market as pharmaceutical companies recognize the
value of this medium for their products.
OUR SOLUTION
Through our Web sites, Mediconsult addresses the consumer's needs for
healthcare information and provides a targeted marketing and advertising
platform for pharmaceutical and other healthcare companies. Key elements of our
solution include:
HIGH QUALITY, TRUSTED CONTENT; USER-FRIENDLY ENVIRONMENT. We provide our
visitors with high quality content on specific medical conditions and health
issues in an easy-to-navigate environment. We search for and review extensive
amounts of health information and select relevant material from a wide variety
of sources, including medical journals, healthcare association literature and
general periodicals. For each medical topic covered on our Web sites, we
aggregate an average of 30 articles covering current news, symptoms and
treatment alternatives that are understandable to the average consumer.
MEDICONSULT.COM is constructed to enable a person interested in any one of the
60 medical topics covered on our Web sites to access a broad range of
information, including relevant information on other portions of our Web sites.
For example, a visitor to the diabetes page will be referred to relevant
information for diabetics on the nutrition section. We frequently solicit
visitor feedback through surveys and polls and use this information to refine
further our content and expand our complementary offerings.
STRONG SENSE OF ON-LINE COMMUNITY. We have developed a strong sense of
on-line community by organizing our Web sites into conditions of concern to
healthcare consumers and providing complementary services. Our Web sites provide
our visitors with the ability to:
- share and search for information in consultation with healthcare
professionals on particular conditions;
- communicate (through chat groups, bulletin boards, and participation in
polls and surveys) with other visitors with similar health conditions,
interests or experiences;
- participate in moderated on-line support groups;
- participate in live, on-line events hosted by prominent physicians; and
- receive quick responses from our visitor support staff.
LARGE, HIGHLY TARGETED AUDIENCE. Our Web sites are designed to attract a
highly desirable target audience for pharmaceutical and other healthcare
advertisers. We have developed a sophisticated, integrated database of
demographic information about patients' needs, habits, preferences and
intentions. This database of information indicates that approximately 62% of the
visitors to MEDICONSULT.COM have been diagnosed with or believe they have a
chronic medical condition covered on this Web site, and that an additional 21%
are friends, family or caregivers. This data also indicates that 64% of the
visitors to MEDICONSULT.COM are female, the average age of our visitors is 39
and approximately 70% of our visitors are college educated. We are able to
identify our visitor traffic
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patterns by condition or health issue, which provides relevant information for
advertisers seeking to target an audience for a particular pharmaceutical
product or condition.
BROAD, SOPHISTICATED INTERNET HEALTHCARE MARKETING AND ADVERTISING
PROGRAMS. We design, develop, and implement broad, sophisticated Internet
marketing and advertising programs for pharmaceutical and other healthcare
companies and provide ongoing support services as part of these programs. We
utilize our extensive knowledge of the Internet healthcare user and our high
quality content to effectively design and develop programs focused on a
particular product or health issue. These programs incorporate one or more of a
broad spectrum of advertising products ranging from banner advertisements to
customized Web sites containing relevant content from our Web sites. In
addition, we create calls to action, through visitor polls, surveys and coupons,
to allow advertisers to gain more information about the visitor. We design our
on-line marketing and advertising programs to complement our clients'
traditional off-line media campaigns.
VALUE TO ADVERTISERS. We design our marketing and advertising programs to
address highly targeted audiences, enabling our clients to direct their
advertising dollars toward consumers most likely to use their products. These
programs are structured to provide our advertisers with a measurable return on
investment by tracking the level of interest and interactive responses of
visitors.
OUR STRATEGY
Our strategy is to be the leading provider of healthcare information to
consumers on the Internet and to use this position to provide targeted marketing
and advertising programs for pharmaceutical and other healthcare companies on
the Web. The key elements of our strategy are to:
ENHANCE VISITOR EXPERIENCE AND SENSE OF ON-LINE COMMUNITY. We are committed
to continually improving the utility and perceived value of our Web sites. We
seek to:
- broaden and deepen the content of our Web sites;
- improve the navigability of our Web site environment;
- expand and enhance our suite of complementary services;
- further segment medical topics into more specific ones; and
- tailor our Web sites to meet the needs and preferences of our visitors.
INCREASE TARGETED TRAFFIC THROUGH STRATEGIC ACQUISITIONS AND RELATIONSHIPS,
AND CONTENT LICENSING. We seek to bolster our traffic and revenue through
strategic acquisitions and relationships. We believe that we can increase the
number of visitors to our Web sites by linking topic-specific or
condition-specific Web sites to ours with "click throughs." We have recently
completed strategic initiatives to purchase, manage or sponsor three significant
Web sites to improve the depth and breadth of our medical content and to
increase visitor traffic.
- PHARMINFO.COM, a leading Web site providing information on pharmaceutical
products and clinical trials for pharmacists, physicians and consumers;
- CYBERDIET.COM, a Web site providing tailored nutritional information and
programs; and
- INCIID.ORG, a Web site providing information on infertility.
We believe that there will be significant opportunities to continue to
manage or acquire Web sites or content that will complement our existing content
offerings. We also increase our visitor traffic and related revenue
opportunities by licensing our content to other Web sites that we manage.
BROADEN RELATIONSHIPS WITH PHARMACEUTICAL ADVERTISERS. We seek to broaden
our relationships with pharmaceutical advertisers in several ways. We seek to
expand our relationships with our existing clients to broaden the number of
programs, both in terms of number of products and types of client services, that
we provide to them. For example, our work with Novartis Consumer Health Canada,
in designing
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and developing a Web site for the Habitrol smoking cessation product has led to
a relationship with Novartis Pharma, the pharmaceutical division of Novartis AG.
We have a number of projects and proposals with Novartis Pharma currently in
process. We are also actively pursuing a number of major pharmaceutical
companies and other healthcare advertisers with proposals tailored to their
specific products and marketing strategies. In addition, we seek to enter into
corporate partnering relationships to expand and enhance our client base. For
example, our February 1999 memorandum of agreement with CommonHealth is intended
to broaden our marketing initiatives within the pharmaceutical industry.
BUILD STRONG BRAND AWARENESS. We believe that establishing brand awareness
is critical to attracting and retaining visitors and advertisers. We seek to
build our brand by creating a superior visitor experience and creating broad
awareness of our name as the trusted on-line source for medical information. We
intend to achieve this goal by expanding our marketing and educational efforts
through both off-line and on-line marketing initiatives, including collaborative
events with patient associations such as the National Stroke Association and the
Arthritis Foundation, speeches and media coverage.
OUR MEDICONSULT.COM WEB SITE
MEDICONSULT.COM serves as a gateway for access to a comprehensive source of
health-related information focused on the clinical and educational needs of the
general public, as well as practicing physicians and other healthcare
professionals. Since our inception in 1996, we have focused on developing our
reputation as the leading independent provider of health information to
consumers on the Web. MEDICONSULT.COM includes easy to understand information on
more than 60 chronic medical conditions and health issues. We believe that in
the United States these medical conditions affect more than 90 million people
and represent a significant portion of healthcare spending. The specific medical
conditions and health issues covered by our Web sites include:
<TABLE>
<S> <C> <C>
Acid Reflux Emphysema Multiple Sclerosis
AIDS/HIV Epilepsy Nutrition
Alzheimer's Disease Erectile Dysfunction Osteoporosis
Anxiety Fitness Palliative Care
Arthritis General Parkinson's Disease
Asthma GERD (Heartburn/Acid Reflux) Peptic Ulcers
Attention Deficit Disorder Headache Pregnancy Complications
Benign Prostatic Hypertrophy Heart Disease Prostate Cancer
Bladder Cancer Heartburn Senior Health
Brain Tumor Herpes Sexually Transmitted Diseases
Breast Cancer Hypertension Skin Cancer
Bronchitis Ileostomy Skin Disorder
Cancer Support Group Incontinence Smoking Cessation
Cervical Cancer Infertility Spinal Cord Injury
Children's Health Inflammatory Bowel Disease Stoma/Ileostomy/Colostomy
Chronic Fatigue Syndrome Interstitial Cystitis Stress
Chronic Pain Kidney Cancer Strokes
Chronic Renal Failure Leukemia Testicular Cancer
Cirrhosis Liver Disease Travel Vaccinations
Colorectal Cancer Lung Cancer Urinary Stones
Colostomy Lymphoma Vasectomy
Contraception Melatonin Vitamins
Depression Menopause Women's Health
Diabetes Men's Health
Eating Disorders Migraines
</TABLE>
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Within this group of medical conditions, we provide specific tools,
resources, experts and information databases to assist visitors in dealing with
a variety of inquiries including those relating to a recent diagnosis, general
background information, and highly technical drug profiles. These resources
include:
- comprehensive and easy to understand independent medical information from
a variety of independent sources, including medical journals, healthcare
association literature and general periodicals;
- a community of visitors with an interest or experience in the topic;
- an on-line moderated support group;
- our MediXpert service, which provides customized on-line medical reports
from medical specialists; and
- a selection of recommended books and other healthcare products for
purchase on-line.
Our MEDICONSULT.COM Web site has received awards from more than 30
independent organizations under the general categories of content, navigation
and overall design. Among the more recent awards and citations are those from
ENCYCLOPAEDIA BRITANNICA (one of 76 "Best of Web" sites out of 125,000
reviewed), THE LANCET ("An exceptionally well-designed, easy to navigate site
brimming with health news and patient-oriented information"), and POPULAR
SCIENCE (one of the "50 Best of the Web" for 1998). In January 1999, our
MEDICONSULT.COM Web site was one of 110 Web sites nominated for a "Webby" by the
International Academy of Digital Arts and Science. We believe that these awards
from independent companies and agencies help to build awareness of, and visitor
traffic to, our MEDICONSULT.COM Web site and provide third party validation of
the perceived thoroughness and quality of the Web site and its content.
Our MediXpert service provides access to more than 45 medical specialists.
For a fee, a visitor can submit a case scenario including background information
and questions to physicians specializing in their medical condition. The
specialist reviews the information and responds with a detailed report a few
days later. The specialist's report is designed to be shared with the visitor's
primary physician, who can examine the report and incorporate it into the
patient's healthcare plan, as appropriate. The report clearly indicates that it
is not a diagnosis or specific medical advice, and advises the visitor to
discuss all material received in the case scenario report with the visitor's
healthcare provider before acting on the information in any way. The information
provided is not intended to constitute the practice of medicine. In order to
ensure security, encryption technology and/or password protection is employed at
every stage. Furthermore, the visitor's name is not made available to the
specialist and a visitor name and password, known only to the visitor who
submitted the information, are required to access the report.
We also provide our visitors with the ability to purchase the following
products on-line through our MEDICONSULT.COM Web site:
- MEDI-STORE. We operate an on-line store on MEDICONSULT.COM. Through this
store, visitors can purchase selected medical products, vitamins and
supplements categorized by medical condition.
- MEDI-BOOKS. Through an agreement with Amazon.com, we offer visitors the
opportunity to purchase healthcare-related books that have been reviewed
by our medical professionals. This offers the visitor a pre-screened and
targeted list of recommended books that are relevant to their area of
interest.
We believe that visitor support services are important in order to attract
and retain visitors to our Web sites. We provide visitor support primarily
through e-mail-based correspondence. Help and feedback buttons are prominently
displayed throughout the MEDICONSULT.COM Web site, and our visitor support staff
responds to most e-mail queries within 24 hours. In addition, through our
support group activities, healthcare professionals provide free e-mail support
for a broad range of issues.
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We have strict policies and practices to ensure privacy and confidentiality
of personal information posted on MEDICONSULT.COM. We adhere to the Health on
the Network (HON) code of conduct (WWW.HON.ORG) and the Trusted Standards in
Electronic Transactions, known as Truste, privacy and disclosure requirements.
The Truste program is intended to maximize our disclosure to consumers with
regard to the collection of personally identifiable information on Web sites in
order to promote the Internet as a safe and secure place to conduct business,
education, communication and entertainment activities. In accordance with our
commitment to Truste, we do not display or make publicly available any
personally identifiable information without the prior written consent of the
individual identified, and we limit the usage of personally identifiable
information gathered on the site.
PRODUCTS AND SERVICES
MARKETING AND ADVERTISING PROGRAMS.
We design, develop and implement sophisticated on-line marketing and
advertising programs for pharmaceutical and other healthcare companies. These
programs are intended to educate patients on particular medical conditions,
increase their awareness of treatment options, describe the benefits of various
treatments and generally increase compliance with treatment protocols. Our
programs include:
- banner advertisements, visitor polls and surveys, and live events, to
build brand awareness;
- condition-specific content, to educate the targeted visitor group;
- calls to action and other visitor interactions, such as requests for
product samples;
- design and development of customized Web sites focused on a particular
product, treatment or medical condition;
- development of product positioning strategies and initiation of on-line
program launches; and
- Web site management and support and visitor services.
To date, we have marketed our capabilities to large pharmaceutical
companies, and listed below is a sample of programs developed for clients.
NOVARTIS CONSUMER HEALTH. We designed, developed and implemented an
on-line marketing and advertising program for Novartis Consumer Health
Canada covering its smoking cessation product, Habitrol, which in Canada
is a non-prescription drug. The program is targeted to Canadian consumers
and is designed to increase usage of Habitrol among those individuals
wishing to quit smoking and to improve their overall continuing
compliance with the protocol for the use of the product. Prior to
designing the HABITROL.COM Web site, we conducted an analysis of our own
visitor traffic across all of our medical conditions covered on our
MEDICONSULT.COM Web site to determine which visitors were most interested
in quitting smoking. We then developed, and launched in June 1998, the
Habitrol marketing and advertising program, which was coordinated with
Novartis' ongoing media campaign. In addition to the creation of the
HABITROL.COM Web site, the program includes a number of other
initiatives. Visitor traffic is generated through the coordination of
Habitrol banner advertisements on our MEDICONSULT.COM Web site with
Novartis' off-line media campaign. Individuals committing to the program
are offered a number of on-line support mechanisms by Novartis, including
daily e-mail reminders providing guidance on physical and emotional
expectations for the day, additional relevant medical information and
on-line "buddies" who had quit, or were themselves quitting smoking. In
addition, visitors are offered coupons for Habitrol and can participate
in on-line surveys. We have been receiving revenue for maintaining and
upgrading HABITROL.COM since its launch. We are currently expanding the
Habitrol program to provide French and professional healthcare versions
of the Web site.
NOVARTIS PHARMA. In October 1998, Novartis Pharma, the pharmaceutical
division of Novartis, engaged us to develop marketing and advertising
programs for several branded pharmaceutical
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products, including currently approved products and products under
clinical development. We are currently developing these programs.
OTHER. We are working with a number of other pharmaceutical and consumer
health organizations to develop marketing and advertising programs.
During 1998, we completed assessment programs for Bristol Myers Squibb,
Glaxo Wellcome and Astra Merck.
CONTENT LICENSING AND WEB SITE SUPPORT.
We also seek to increase our visitor traffic and generate additional revenue
by licensing our content to, and providing Web site support for, Web sites
established by healthcare organizations, including health maintenance
organizations, hospital chains and pharmacies. Under these arrangements, we
design, develop and maintain individual Web sites for our clients incorporating
the content from our MEDICONSULT.COM Web site. In addition, with certain clients
we maintain the right to place advertisements on these sites, sharing the
revenue with the client on a predetermined basis. Listed below is a sample of
some of our content licensing and Web site support clients.
IBM. In January 1998, we entered into a content licensing agreement with
IBM. Under this agreement, the healthcare division of IBM markets
MEDICONSULT.COM'S medical content to IBM's clients.
GEOACCESS. In December 1998, we entered into a content licensing
agreement with GeoAccess, a healthcare information services company that
provides enterprise-wide software for managed care companies, authorizing
GeoAccess to market our content to its managed care clients.
ONTARIO HOSPITAL ASSOCIATION. In October 1998, we entered into an
agreement with the Ontario Hospital Association, an association of
approximately 185 not-for-profit hospitals in Canada, to design, develop
and maintain a Web site template for use by their member hospitals for a
monthly fee. For each hospital that elects to participate, we will create
a customized home page that is integrated with the basic template. The
customized entry point allows each hospital to enhance the base Web site
with information about local services and support. We completed the
template in November 1998, and we have recently developed pilot Web sites
for five of the member hospitals.
OTHER. We are licensing our content and providing consulting services to
pharmaceutical companies and are seeking to expand our client base to
include other service providers, such as hospital groups, managed care
companies and retail pharmacies.
JOINT VENTURES, STRATEGIC ACQUISITIONS AND RELATIONSHIPS
JOINT VENTURES.
In February 1999, we entered into a memorandum of agreement to form a 50/50
joint venture with CommonHealth LLP which will focus on providing pharmaceutical
and other healthcare companies with innovative approaches to marketing their
products in comprehensive marketing and advertising campaigns containing both
significant Internet components and traditional media such as, print, television
and direct marketing. The joint venture has the right of first refusal to
provide services for these campaigns using our Internet expertise and
CommonHealth's experience in traditional forms of media. Mediconsult and
CommonHealth will each charge the joint venture for work performed by it at its
normal rates. Profits of the joint venture will be shared equally by the
parties, and losses of the joint venture will be shared in proportion to each
party's billings. In addition to the joint venture, CommonHealth and
Mediconsult, will each continue to pursue their individual business plans. In
connection with the formation of the joint venture, the parties agreed that a
representative of each party may serve on the board of directors of the other.
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STRATEGIC ACQUISITIONS
We have grown in part through recent strategic acquisitions and agreements.
We plan to continue this strategy in order to increase visitor traffic, increase
revenue, gain access to human resources, and increase the breadth and depth of
the medical content provided on our Web sites. Recently, we have acquired or
entered into Web site management or sponsorship agreements with respect to three
Web sites, each providing us with high quality content in a particular niche:
- PHARMINFO.COM, a leading Web site providing information on pharmaceutical
products and clinical trials for pharmacists, physicians and consumers. We
acquired PHARMINFO.COM in December 1998, in exchange for 100,000 shares of
our common stock.
- CYBERDIET.COM, a Web site providing tailored nutritional information and
programs. In February 1999, we entered into an agreement outlining the
principal terms of an exclusive management arrangement with CyberDiet,
Inc. related to CYBERDIET.COM and granting to Mediconsult the sole right
to place advertisements on the Web site, to link traffic, and manage the
content on the Web site. We have an option to purchase this company and
its Web site which we expect to exercise, and this company has under
certain circumstances the right to cause us to purchase it, in exchange
for 400,000 shares of our common stock.
- INCIID.ORG, a Web site providing information on infertility. In February
1999, we entered into an exclusive sponsorship agreement with the
InterNational Counsel of Infertility Information Dissemination, a
not-for-profit organization, relating to INCIID.ORG and granting to
Mediconsult the sole right to place advertisements on the Web site, to
link traffic, and manage the content on the Web site.
STRATEGIC RELATIONSHIPS
We have entered into strategic alliances with a number of patient
associations, including the Arthritis Foundation, Leukemia Society of America,
the National Stroke Association and the National Mental Health Association.
These alliances allow us to:
- gain access to condition-specific medical information;
- gain access to condition-specific visitor traffic;
- increase our visibility on the Internet; and
- increase resources available to us regarding particular medical
conditions.
MARKETING, SALES AND PROGRAM DESIGN
As of January 1, 1999, we had a marketing, sales and program design group of
14 professionals who consult regularly with clients and their advertising
agencies on how we can best apply our resources to meet their DTC marketing,
advertising and content licensing needs. We generally seek to hire individuals
with significant experience in program design, advertising sales and
pre-existing relationships with advertisers in a variety of media. Our
marketing, sales and program design professionals have an average of 12 years of
related experience.
INFRASTRUCTURE, OPERATIONS AND TECHNOLOGY
Our operating infrastructure has been designed and implemented to support
the reliable and swift delivery of hundreds of thousands of page views a day.
The design of our Web site allows for growth into millions of page views per
day. Web pages are generated and delivered in response to visitors' requests by
any one of six Web servers. Key attributes of this infrastructure include
scalability, performance and service availability.
We have deployed a standard production and development server environment
utilizing standard software solutions running on generally available server
hardware platforms. We are currently
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transitioning from a core production environment running on SGI hardware and
Unix platform hosted at TVisions of Cambridge, Massachusetts to an IBM Lotus
Domino software environment to be located in the United States, which we may
manage from Toronto, Canada. Our Web-based software systems use standard,
off-the-shelf software components. Our strategy is to license and integrate
"best-of-breed" commercially available technology from industry leaders such as
IBM, Sun Microsystems and Microsoft whenever possible. We believe this
architecture will allow us to increase rapidly the scale of our systems in a
cost-effective manner.
A number of other applications, such as client-developed application sites,
demonstration facilities for client projects and our Intranet site, are hosted
at Internoded of Cambridge, Massachusetts. Our MediStore electronic commerce
applications are hosted at Entrevision, Inc. of Toronto, Canada. Our production
servers are currently hosted at Exodus in Waltham, Massachusetts.
Our production data is copied to backup tapes each night and stored at a
third party, off-site storage facility. We are in the process of developing a
comprehensive disaster recovery plan to respond to system failures. We keep all
of our production servers behind firewalls for security purposes and do not
allow outside access at the operating systems level, except via special secure
channels. Strict password management and physical security measures are
followed.
COMPETITION
There are many companies that provide Internet and non-Internet based
marketing and advertising services to the healthcare industry. All of these
companies compete with us for advertisers, and Internet healthcare companies
also compete with us for visitor traffic. We expect competition to continue to
increase as there are no substantial barriers to entry in our market. Increased
competition could result in reductions in the fees we receive for our marketing
and advertising services, lower margins, loss of clients, reduced visitor
traffic to our Web sites, or loss of market share. Any of these occurrences
could materially and adversely affect our business, financial condition and
results of operations. Competition is also likely to increase significantly, not
only as new entities enter the market, but also as current competitors expand
their services. Our principal competitors include:
- advertising agencies and consulting firms, such as Young & Rubicam and
Agency.com, that develop marketing and advertising programs for
pharmaceutical and other healthcare companies;
- Web sites that deliver consumer healthcare information, either as their
sole focus or as part of a more broadly-based site, such as Health Oasis,
InteliHealth, iVillage, OnHealth, Thrive Online and WebMD;
- general purpose consumer online service providers, such as America Online
and Microsoft Network;
- Web site development firms, such as USWeb/CKS; and
- publishers and distributors of television, radio and print, such as CBS,
Disney, NBC and Time Warner.
Our ability to compete depends on a number of factors, many of which are
outside of our control. These factors include quality of content, ease of use,
timing and market acceptance of new and enhanced services, and level of sales
and marketing efforts.
Many of our existing competitors, as well as a number of potential new
competitors, have longer operating histories, greater name recognition, existing
relationships with pharmaceutical and other healthcare companies and
significantly greater financial, technical and marketing resources than we do.
This may allow them to devote greater resources than we can to the development
and promotion of their services. These competitors may also engage in more
extensive development efforts, undertake more far-reaching marketing campaigns,
adopt more aggressive pricing policies and make more attractive offers to
existing and potential employees, advertisers and alliance partners. Our
competitors
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may develop services that are equal or superior to those we provide or that
achieve greater market acceptance and brand recognition than we achieve. In
addition, current and potential competitors have established or may establish
cooperative relationships among themselves or with third parties to increase
their ability to address the needs of advertisers. It is possible that new
competitors may emerge and rapidly acquire significant market share. We may not
be able to compete successfully or competitive pressures may have a material
adverse effect on our business, results of operations and financial condition.
If advertisers perceive the Internet generally or our Web sites to be a
relatively limited or ineffective advertising medium, advertisers may be
reluctant to devote a significant portion of their advertising budget to
Internet advertising or to advertise on our Web sites.
INTELLECTUAL PROPERTY, PROPRIETARY RIGHTS AND DOMAIN NAMES
We protect our intellectual property through a combination of trademark and
copyright law, trade secret protection and confidentiality with our employees,
customers, independent contractors and strategic partners. We pursue the
registration of our domain names, trademarks and service marks in the United
States, and have obtained trademark registration in the United States of
"MEDICONSULT.COM" and assert various other trademarks and servicemarks.
Effective trademark, service mark, copyright and trade secret protection may not
be available in every country in which our services and products are made
available on-line. We obtain a majority of our content from the public domain.
In addition, we create some of our own content and obtain rights to use the
balance of our content from third parties. It is possible that we could become
subject to infringement actions based upon the content obtained from these third
parties. In addition, others may use this content and we may be subject to
claims from our licensors. We currently have no patents or patents pending and
do not anticipate that patents will become significant part of our intellectual
property in the future. We seek to enter into confidentiality agreements with
our employees and independent consultants and we have instituted procedures to
control access to and distribution of our technology, documentation and other
proprietary information and the proprietary information of others from whom we
license content. The steps we take to protect our proprietary rights may not be
adequate and third parties may infringe or misappropriate our copyrights,
trademarks, service marks and similar proprietary rights. In addition, other
parties may assert claims of infringement of intellectual property or alter
proprietary rights against us. The legal status of intellectual property on the
Internet is currently subject to various uncertainties.
HUMAN RESOURCES
As of January 31, 1999, we employed 35 full-time employees, of whom 14 were
in marketing, sales and program design, 12 were in product and content
development, four were in administration and corporate services, and five were
in operations and support. In addition, there were 10 part-time employees. As we
continue to grow and introduce more products, we expect to hire more personnel.
Competition for personnel is intense and we may not be able to retain our senior
management or other key personnel in the future. None of our current employees
is represented by a labor union or is the subject of a collective bargaining
agreement. We believe that relations with our employees are good.
GOVERNMENT REGULATION AND LEGAL UNCERTAINTIES
GENERAL. There is an increasing number of laws and regulations pertaining
to the Internet. In addition, a number of legislative and regulatory proposals
are under consideration by federal, state, local and foreign governments and
agencies. Laws or regulations may be adopted with respect to the Internet
relating to liability for information retrieved from or transmitted over the
Internet, online content regulation, visitor privacy, taxation and quality of
products and services. Moreover, the applicability to the Internet of existing
laws governing issues such as intellectual property ownership and infringement,
copyright, trademark, trade secret, obscenity, libel, employment and personal
privacy is uncertain and developing. Any new legislation or regulation, or the
application or interpretation of existing laws may have an adverse effect on our
business. In addition to Internet regulation, our Web
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sites may be subject to numerous state and federal laws that govern the delivery
of healthcare services and goods in the United States. These laws range from
laws prohibiting the offer, payment or receipt of remuneration to induce
referrals to entities providing healthcare services and goods to licensure
requirements as well as special protection for healthcare data. These laws are
complicated and are under constant revision and interpretation. These laws and
their active enforcement, particularly in the area of healthcare fraud, affects
the way all healthcare providers structure their business relationships and
deliver healthcare services and goods. New developments in this area could
affect the structure and operation of our business. In the event some state or
federal regulatory agency determined that our relationship with one or more of
our advertisers that deliver healthcare services or goods violate any such laws,
then we could be subjected to fines and other costs and could be required to
revise or terminate that portion of our business.
LIABILITY FOR INFORMATION RETRIEVED FROM OUR WEB SITES AND FROM THE
INTERNET. Content may be accessed on our Web sites and this content may be
downloaded by visitors and subsequently transmitted to others over the Internet.
This could result in claims against us based on a variety of theories, including
defamation, practicing medicine without a license, malpractice, obscenity,
negligence, copyright or trademark infringement or other theories based on the
nature, publication and distribution of this content. Some of these types of
claims have been brought, sometimes successfully, against providers of Internet
services in the past. We could also be exposed to liability with respect to
third-party content that may be posted by visitors in chat rooms or bulletin
boards offered on our Web sites. It is also possible that if any information,
including information deemed to constitute professional medical advice provided
by a specialist on MediXpert contains errors or false or misleading information,
third parties could make claims against us for losses incurred in reliance on
such information. In addition, we may be subject to claims alleging that, by
directly or indirectly providing links to other Web sites, we are liable for
copyright or trademark infringement or the wrongful actions of third parties
through their respective Web sites. The Communications Decency Act of 1996 (CDA)
provides that, under certain circumstances, a provider of Internet services
shall not be treated as a publisher or speaker of any information provided by a
third-party content provider. This safe harbor has been interpreted to exempt
certain activities of providers of Internet services. Our activities may prevent
us from being able to take advantage of this safe harbor provision. While we
attempt to reduce our exposure to such potential liability through, among other
things, visitor policies and disclaimers, the enforceability and effectiveness
of such measures are uncertain. Any claims brought against us in this respect
may have a material and adverse effect on our business.
ON-LINE CONTENT REGULATIONS. While we do not believe the content on our Web
sites is obscene or indecent, our Web sites contain healthcare content which is
explicit in nature and is intended for a mature audience. Several federal and
state statutes prohibit the transmission of certain types of indecent, obscene
or offensive content over the Internet to certain persons. The enforcement of
these statutes and initiatives, and any future enforcement activities, statutes
and initiatives, may result in limitations on the type of content and
advertisements available on our Web sites. Legislation regulating online content
could dampen the growth in use of the Internet generally and decrease the
acceptance of the Internet as an advertising and e-commerce medium, which could
have a material adverse effect on our business, results of operations and
financial condition. We adhere to the Health on the Network (HON) code of
conduct which establishes guidelines for health information on the Internet.
PRIVACY CONCERNS. The Federal Trade Commission (FTC) is considering
adopting regulations regarding the collection and use of personal identifying
information obtained from individuals when accessing Web sites, with particular
emphasis on access by minors. Such regulations may include requirements that
companies establish certain procedures to, among other things: (1) give adequate
notice to consumers regarding information collection and disclosure practices,
(2) provide consumers with the ability to have personally identifiable
information deleted from a company's database, (3) provide consumers with access
to their personal information and with the ability to rectify
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inaccurate information, (4) clearly identify affiliations or a lack thereof with
third parties that may collect information or sponsor activities on a company's
Web site and (5) obtain express parental consent prior to collecting and using
personal identifying information obtained from children under 13 years of age.
Such regulation may also include enforcement and redress provisions. While we
have implemented or intend to implement programs designed to enhance the
protection of the privacy of our visitors, including children, there can be no
assurance that such programs will conform with any regulations adopted by the
FTC. The FTC's regulatory and enforcement efforts may adversely affect the
ability to collect demographic and personal information from visitors, which
could have an adverse effect on our ability to provide highly targeted
opportunities for advertisers and e-commerce marketers.
It is also possible that "cookies" (information keyed to a specific server,
file pathway or directory location that is stored on a visitor's hard drive,
possibly without the visitor's knowledge) used to track demographic information
and to target advertising may become subject to laws limiting or prohibiting
their use. A number of Internet commentators, advocates and governmental bodies
in the United States and other countries have urged the passage of laws limiting
or abolishing the use of cookies. Limitations on or elimination of our use of
cookies could limit the effectiveness of our targeting of advertisements, which
could have a material adverse effect on our business, results of operations and
financial condition.
The European Union (EU) has adopted a directive that imposes restrictions on
the collection and use of personal data. Under the Directive, EU citizens are
guaranteed certain rights, including the right of access to their data, the
right to know where the data originated, the right to have inaccurate data
rectified, the right to recourse in the event of unlawful processing and the
right to withhold permission to use their data for direct marketing. The
directive could, among other things, affect U.S. companies that collect
information over the Internet from individuals in EU member countries, and may
impose restrictions that are more stringent than current Internet privacy
standard in the United States. In particular, companies with offices located in
EU countries will not be allowed to send personal information to countries that
do not maintain adequate standards of privacy. The directive does not, however,
define what standards of privacy are adequate. As a result, there can be no
assurance that the directive will not adversely affect the activities of
entities such as us that engage in data collection from visitors in EU member
countries.
DOMAIN NAMES. Domain names are Internet "addresses." The current system for
registering, allocating and managing domain names has been the subject of
litigation, including trademark litigation, and of proposed regulatory reform.
We have registered as our URL, the domain name "MEDICONSULT.COM." Although we
have registered "MEDICONSULT.COM" as a trademark, third parties may bring claims
for infringement against us for the use of this trademark. There can be no
assurance that our domain names will not lose their value, or that we will not
have to obtain entirely new domain names in addition to or in lieu of our
current domain names if reform efforts result in a restructuring of the current
system.
JURISDICTIONS. Due to the global nature of the Internet, it is possible
that, although transmissions by us over the Internet originate primarily in the
United States, the governments of other states and foreign countries might
attempt to regulate our transmissions or prosecute us for violations of their
laws. These laws may be modified, or new laws enacted, in the future. Any of the
foregoing developments could have a material adverse effect on our business,
results of operations and financial condition. In addition, as our service is
available over the Internet in multiple states and foreign countries, these
jurisdictions may claim that we are required to qualify to do business as a
foreign corporation in each state or foreign country. We have not qualified to
do business as a foreign corporation in any jurisdiction. This failure by us to
qualify as a foreign corporation in a jurisdiction where we are required to do
so could subject us to taxes and penalties and could result in our inability to
enforce contracts in such jurisdictions. Any new legislation or regulation, the
application of laws and regulations from jurisdictions whose laws do not
currently apply to our business, or the application of
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existing laws and regulations to the Internet and other online services could
have a material adverse effect on our business, financial condition and results
of operations.
FACILITIES
To date, we have operated without corporate office space for our employees.
We manage our operations through an internal computer network that contains
substantially all of our records, plans, projects in process and other
information and we communicate principally via e-mail, telephone and
face-to-face meetings. We have no leases for office space, as all employees are
geographically disperse and work out of home offices or independent or client
offices. We are headquartered in Hamilton, Bermuda, occupying space in the
office of Robert A. Jennings, our Chief Executive Officer, at no cost to us. We
currently anticipate that we will require office space to accommodate growth and
meet increasing client needs. In this regard, we are contemplating opening an
office in Parsippany, New Jersey, in conjunction with the CommonHealth joint
venture, and are evaluating the possibility of establishing an office in
Toronto, Canada.
LEGAL PROCEEDINGS
There are no pending legal proceedings in which Mediconsult is a party, and
Mediconsult is not aware of any threatened legal proceedings involving
Mediconsult.
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<PAGE>
MANAGEMENT
DIRECTORS, EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES
The following table sets forth, as of February, 1999, the name, age and
position of Mediconsult's directors, executive officers and other significant
employees.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------ --- ---------------------------------------------------------------------
<S> <C> <C>
Robert A. Jennings (1)(2)........... 41 Chairman and Chief Executive Officer
Ian Sutcliffe (2)(3)................ 46 President and Director
David J. Austin..................... 42 Chief Operating Officer
Michel Bazinet, M.D................. 42 Medical Director
Debora A. Falk...................... 39 Vice President, Client Services
Michael Swanson..................... 30 Vice President, Sales
Bruce Tilden........................ 45 Vice President, Administration
Michael Treacy, Ph.D. (1)(2)........ 42 Director
John Buchanan (3)................... 42 Director
Barry Guld (1)(3)................... 42 Director
</TABLE>
- ------------------------------
(1) Member of the compensation committee
(2) Member of the nominating committee
(3) Member of the audit committee
ROBERT A. JENNINGS has served as our Chairman and Chief Executive Officer
since our inception in 1996. From 1993 to 1997, Mr. Jennings acted as an advisor
to a number of companies on general business matters. Beginning in 1997, Mr.
Jennings began to work on a full-time basis on Mediconsult matters. Mr. Jennings
is a chartered accountant and was employed by Coopers & Lybrand in Canada and
England for nine years.
IAN SUTCLIFFE has served as our President and a Director since 1996. He has
17 years of experience as a management consultant, primarily in the high-tech
sector. Most recently, from 1993 to 1996, he was a consultant specializing in
re-engineering marketing and sales processes worldwide for IBM. From 1989 to
1993, Mr. Sutcliffe was a partner at BDO Dunwoody, a consulting organization
which he joined in 1989 upon the merger of his consulting firm, Sutcliffe &
Associates, with BDO Dunwoody. Mr. Sutcliffe is a chartered accountant and was
employed by Coopers & Lybrand in Canada and Europe for six years.
DAVID J. AUSTIN has served as our Chief Operating Officer since 1998. He has
18 years of experience in developing and executing strategies for high-tech
business development. From 1995 to 1998, Mr. Austin was the President and Chief
Executive Officer of Triant Technologies Inc., a publicly traded software
company. From 1980 to 1995, he held various management roles in operations,
business development and marketing at IBM.
MICHEL BAZINET, M.D. has served as our Medical Director since 1996. He is a
urologist specializing in uro-oncology and practiced medicine at McGill
University in Montreal from 1987 to 1996. His responsibilities with Mediconsult
include the supervision of the overall medical content of our Web site. He
completed his medical and specialty training at Sherbrooke and McGill
Universities in Canada and completed a fellowship in uro-oncology at the
Memorial Sloan Kettering Cancer Center in New York.
DEBORA FALK has served as our Vice President, Client Services since 1996.
From 1985 until 1996, she was employed by IBM Canada in several technical and
marketing positions, including Canadian Market Management Process Manager.
MICHAEL SWANSON has served as our Vice President, Sales since 1998 when he
was seconded from Treacy & Co., where he was a principal and provided strategic
consulting services in a variety of
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<PAGE>
industries since 1995. From 1993 to 1995, Mr. Swanson was President of Now!Food,
a company focused on healthy living through nutrition and diet.
BRUCE TILDEN has served as our Vice President, Administration since 1998.
From 1996 to 1998, he was Vice President and General Manager of Hepworth &
Company, a leading customer satisfaction measurement and contact management
consultancy. From 1990 to 1996 he was Vice President, Corporate and Business
Development of Tilden Car Rental.
MICHAEL TREACY, PH.D. has been a Director of Mediconsult since July 1998. He
is the Managing Director of Treacy & Co. which provides strategic consulting
services in a number of industries and leads that firm's business and practice
development. From 1981 to 1989, he was a professor of management science at the
MIT Sloan School of Management, after which he formed his own consulting firm.
Mr. Treacy earned his Ph.D. from the MIT Sloan School of Management.
JOHN BUCHANAN has been a Director of Mediconsult since 1998. Since 1993, he
has been President & CEO of Retek Information Systems Inc., a wholly owned
subsidiary of HNC Software Inc. Retek develops, markets and supports predictive
software solutions to the enterprise software industry.
BARRY GULD has been a Director of Mediconsult since 1998. Mr. Guld
co-founded and served as President of Zadall Systems Group, a leading vendor of
pharmacy software systems, which was sold to National Data Corporation. He is
currently a consultant to National Data Corporation and a director of Client
Technology Inc., Mood Sciences Inc., and Velocity Computer Solutions.
On April 1, 1999, we engaged E. Michael Ingram to be our General Counsel
and, after consummation of this offering, also our Chief Financial Officer.
Prior to joining us and since 1980, Mr. Ingram, age 47, held several legal
positions with National Data Corporation. Most recently since 1988, he was
Senior Vice President, General Counsel and Secretary of National Data
Corporation. Mr. Ingram earned his JD degree from the University of Georgia
School of Law and his LLM in taxation from Emory University School of Law.
BOARD OF DIRECTORS AND COMMITTEES
Our by-laws provide for not less than one and not more than six directors.
We currently have five directors. Directors are elected by the stockholders and
all directors hold office until the next annual meeting of stockholders or until
their successors have been duly elected and qualified.
The Audit Committee of the board of directors was established in October
1998, and reviews, acts on and reports to the board of directors with respect to
various auditing and accounting matters, including the recommendation of our
independent auditors, the scope of annual audits, fees to be paid to the
independent auditors, the performance of our independent auditors and our
accounting practices. The current members of our Audit Committee are Messrs.
Guld, Sutcliffe and Buchanan.
The Compensation Committee of the board of directors was established in
October 1998 and determines the salaries and benefits for our employees,
consultants, directors and other individuals we compensate. The Compensation
Committee also administers our compensation plans. The current members of the
Compensation Committee are Messrs. Jennings, Guld and Treacy.
The Nominating Committee of the board of directors was established on
January 15, 1999, and recommends individuals for director positions. The members
of the Nominating Committee are Messrs. Jennings, Sutcliffe and Treacy.
DIRECTOR COMPENSATION
Our directors do not receive any fees for their services as directors. Each
director, however, is reimbursed for all reasonable and necessary costs and
expenses incurred as a result of being a director, such as expenses incurred for
attendance at meetings of the board of directors.
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<PAGE>
In November 1998, we entered into a services agreement with Treacy & Co., an
entity of which Michael Treacy, one of our directors, is a principal, under
which we received various services from Treacy & Co. in consideration of the
grant of options to acquire 2,000,000 shares of our common stock at an exercise
price of $0.003 per share. All of the options have vested and expire on November
16, 2003. In addition, the predecessor of JHC Limited, our majority stockholder,
granted Treacy & Co. an option to acquire 358,333 shares of our common stock
owned by JHC, at an exercise price of $1.20 per share. The services provided
included marketing, sales and client services advice, strategic planning and
seconding Mr. Swanson to act in the capacity of our Vice President, Sales. We
have no obligation to grant additional options to Treacy & Co.
In addition, on October 31, 1998, John Buchanan and Barry Guld each received
options to purchase 100,000 shares of our common stock at an exercise price of
$1.50 per share, which vest at a rate of 5,000 shares per month beginning on
October 30, 1998 for their services on the board of directors.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Our Compensation Committee currently consists of Messrs. Jennings, Treacy
and Guld. Other than Mr. Jennings, our Chairman and Chief Executive Officer,
none of the members of the Compensation Committee has been an officer or
employee of Mediconsult at any time since its inception. None of our executive
officers or employees serves as a member of the board of directors or
compensation committee of any entity that has one or more executive officers
serving as a member of our board of directors or Compensation Committee. Prior
to the formation of the Compensation Committee, the board of directors as a
whole made decisions relating to compensation of our executive officers. Mr.
Jennings did not receive a salary from us in 1998, but he is now entitled to
receive a salary pursuant to his employment agreement, which became effective as
of January 1, 1999. Mr. Jennings has not participated in board discussions
regarding his own compensation.
EMPLOYMENT AGREEMENTS
Robert Jennings, Ian Sutcliffe, David Austin, Debora Falk and Bruce Tilden
each has an employment agreement with Mediconsult or one of our subsidiaries.
Each agreement is effective as of January 1, 1999, and expires on December 31,
2001, and will be automatically renewed for 12 month periods after that date
unless either party gives the other written notice of termination at least three
months prior to the expiration of the initial or any subsequent term. The annual
salary for each of these executives is as follows: Robert Jennings, $275,000;
Ian Sutcliffe, $240,000; David Austin, $198,000 CDN; Debora Falk, $198,000 CDN;
and Bruce Tilden, $154,200 CDN. In addition, David Austin has received options
to purchase 100,000 shares of our common stock, 10,000 of which have vested upon
the signing of his agreement and 8,000 vest each month beginning February 1,
1999 and ending November 1, 1999. Mr. Austin is entitled to receive a cash
equivalent of 12% of his base salary until he joins the applicable employee
benefit plans and programs. Also, each of these executives is entitled to
participate in a team-based performance bonus plan, with awards based upon
predetermined deliverables being developed by Mediconsult and may receive
options to purchase shares of our common stock in the future. The employment
agreements can be terminated upon delivery of written notice from us, with or
without cause. Upon termination without cause, Robert Jennings, Ian Sutcliffe,
David Austin and Debora Falk are each entitled to 12 months salary and any bonus
earned in the preceding 12 months, and Bruce Tilden is entitled to six months
salary and bonus earned in the preceding six months.
E. Michael Ingram has an employment agreement with Mediconsult, effective as
of April 1, 1999 and expiring on March 31, 2003. This agreement will be
automatically renewed for 12 month periods after that date unless either party
gives the other written notice of termination at least three months prior to the
expiration of the initial or any subsequent term. The annual salary for Mr.
Ingram is
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$200,000. In addition, Mr. Ingram is entitled to a non-accountable expense
allowance of $50,000 per year for the first two years, and has received options
to purchase 200,000 shares of our common stock, which options vest at the rate
of 50,000 option shares per year beginning on the first anniversary of the date
of grant. Upon termination without cause, Mr. Ingram is entitled to 12 months
salary and any bonus earned in the preceding 12 months, except that upon
termination by Mediconsult without cause or by Mr. Ingram for good reason within
12 months after a change of control of Mediconsult, Mr. Ingram is entitled to 24
months salary and any bonus earned in the preceding 24 months.
Each of the executives with an employment agreement has agreed not to
compete or solicit clients or other employees during their severance period.
Each of the executives is also bound by a nondisclosure and invention assignment
agreement, which prohibits such executive from, among other things,
disseminating or using confidential information about our business or clients in
any way that would be adverse to Mediconsult.
EXECUTIVE COMPENSATION
The following table sets forth all compensation awarded to, earned by or
paid to our Chief Executive Officer and our most highly compensated executive
officers, other than the Chief Executive Officer (the "Named Executive
Officers") whose total annual salary and bonus exceeded $100,000 for the years
ended December 31, 1998, 1997 and 1996 for services rendered in all capacities
in these years.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION -------------
SECURITIES
--------------------- UNDERLYING ALL OTHER
NAME AND POSITION YEAR SALARY BONUS OPTIONS (#) COMPENSATION
- ----------------------------------------------------- --------- ---------- --------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Robert A. Jennings................................... 1998 $ -- $ -- -- $ --
Chief Executive Officer 1997 -- -- -- --
1996 55,000 -- 790,000 --
Ian Sutcliffe........................................ 1998 240,000 -- -- --
President 1997 240,000 -- -- --
1996 120,000 -- 250,000 --
Debora A. Falk....................................... 1998 100,200 -- --
Vice President, Client Services 1997 100,200 -- -- 48,000 --
1996 25,050 5,400 96,000 --
</TABLE>
50
<PAGE>
OPTION GRANTS IN THE LAST FISCAL YEAR
The Named Executive Officers did not receive any option grants during the
year ended December 31, 1998.
OPTION EXERCISES AND YEAR-END HOLDINGS
The following table sets forth certain information concerning the number and
value of unexercised options held by each of the Named Executive Officers at
December 31, 1998.
AGGREGATED OPTION EXERCISES IN THE YEAR ENDED DECEMBER 31, 1998 AND YEAR-END
OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
FISCAL YEAR END FISCAL YEAR END (1)
-------------------------- --------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------------------------------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Robert A. Jennings........................................ -- -- $ -- $ --
Ian Sutcliffe............................................. -- -- -- --
Debora A. Falk............................................ 96,000 -- 781,440 --
</TABLE>
- --------------------------
(1) Options are In-the-Money if the market value of the shares covered thereby
is greater than the option exercise price. This calculation is based on the
fair market value of the common stock at December 31, 1998, of $8.19 per
share, less the exercise price.
1996 STOCK OPTION PLAN
In April 1996, our board of directors adopted our 1996 Stock Option Plan.
The plan was approved by our stockholders during May 1996. The plan allows the
board to grant stock options from time to time to our employees, officers,
directors and consultants. The board has the power to determine at the time the
option is granted whether the option will be an Incentive Stock Option (an
option which qualifies under Section 422 of the Internal Revenue Code of 1986)
or an option which is not an Incentive Stock Option. However, Incentive Stock
Options will only be granted to persons who are our employees. Vesting
provisions are determined by the board at the time options are granted. As
originally adopted, the total number of shares of common stock subject to
options under the plan was not to exceed 1,000,000, subject to adjustment in the
event of certain recapitalizations, reorganizations and similar transactions.
The plan provides that all outstanding options will vest upon a change of
control. The exercise price is payable in cash, stock or any other means as
determined by the board. On December 31, 1997, the shares eligible under the
plan were increased to 2,500,000 shares.
The board of directors may amend the 1996 Plan at any time, provided that
the board may not amend the plan to materially increase the number of shares
available under the plan, materially increase the benefits accruing to
participants under the plan, or materially change the eligible class of
employees without stockholder approval.
There have been a total of 2,353,050 options granted under the plan, of
which 1,626,550 have been exercised as of December 31, 1998. There were 716,000
options outstanding as of December 31, 1998.
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<PAGE>
CERTAIN TRANSACTIONS
Recently, The Mediconsult Trust, which has been our majority stockholder and
is controlled by Robert Jennings, our Chairman and Chief Executive Officer,
transferred its interest in Mediconsult to JHC Limited, a Bermuda corporation
also controlled by Mr. Jennings. As a result, JHC Limited now is our majority
stockholder. The Mediconsult Trust has from time to time advanced funds to
Mediconsult on an interest-free basis. On September 30, 1998, the board of
directors approved the conversion of these advances to us up to that date into
shares of junior preferred stock with a $10 liquidation preference. In
connection with this conversion, we amended our certificate of incorporation to
provide, among other things, that the outstanding junior preferred stock will be
automatically converted into 8.33 shares of common stock, subject to adjustment,
upon the occurrence of a "Conversion Event." This offering will be a Conversion
Event and the shares of junior preferred stock currently outstanding will be
converted into 3,583,333 shares of common stock, and the shares of junior
preferred stock issuable in respect of dividends accruing since September 30,
1998 will also be converted into common stock. Since September 30, 1998, The
Mediconsult Trust has advanced an additional $713,000 to Mediconsult as an
interest free loan. Of this amount approximately $200,000 has been repaid from
the proceeds of the private placement of senior preferred stock referred to
below and the balance is expected to be repaid from the proceeds of this
offering.
We are a party to a strategic consulting interim agreement dated November
16, 1998, with Treacy & Co. and The Mediconsult Trust. The agreement provides
that in consideration for consulting services rendered by Treacy & Co. to
Mediconsult in connection with marketing, sales and client services advice,
strategic planning and the seconding of Mr. Swanson to act in the capacity of
our Vice President, Sales, we granted Treacy & Co. immediately exercisable
options to purchase 2,000,000 shares of common stock, at an exercise price of
$0.003 per share, which expire on November 16, 2003. In addition, The
Mediconsult Trust granted Treacy & Co. an option to purchase 358,333 shares of
common stock, exercisable from and after a Conversion Event, at an exercise
price of $1.20 per share which expires on December 31, 1999. This option is now
the obligation of JHC Limited. The agreement gives Treacy & Co. registration
rights in the event of a public offering, such as this offering. Treacy & Co.'s
registration rights have been waived in connection with this offering.
We granted options to purchase 100,000 shares of common stock to Messrs.
Guld and Buchanan on October 31, 1998 for their services on our board of
directors.
On February 26, 1999, we sold in a private placement an aggregate of 506,329
shares of our newly designated senior preferred stock and warrants exercisable
for five years to purchase 224,000 shares of senior preferred stock to Nazem &
Company IV, L.P., Transatlantic Venture Fund C.V. (a joint venture of Nazem &
Company and Banque Nationale de Paris) and other individual investors, for an
aggregate of $3.2 million. The purchase price was, and the conversion price of
the senior preferred stock and exercise price of the warrants is, $6.32 per
share, an amount equal to 85% of the average bid and ask price of our shares on
the OTC Bulletin Board for the relevant 30-day period preceding the closing. The
shares of senior preferred stock are convertible at any time at the option of
the holder into an equal number of shares of common stock, subject to adjustment
for stock splits, stock dividends and similar events, and will be automatically
converted into an equal number of shares of common stock upon closing of this
offering. The holders of the senior preferred stock have the right to nominate a
member of our board of directors so long as they maintain at least 50% of their
original share position. The senior preferred stock has voting rights on an
as-converted basis. In connection with the private placement, we agreed to
provide the holders of senior preferred stock and common stock issuable upon the
conversion of senior preferred stock demand and piggyback registration rights,
the right to tag-along with our founders in certain sales of their shares. In
connection with this investment, and so long as the investors hold at least 50%
of their original share position, we agreed not to effect any material change in
the direction of our business unless approved by at least two-thirds of the
board of directors and then only after consultation with the investors.
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PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information with respect to the
beneficial ownership of our common stock as of February 26, 1999 (assuming the
conversion of all of the outstanding shares of preferred stock), and as adjusted
to reflect the sale of the shares of common stock offered hereby (assuming the
Underwriters' over-allotment option is not exercised), by (1) each person (or
group of affiliated persons) who we know to beneficially own 5% or more of our
common stock, (2) each Selling Stockholder, (3) each of our directors and
executive officers and (4) all of our directors and executive officers as a
group. Unless otherwise indicated below, to our knowledge, all persons listed
below have sole voting and investment power with respect to their shares.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
PRIOR TO THIS BENEFICIAL OWNERSHIP
OFFERING(1)(2) AFTER OFFERING
----------------------- SHARES -----------------------
NAME OF BENEFICIAL OWNER SHARES PERCENT OFFERED SHARES PERCENT
- ------------------------------------------------------------ ---------- ----------- --------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Robert A. Jennings (3)...................................... 13,644,999 59.9% 375,000 13,269,999 48.9%
Michael Treacy (4).......................................... 2,358,333 9.5 -- 2,358,333 8.1
Michel Bazinet (5).......................................... 1,000,000 4.4 100,000 900,000 3.3
Ian Sutcliffe (6)........................................... 290,000 1.3 -- 290,000 1.1
David J. Austin (7)......................................... 34,000 * -- 34,000 *
Debora A. Falk (8).......................................... 96,000 * -- 96,000 *
Michael Swanson (9)......................................... -- -- -- -- --
Bruce Tilden (10)........................................... 33,300 * -- 33,300 *
John Buchanan (11).......................................... 35,000 * -- 35,000 *
Barry Guld (12)............................................. 35,000 * -- 35,000 *
JHC Limited (13)............................................ 12,854,999 56.6 375,000 12,479,999 46.0
All Directors and Officers as a group (10 persons)(14)...... 17,096,633 68.9 475,000 16,693,299 56.9
Arnhold and S. Bleichroeder, Inc. (15)...................... 300,000 1.3% 100,000 200,000 *%
</TABLE>
- ------------------------
* Indicates beneficial ownership of less than 1% of the total outstanding
common stock.
(1) Under the rules of the Securities and Exchange Commission, a person is
deemed to be the beneficial owner of a security if such person has or shares
the power to vote or direct the voting of such security or the power to
dispose or direct the disposition of such security. A person is also deemed
to be a beneficial owner of any securities if that person has the right to
acquire beneficial ownership within 60 days. Accordingly, more than one
person may be deemed to be a beneficial owner of the same securities.
(2) Applicable percentage of ownership is based on 22,699,278 shares outstanding
prior to the offering (assuming the conversion of all of the outstanding
shares of preferred stock and payable in kind preferred stock dividends
accrued through December 31, 1998) and 27,124,278 shares to be outstanding
upon the consummation of the offering, but does not include 375,000 shares
to be issued if the Underwriters' over-allotment option is exercised.
(3) Includes 12,783,333 shares owned by JHC Limited, 71,666 shares of common
stock issuable in respect of the 8% payable in kind dividend which has
accrued on the junior preferred stock through December 31, 1998, and 790,000
shares owned by Mr. Jennings. Mr. Jennings controls JHC Limited. The
12,783,333 shares owned by JHC Limited includes 3,583,333 shares of common
stock to be issued upon the conversion of 430,000 shares of junior preferred
stock as a result of this offering, but does not include shares issuable in
respect of cumulative payable in kind dividends on the junior preferred
stock after December 31, 1998. JHC Limited owns 375,000 of the shares of
common stock being sold in this offering. Mr. Jennings' address is 33 Reid
Street, 4(th) Floor, Hamilton HM 12, Bermuda.
(4) Includes 2,000,000 shares of common stock issuable upon the exercise of a
currently exercisable option granted to Treacy &Co., LLC, of which Mr.
Treacy is a principal, on November 16, 1998, with an exercise price of
$0.003 per share, and 358,333 shares of common stock issuable upon the
exercise of an option granted to Treacy & Co. on the same date by The
Mediconsult Trust, which is now the obligation of JHC Limited, exercisable
from and after the conversion of the junior preferred stock, with an
exercise price of $1.20 per share. Mr. Treacy's address is 1184 South
Street, Needham, Massachusetts 02492.
(5) Includes 100,000 shares of common stock being sold in this offering. Dr.
Bazinet's address is 343 Brookfield Avenue, Mount-Royal, P. Quebec, Canada,
H3P 2A7.
(6) Mr. Sutcliffe's address is 16 Stonehedge Hollow, Unionville, Ontario,
Canada, L3R 3Y9.
(7) Represents currently exercisable options and options which vest within 60
days at an exercise price of $3.50 per share. Mr. Austin's address is 4608
Woodgreen Drive, West Vancouver, British Columbia, Canada, V7S 2V2.
(8) Represents currently exercisable options at an exercise price of $0.05 per
share. Ms. Falk's address is 53 Elizabeth Street, Tavistock, Ontario,
Canada, NOB 2RO.
(9) Mr. Swanson's address is 45 Milk Street, 2nd floor, Boston, Massachusetts
02109.
(10) Includes currently exercisable options and options which vest within 60
days to purchase 31,000 shares at an exercise price of $1.05 per share. Mr.
Tilden's address is 4 Stonehedge Hollow, Unionville, Ontario, Canada, L3R
3Y9.
(11) Represents currently exercisable options and options which vest within 60
days at an exercise price of $1.50 per share. Mr. Buchanan's address is 7
Rose Glen, Warwick, WKO6, Bermuda.
(12) Represents currently exercisable options and options which vest within 60
days at an exercise price of $1.50 per share. Mr. Guld's address is 4345
Erwin Drive, West Vancouver, British Columbia, Canada, V7V1H7.
(13) Includes 3,583,333 shares of common stock to be issued upon the conversion
of 430,000 shares of junior preferred stock as a result of this offering,
but does not include shares issuable in respect of cumulative paid in kind
dividends on the junior preferred stock. Mr. Jennings controls JHC Limited,
a Bermuda company.
(14) Does not include E. Michael Ingram, who became General Counsel on April 1,
1999 and will become Chief Financial Officer after this offering, nor
options granted to him for 200,000 shares, which options are not currently
exercisable.
(15) Includes 200,000 shares issuable upon the exercise of currently exercisable
warrants to purchase common stock at an exercise price of $1.22 per share,
of which 100,000 shares are being sold in this offering. Does not include
warrants to purchase 200,000 shares of common stock, being held in escrow
and deliverable in 2000, with an exercise price of $1.22 per share. This
firm's address is 1345 Avenue of the Americas, New York, New York
10105-4300.
53
<PAGE>
DESCRIPTION OF SECURITIES
The following summary description of our capital stock does not purport to
be complete and is subject to the provisions of our certificate and by-laws, and
applicable law.
We are authorized to issue capital stock of 50,000,000 shares of common
stock, $0.001 par value per share, and 5,000,000 shares of preferred stock with
$0.001 par value per share. We have designated 1,000,000 shares of this as
junior preferred stock and 1,000,000 shares as senior preferred stock. As of
February 26, 1999 there were 18,537,950 shares of common stock issued and
outstanding, 430,000 shares of junior preferred stock issued and outstanding
(other than the accrued payable in kind dividend), and 506,329 shares of senior
preferred stock issued and outstanding. Immediately after the completion of this
offering, we estimate there will be issued and outstanding an aggregate of
shares of common stock and no preferred stock, all of which will be
automatically converted into common stock. In addition, as of February 26, 1999,
716,000 shares of common stock will be issuable upon exercise of outstanding
options at that time pursuant to the 1996 Stock Option Plan and an aggregate of
624,000 shares will be issuable upon the exercise of warrants outstanding.
COMMON STOCK
Holders of common stock are entitled to one vote per share on all matters to
be voted upon by the stockholders and they do not have cumulative voting rights.
Accordingly, holders of a majority of the shares voting for the election of
directors can elect all of the directors. In such an event, the holders of the
remaining shares of common stock will not be able to elect any directors.
Holders of the common stock are entitled to receive such dividends as may be
declared from time to time by the board of directors out of funds legally
available for that purpose. We have never declared or paid cash dividends on our
capital stock and expects to retain future earnings, if any, for use in the
operation and expansion of its business, and do not anticipate paying any cash
dividends in the foreseeable future. In the event of the liquidation,
dissolution or winding up, the holders of common stock are entitled to share
ratably in all assets legally available for distribution after payment of all
debts and other liabilities and subject to the prior rights of any holders of
preferred stock then outstanding.
PREFERRED STOCK
The board of directors is authorized to issue the preferred stock in one or
more series and to fix the price, rights, preferences, privileges and
restrictions thereof, including dividend rights, dividend rates, conversion
rights (into common stock or other preferred stock), voting rights, terms of
redemption, redemption prices, liquidation preferences and the number of shares
constituting a series or the designation of such series, without any further
vote or action by our stockholders. The issuance of preferred stock, while
providing desirable flexibility in connection with possible acquisitions and
other corporate purposes, could have the effect of delaying, deferring or
preventing a change in control of Mediconsult without further action by the
stockholders and may adversely affect the market price of, and the voting and
other rights of, the holders of shares of common stock. The issuance of
preferred stock with voting and conversion rights may adversely affect the
voting power of the holders of common stock, including the loss of voting
control to others. We have no current plans to issue any shares of preferred
stock.
WARRANTS
We have issued warrants to purchase an aggregate of 224,000 shares of senior
preferred stock in connection with the private placement by Mediconsult of $3.2
million of senior preferred stock. Each of these warrants entitles the
registered holder to purchase one share of senior preferred stock or common
stock issuable upon conversion of senior preferred stock at a purchase price of
$6.32 per share, at any time prior to March 1, 2004. The warrants may be
exercised by payment of the purchase
54
<PAGE>
price in cash, by cancellation of indebtedness and/or delivery of shares of our
common stock, and the holders have the right to make a net issue election. The
exercise price and number and kind of shares or other securities and property
issuable upon exercise of these warrants are subject to adjustment upon a stock
split, stock dividend or subdivision. In addition, an adjustment will be made
upon the sale of all or substantially all of our assets in order to enable
holders of these warrants to purchase the kind and number of shares of stock or
other securities or property (including cash) receivable in such event by a
holder of the number of shares of common stock that might otherwise have been
purchased upon exercise of the warrants. The warrants do not confer upon the
holder any voting or any other right of a stockholder. The holders of the
warrants have registration rights described below.
In addition, we also have outstanding warrants to purchase 400,000 shares of
common stock at an exercise price of $1.22 per share, which were issued to
Arnhold and S. Bleichroeder, Inc. in consideration of investment advisory
services. These warrants have been delivered or are being held in escrow and are
deliverable in tranches, as follows: 200,000 upon initial filing of this
prospectus; 100,000 on March 15, 2000; and 100,000 on September 15, 2000. The
delivery of the remaining 200,000 warrants is subject to the continued
performance of financial advisory services for us by a particular individual on
behalf of this firm. These warrants, which expire on March 1, 2004, have net
issue election and anti-dilution provisions comparable to the senior preferred
stock warrants, and registration rights described below. These warrants do not
confer upon the holder any voting or any other right of a stockholder.
ANTI-TAKEOVER EFFECTS OF PROVISIONS OF BY-LAWS
Under Delaware law, all stockholder actions must be effected at a duly
called annual or special meeting or by written consent. Our by-laws provide
that, except as otherwise required by law, special meetings of the stockholders
can only be called by the president, the board of directors, the holders of not
less than one-tenth of all shares entitled to vote at the meeting or legal
counsel of the corporation as last designated by resolution of the board of
directors, the Chairman of the board of directors or our Chief Executive
Officer.
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
Section 145 of the Delaware General Corporation Law (DGCL) empowers a
corporation to indemnify its directors and officers and to purchase insurance
with respect to liability arising out of their capacity or status as directors
and officers, provided that this provision shall not eliminate or limit the
liability of a director: (1) for any breach of the director's duty of loyalty to
the corporation or its stockholders, (2) for acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation of law, (3) for
acts in violation of Section 174 of the DGCL, or (4) for any transaction from
which the director derived an improper personal benefit pursuant to section
102(b)(7) of the DGCL. The DGCL provides further that the indemnification
permitted thereunder shall not be deemed exclusive of any other rights to which
the directors and officers may be entitled under a corporation's by-laws, any
agreement, a vote of stockholders or otherwise. The certificate of incorporation
eliminates the personal liability of directors to the fullest extent permitted
by Section 102(b)(7) of the DGCL and provides that we may fully indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding (whether civil,
criminal, administrative or investigative) by reason of the fact that such
person is or was our director or officer or is or was serving at our request as
a director or officer of another corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise, against expenses (including
attorney's fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by such person in connection with such action, suit or
proceeding.
At present, there is no pending litigation or proceeding involving any
director, officer, employee or agent as to which indemnification will be
required or permitted under the certificate. We are not aware of any threatened
litigation or proceeding that may result in a claim for such indemnification.
55
<PAGE>
EFFECT OF DELAWARE ANTI-TAKEOVER STATUTE
We are subject to Section 203 of the DGCL (the anti-takeover law), which
regulates corporate acquisitions. The anti-takeover law prevents certain
Delaware corporations, including those whose securities are listed for trading
on the Nasdaq National Market, from engaging, under certain circumstances in a
"business combination" with any "interested stockholder" for three years
following the date that such stockholder became an interested stockholder. For
purposes of the anti-takeover law, a "business combination" includes, among
other things, a merger or consolidation involving us and the interested
shareholder and the sale of more than 10% of our assets. In general, the
anti-takeover law defines an "interested stockholder" as any entity or person
beneficially owning 15% or more our outstanding voting stock and any entity or
person affiliated with or controlling or controlled by such entity or person. A
Delaware corporation may "opt out" of the anti-takeover law with an express
provision in its original articles of incorporation or an express provision in
its certificate of incorporation or bylaws resulting from amendments approved by
the holders of at least a majority of our outstanding voting shares. We have not
"opted out" of the provisions of the anti-takeover law.
TRANSFER AGENT
The Transfer Agent and Registrar for the common stock is Standard Registrar
& Transfer Agency, Albuquerque, New Mexico.
SHARES ELIGIBLE FOR FUTURE SALE
Upon the closing of this offering, we will have an aggregate of 27,124,278
shares of common stock outstanding, assuming no exercise of the underwriters'
over-allotment option and no exercise of outstanding options or warrants. Of the
outstanding shares, 13,012,950 shares will be freely tradable, except that any
shares held by our "affiliates" (as that term is defined in Rule 144 promulgated
under the Securities Act) may only be sold in compliance with the limitations
described below. The remaining 14,111,328 shares of common stock will be deemed
"restricted securities" as defined under Rule 144. Restricted securities may be
sold in the public market only if registered or if they qualify for an exemption
from registration under Rule 144 promulgated under the Securities Act, which
rule is summarized below. Subject to the lock-up agreements described below and
the provisions of Rule 144, additional shares will be available for sale in the
public market as follows:
<TABLE>
<CAPTION>
NUMBER OF SHARES DATE
- ------------------------------------------ ------------------------------------------------------------
<C> <S>
9,950,000 After 180 days from the date of this prospectus, the 180-day
lockup is released and these shares are saleable under Rule
144 (subject, in some cases, to volume limitations), Rule
144(k), or pursuant to a registration statement to register
for resale shares of common stock issued upon the exercise
of warrants.
4,161,328 Over 180 days from the date of this prospectus, restricted
securities that are held for less than one year and are not
yet saleable under Rule 144.
</TABLE>
In general, under Rule 144, as currently in effect, a person (or persons
whose shares are required to be aggregated), including an affiliate, who has
beneficially owned shares for at least one year is entitled to sell, within any
three-month period commencing 90 days after the date of this prospectus, a
number of shares that does not exceed the greater of (1) 1% of the then
outstanding shares of common stock (approximately 271,243 shares immediately
after this offering) or (2) the average weekly trading volume in the common
stock during the four calendar weeks preceding the date on which notice of such
sale is filed, subject to certain restrictions. In addition, a person who is not
deemed to
56
<PAGE>
have been our affiliate at any time during the 90 days preceding a sale and who
has beneficially owned the shares proposed to be sold for at least two years
would be entitled to sell such shares under Rule 144(k) without regard to the
requirements described above. To the extent that shares were acquired from our
affiliate, that person's holding period for the purpose of effecting a sale
under Rule 144 commences on the date of transfer for the affiliate.
On July 28, 1997 we filed a registration statement with the Commission
pursuant to which we registered 1,000,000 shares of common stock issued or
issuable upon the exercise of options granted under the 1996 Stock Option Plan.
On February 25, 1999 we filed a registration statement to increase this amount
to 2,500,000 shares. This registration statement became immediately effective
upon filing. As of December 31, 1998, there were outstanding options under the
1996 Stock Option Plan to purchase 716,000 shares of common stock, which will be
eligible for sale in the public market from time to time subject to vesting
under the 1996 Stock Option Plan. The possible sale of a significant number of
such shares by such option holders thereof may have an adverse affect on the
price of the common stock.
Our directors and officers and certain stockholders who hold 15,068,628
shares in the aggregate, together with the holders of options to purchase
2,233,300 shares of common stock and the holders of warrants to purchase 524,000
shares of common stock, have agreed that they will not sell, directly or
indirectly, any shares of common stock without the prior written consent of ING
Baring Furman Selz LLC for a period of 180 days from the date of this
prospectus.
Following this offering, under certain circumstances and subject to certain
conditions, certain stockholders and holders of options and warrants to purchase
3,130,329 shares of our outstanding common stock will have certain registration
rights with respect to these shares of common stock underlying the options and
warrants to require us to register such shares of common stock under the
Securities Act and they will have certain rights to participate in future
registrations of securities. In addition, we may also be required to issue
400,000 shares of common stock in connection with the purchase of CyberDiet,
Inc. If issued, these shares are expected to have registration rights and will
be subject to a lock-up agreement related to this offering on the same terms as
our directors and executive officers.
REGISTRATION RIGHTS
Pursuant to a consulting agreement dated November 16, 1998 between
Mediconsult and Treacy & Co., Treacy & Co. is entitled to require us to register
the shares of our common stock it owns at any time after the preferred stock
held by JHC Limited has been redeemed by Mediconsult or converted into common
stock. Treacy & Co.'s registration rights are subject to customary restrictions
and limitations. Treacy & Co. has waived its registration rights in connection
with this offering and also agreed to enter into a lock-up agreement related to
this offering on the same terms as our directors and executive officers.
In connection with an agreement we have with Arnhold and S. Bleichroeder,
Inc. (ASB) to provide investment advisory services, we have agreed that ASB
shall have piggyback registration rights with respect to the 100,000 shares it
owns and any shares issuable upon the exercise of warrants issued to ASB.
Pursuant to this agreement, ASB has been issued warrants for an aggregate of
400,000 shares, exercisable at $1.22 per share. We have agreed to include
100,000 shares owned by ASB in this offering in partial satisfaction of our
registration obligation under such agreement, and have also agreed to piggyback
registration for all other shares and warrant shares owned by ASB. ASB has
agreed to enter into a lock-up agreement related to this offering on the same
terms as our directors and executive officers.
Pursuant to a registration rights agreement, the owners of 506,329 shares of
senior preferred stock and 224,000 warrants to purchase senior preferred stock
have the right to demand that we register their
57
<PAGE>
common stock issuable upon the conversion of the senior preferred stock on two
occasions (or, subject to certain limitations, up to two registration statements
per year on Form S-3) at any time after six months from the closing of this
offering if this offering shall close by June 30,1999, but if this offering does
not close by June 30, 1999, then at any time thereafter October 15, 1999, and
provided that the shares requested to be registered have a minimum anticipated
aggregate gross offering price of at least $5.0 million. In addition, the
holders of common stock issuable upon conversion of the senior preferred stock
have piggyback registration rights. Notwithstanding the foregoing, the demand
registration rights of each stockholder will terminate at such time as such
holder may sell immediately all shares issuable to such holder upon the
conversion of the senior preferred stock under Rule 144 without limitation as to
volume. We will bear the expense of the registration of the shares, except any
underwriting discounts and commissions. The holders of senior preferred stock
have agreed to enter into a lock-up agreement related to this offering on the
same terms as our directors and executive officers.
Our memorandum of agreement with the stockholders of CyberDiet, Inc.
provides that if we acquire CyberDiet, the CyberDiet stockholders will be
entitled to piggyback and limited demand registration rights. We will bear the
expense of the registration of these shares, except any underwriting discounts
and commissions. The stockholders of CyberDiet, Inc. have agreed to enter into a
lock-up agreement related to this offering on the same terms as our directors
and executive officers.
The exercise of these registration rights may hinder our efforts to arrange
future financings, and may have an adverse effect on our market price.
58
<PAGE>
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
Underwriters named below (the "Underwriters") have severally agreed to purchase
from us and the Selling Stockholders the following respective numbers of shares
of common stock at the public offering price less the underwriting discounts and
commissions set forth on the cover page of this prospectus:
<TABLE>
<CAPTION>
UNDERWRITER NUMBER OF SHARES
- --------------------------------------------------------------------------- -----------------
<S> <C>
ING Baring Furman Selz LLC.................................................
Volpe Brown Whelan & Company, LLC..........................................
-----------------
Total..................................................................
-----------------
-----------------
</TABLE>
The Underwriting Agreement provides that the obligations of the Underwriters
are subject to certain conditions precedent and that the Underwriters will
purchase all shares of the common stock offered hereby if any of such shares are
purchased.
We have been advised by the Underwriters that the Underwriters propose to
offer the shares of common stock to the public at the public offering price set
forth on the cover page of this prospectus and to certain dealers at such price
less a concession not in excess of per share. The Underwriters may allow, and
such dealers may reallow, a concession not in excess of per share to certain
other dealers. After the public offering, the public offering price and other
selling terms may be changed by the Underwriters.
We and certain of our stockholders (as described below) have granted the
several Underwriters an option, exercisable not later than 30 days after the
date of this prospectus, to purchase up to 375,000 and 375,000, respectively,
additional shares of common stock at the public offering price less the
underwriting discounts and commissions set forth on the cover page of this
prospectus. To the extent that the Underwriters exercise such option, each of
the Underwriters will have a firm commitment to purchase approximately the same
percentage thereof that the number of shares of common stock to be purchased by
it shown in the table above bears to 5,000,000. Only if the Underwriters
exercise in full the option to purchase up to 375,000 shares from us may the
Underwriters purchase up to 250,000 shares from JHC Limited and up to 125,000
shares from Michel Bazinet on a pro rata basis. To the extent the Underwriters
exercise such option, Mediconsult and such stockholders will be obligated,
pursuant to the option, to sell such shares to the Underwriters. The
Underwriters may exercise such option only to cover over-allotments, if any,
made in connection with the sale of the common stock offered hereby. If
purchased, the Underwriters will offer such additional shares on the same terms
as those on which the 5,000,000 shares of common stock are being offered.
In connection with this offering, certain Underwriters may engage in passive
market making transactions in the common stock on Nasdaq immediately prior to
the commencement of sales in this offering in accordance with Rule 103 of
Regulation M. Passive market making consists of displaying bids on Nasdaq
limited by the bid prices of independent market makers and making purchases
limited by such prices and effected in response to order flow. Net purchases by
a passive market maker on each day are limited to a specified percentage of the
passive market maker's average daily trading volume in the common stock during a
specified period and must be discontinued when such limit is reached. Passive
market making may stabilize the market price of the common stock at a level
above that which might otherwise prevail and, if commenced, may be discontinued
at any time.
Subject to applicable limitations, the Underwriters, in connection with this
offering, may place bids for or make purchases of the common stock in the open
market or otherwise, for long or short account, or cover short positions
incurred, to stabilize, maintain or otherwise affect the price of the common
stock, which may be higher than the price that might otherwise prevail in the
open market. There can be no assurance that the price of the common stock will
be stabilized, or that stabilizing, if
59
<PAGE>
commenced, will not be discontinued at any time. Subject to applicable
limitations, the Underwriters may also place bids, or make purchases on behalf
of the underwriting syndicate to reduce a short position created in connection
with this offering. The Underwriters are not required to engage in these
activities and may end these activities at any time.
The Underwriting Agreement contains covenants of indemnity among the
Underwriters, Mediconsult and the Selling Stockholders against certain civil
liabilities, including liabilities under the Securities Act.
We and each of our directors and executive officers, the Selling
Stockholders and certain of our security holders, who in the aggregate will
hold, following this offering 15,068,628 shares of common stock and options and
warrants to purchase 2,757,300 shares of common stock, have agreed that they
will not directly or indirectly, without the prior written consent of ING Baring
Furman Selz LLC, offer, sell, offer to sell, contract to sell, or otherwise
dispose of any shares of common stock or securities exchangeable for or
convertible into common stock for a period of 180 days after the date of this
prospectus, except that we may issue, and grant options to purchase, shares of
common stock under its current stock option plan and other currently outstanding
options.
The Underwriters have informed us that they do not intend to confirm the
sales to any accounts over which they exercise discretionary authority.
LEGAL MATTERS
The validity of the shares of common stock offered hereby will be passed
upon for us by Golenbock, Eiseman, Assor & Bell, New York, New York. Certain
legal matters in connection with this offering will be passed upon for the
underwriters by Brobeck, Phleger & Harrison LLP.
EXPERTS
The consolidated balance sheets of Mediconsult.com, Inc. as of December 31,
1997 and 1998 and the consolidated statements of operations, stockholders'
equity and cash flows for the three years ended December 31, 1998 have been
included herein and in this Registration Statement in reliance on the report of
PricewaterhouseCoopers, independent accountants, appearing elsewhere herein,
given on the authority of said firm as experts in auditing and accounting.
60
<PAGE>
ADDITIONAL INFORMATION
We have filed with the Securities and Exchange Commission a Registration
Statement on Form S-1 (including the exhibits, schedules and amendments thereto)
under the Securities Act with respect to the shares of common stock to be sold
in this offering. This prospectus does not contain all the information set forth
in the Registration Statement. For further information with respect to
Mediconsult and the shares of common stock to be sold in this offering,
reference is made to the Registration Statement. Statements contained in this
prospectus as to the contents of any contract, agreement or other document
referred to are not necessarily complete, and in each instance reference is made
to the copy of such contract, agreement or other document filed as an exhibit to
the Registration Statement, each such statement being qualified in all respects
by such reference.
Mediconsult.com, Inc. is subject to the reporting requirements of the
Securities Exchange Act of 1934 (the "Exchange Act") and files reports and other
information with the Securities and Exchange Commission (the "Commission") in
accordance therewith. Such reports, proxy statements, and other information
filed by Mediconsult are available for inspection and copying at the public
reference facilities of the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the Commission's Regional Offices located at 7 World Trade
Center, Suite 1300, New York, New York 10048, and at Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of such
material may be obtained by mail from the Public Reference Section of the
Commission at 450 Fifth St., N.W., Washington, D.C. 20549, at prescribed rates.
The Commission maintains a World Wide Web site on the Internet at
http://www.sec.gov that contains reports, proxy and information statements and
other information regarding registrants, including Mediconsult, that file
electronically with the Commission.
Mediconsult.com is the registered United States trademark of
Mediconsult.com, Inc., MediXpert and the Mediconsult logo are also trademarks of
Mediconsult.com, Inc. This prospectus also contains trademarks and trade names
of other companies.
61
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
MEDICONSULT.COM, INC.
Report of PricewaterhouseCoopers, Independent Accountants.................................................. F-2
Consolidated Balance Sheets as of December 31, 1997 and 1998............................................... F-3
Consolidated Statements of Operations for the Years Ended December 31, 1996, 1997 and 1998................. F-4
Consolidated Statements of Changes in Stockholders' Equity for the Years Ended December 31, 1996, 1997 and
1998..................................................................................................... F-5
Consolidated Statements of Cash Flows for the Years Ended December 31, 1996, 1997 and 1998................. F-6
Notes to Consolidated Financial Statements................................................................. F-7
CYBERDIET, LLC
Report of PricewaterhouseCoopers, Independent Accountants.................................................. F-17
Balance Sheets as of December 31, 1996, 1997 and 1998...................................................... F-18
Statements of Operations for the Years Ended December 31, 1996, 1997 and 1998.............................. F-19
Statements of Changes in Members' Equity for the Years Ended December 31, 1996, 1997 and 1998.............. F-20
Statements of Cash Flows for the Years Ended December 31, 1996, 1997 and 1998.............................. F-21
Notes to Financial Statements.............................................................................. F-22
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE DIRECTORS AND STOCKHOLDERS OF MEDICONSULT.COM, INC.
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations and stockholders' equity and of cash flows
present fairly, in all material respects, the financial position of
Mediconsult.com, Inc. and its subsidiaries at December 31, 1997 and 1998, and
the results of their operations and their cash flows for each of the three years
in the period ended December 31, 1998, in conformity with generally accepted
accounting principles in the United States of America. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards in the United States of America which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
PricewaterhouseCoopers
Hamilton, Bermuda
February 26, 1999
F-2
<PAGE>
MEDICONSULT.COM, INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 AND 1998
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
<S> <C> <C>
1997 1998
------------- -------------
ASSETS
Current assets:
Cash............................................................................ $ 400,949 $ 135,053
Accounts receivable............................................................. 157,810 135,790
------------- -------------
Total current assets........................................................ 558,759 270,843
------------- -------------
Non-current assets:
Tangible fixed assets........................................................... 193,004 52,790
Intangible fixed assets......................................................... -- 818,750
------------- -------------
Total non-current assets.................................................... 193,004 871,540
------------- -------------
Total assets................................................................ $ 751,763 $ 1,142,383
------------- -------------
------------- -------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities........................................ $ 42,399 $ 243,413
Advances from Stockholder....................................................... 143,838 513,589
Unearned revenue................................................................ -- 107,000
------------- -------------
Total current liabilities................................................... 186,237 864,002
------------- -------------
Stockholders' equity:
Preferred stock 5,000,000 authorized, 1,000,000 shares designated, 250,000 and
430,000 shares issued and outstanding at December 31, 1997 and 1998,
respectively.................................................................. 2,500,000 4,300,000
Common stock, $.001 par value, 50,000,000 shares authorized, 17,291,400 and
18,519,950 shares issued and outstanding at December 31, 1997 and 1998,
respectively.................................................................. 17,291 18,520
Additional paid-in capital...................................................... 1,651,256 5,242,981
Deferred compensation........................................................... (113,277) (884,109)
Retained deficit................................................................ (3,489,744) (8,399,011)
------------- -------------
Total stockholders' equity.................................................. 565,526 278,381
------------- -------------
Total liabilities and stockholders' equity.................................. $ 751,763 $ 1,142,383
------------- -------------
------------- -------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE>
MEDICONSULT.COM, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------
<S> <C> <C> <C>
1996 1997 1998
------------ ------------- -------------
Revenues.............................................................. $ -- $ 256,374 $ 1,030,934
Operating expenses:
Product and content development..................................... -- 765,864 1,316,188
Marketing, sales and client services................................ 435,637 1,130,340 1,811,710
General and administrative.......................................... 403,794 792,213 1,012,719
Depreciation........................................................ -- 132,768 170,439
Fair value of options granted to employees.......................... -- 40,235 275,145
Fair value of options granted to consultants........................ -- -- 1,354,000
------------ ------------- -------------
Total operating expenses........................................ 839,431 2,861,420 5,940,201
------------ ------------- -------------
Loss from operations.................................................. (839,431) (2,605,046) (4,909,267)
Interest income (expense), net........................................ (22,667) (20,000) --
------------ ------------- -------------
Net loss.............................................................. $ (862,098) $ (2,625,046) $ (4,909,267)
------------ ------------- -------------
------------ ------------- -------------
Net loss per share
Basic and diluted..................................................... $ (0.08) $ (0.16) $ (0.27)
Weighted average shares - basic....................................... 11,137,662 16,729,900 17,910,898
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE>
MEDICONSULT.COM, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
<TABLE>
<CAPTION>
ADDITIONAL
PREFERRED PAID IN DEFERRED
STOCK COMMON STOCK CAPITAL COMPENSATION DEFICIT TOTAL
---------- -------------- ---------- ------------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1996............ $ -- $ 2,700 $ -- $ -- $ (2,600) $ 100
Issuance of common stock............ 13,009 982,976 995,985
Options exercised................... 500 12,000 12,500
Net loss............................ (862,098) (862,098)
---------- -------------- ---------- ------------- ----------- ----------
Balance at December 31, 1996.......... -- 16,209 994,976 -- (864,698) 146,487
Conversion of debentures............ 1,000 499,000 500,000
Options exercised................... 82 3,768 3,850
Stockholder advances converted to
shares............................ 2,500,000 2,500,000
Deferred compensation............... 153,512 (153,512) --
Amortization of deferred
compensation...................... 40,235 40,235
Net loss............................ (2,625,046) (2,625,046)
---------- -------------- ---------- ------------- ----------- ----------
Balance at December 31, 1997.......... 2,500,000 17,291 1,651,256 (113,277) (3,489,744) 565,526
Shares issued in exchange for
services.......................... 100 119,900 120,000
Shares issued for acquisition of
PharmInfoNet...................... 100 818,650 818,750
Stockholder advances converted to
shares............................ 1,800,000 1,800,000
Stock options exercised............. 1,029 253,199 254,228
Compensation to non-employees....... 1,354,000 1,354,000
Deferred compensation to employees.. 1,045,976 (1,045,976) --
Amortization of deferred
compensation...................... 275,144 275,144
Net loss............................ (4,909,267) (4,909,267)
---------- -------------- ---------- ------------- ----------- ----------
Balance at December 31, 1998.......... $4,300,000 $ 18,520 $5,242,981 $ (884,109) $(8,399,011) $ 278,381
---------- -------------- ---------- ------------- ----------- ----------
---------- -------------- ---------- ------------- ----------- ----------
</TABLE>
F-5
<PAGE>
MEDICONSULT.COM, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------
<S> <C> <C> <C>
1996 1997 1998
----------- ------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss............................................................... $ (862,098) $ (2,625,046) $ (4,909,267)
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation of fixed assets......................................... -- 132,768 170,439
Services received in exchange for common stock....................... -- -- 120,000
Fair value of options granted........................................ -- 40,235 1,629,144
Changes in assets and liabilities:
Accounts receivable................................................ -- (157,810) 22,020
Deferred medical content costs..................................... (161,600) 161,600 --
Accounts payable and accrued liabilities........................... 39,033 3,366 201,014
Unearned revenue................................................... -- -- 107,000
Interest payable................................................... 22,667 (22,667) --
----------- ------------- -------------
Net cash used in operating activities.................................. (961,998) (2,467,554) (2,659,650)
----------- ------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES
Fixed assets purchases............................................... (205,298) (120,474) (30,225)
----------- ------------- -------------
Net cash used in investing activities.................................. (205,298) (120,474) (30,225)
----------- ------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES
Advances from stockholder............................................ 51,841 2,591,997 2,169,751
Issuance of common stock............................................. 1,008,585 3,850 254,228
Issuance of notes payable............................................ 500,000 -- --
----------- ------------- -------------
Net cash provided by financing activities.............................. 1,560,426 2,595,847 2,423,979
----------- ------------- -------------
(Decrease) increase in cash............................................ 393,130 7,819 (265,896)
Cash-Beginning of year................................................. -- 393,130 400,949
----------- ------------- -------------
Cash-End of year....................................................... $ 393,130 $ 400,949 $ 135,053
----------- ------------- -------------
----------- ------------- -------------
Non-cash financing activities (note 3)
</TABLE>
F-6
<PAGE>
MEDICONSULT.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION
Mediconsult.com, Inc. (the "Company") was originally incorporated under the
laws of the State of Colorado in October 1989. In April 1996, the Company
purchased Mediconsult.com Limited, a Bermuda corporation (MCL), through a merger
in which MCL became a wholly-owned subsidiary, resulting in 90% of the
outstanding stock of Mediconsult being held by the former stockholders of
MCL--The Mediconsult Trust, controlled by Mr. Robert Jennings, and Michel
Bazinet. In December 1996, the Company consummated a reincorporation merger
pursuant to which it became a Delaware corporation. Mediconsult conducts its
business primarily through MCL.
The Company is a provider of patient-oriented healthcare information and
services on the World Wide Web. The Company's sites provide a source of medical
information and are designed to empower consumers through increased consumer
education regarding medical conditions and treatment alternatives. The Company's
sites also provide a destination on the Internet where visitors can interact
with others in communities centered around chronic medical conditions and other
health issues. The Company facilitates this environment through an array of
complementary services such as moderated on-line support groups and discussion
forums.
2. NEED FOR FUTURE CAPITAL
The Company has sustained losses and negative cash flows from operations
since inception and expects these conditions to continue for the foreseeable
future. As of December 31, 1998, the Company has an accumulated deficit of
$8,399,011. The implementation of the Company's business plan is dependent on
obtaining additional financing through public or private sources, strategic
relationships or other arrangements. The Company's current cash resources and
anticipated cash flow from operating activities are not expected to be
sufficient to meet its anticipated need for working capital. The Company has a
commitment from its majority stockholder to provide additional funds, as needed,
to cover its working capital needs through February 2000. However, the Company
will require additional funds to implement its business plan and growth plans.
There can be no assurance that such additional financing will be available on
terms attractive to the Company, or at all.
3. SIGNIFICANT ACCOUNTING POLICIES
These consolidated financial statements are prepared in accordance with
accounting principles generally accepted in the United States of America. The
following is a summary of the Company's significant accounting policies:
A) BASIS OF PRESENTATION
The consolidated financial statements have been prepared on a going
concern basis with the assumption that the Company will secure additional
financing through a private or public share offering or from the
principal shareholders to fund cash flow deficiencies and the Company
will ultimately become profitable.
B) USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
F-7
<PAGE>
MEDICONSULT.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
C) BASIS OF CONSOLIDATION
These consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiaries. All intercompany balances and
transactions have been eliminated on consolidation.
D) CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject the Company to significant
concentration of credit risk consist primarily of cash, short and
long-term investments, and accounts receivable. Substantially all of the
Company's cash, short and long-term investments are managed by one
financial institution. Accounts receivable are typically unsecured and
are derived from revenues earned from customers primarily located in the
United States. The Company performs ongoing credit evaluations of its
customers and maintains reserves for potential credit losses;
historically, such losses have been immaterial and within management's
expectations. At December 31, 1998, two customers accounted for 43% and
12% of the accounts receivable balance, respectively. During 1998 and
1997, one customer accounted for 65% and 55% of net revenues,
respectively.
E) REVENUE RECOGNITION
The Company's revenues are derived from the development and
implementation of on-line marketing and advertising programs for
pharmaceutical and other healthcare companies. Such revenues are
recognized ratably over the period that the development work is
performed. Development work could include marketing research, focus-group
testing, on-line testing of visitor preferences, and development of
customized client Web sites.
Revenue from the sale of banner advertisements are recognized ratably in
the period in which the advertisement is displayed, provided that no
significant Company obligations remain and collection of the resulting
receivable is probable. Company obligations typically include guarantees
of minimum number of "impressions", or times that an advertisement
appears in pages viewed by users of the Company's on-line properties. To
the extent minimum guaranteed impressions are not met, the Company defers
recognition of the corresponding revenues until the remaining guaranteed
impression levels are achieved.
Revenues from the licensing of the Company's content are recognized
ratably over the period of the license agreement.
A number of the Company's agreements provide that the Company receive
revenues from electronic commerce transactions. These revenues are
recognized by the Company upon notification of revenues earned by the
Company and, to date, have not been material.
F) TANGIBLE FIXED ASSETS
Property and equipment, mainly comprising purchased computer equipment
and software is recorded at cost and depreciated using the straight-line
method over their estimated useful lifes of two years. The carrying
amounts and accumulated depreciation for fixed assets sold or retired are
eliminated from the respective accounts and gains or losses realized on
disposition are reflected in the accompanying consolidated statements of
operation.
F-8
<PAGE>
MEDICONSULT.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
G) INTANGIBLE FIXED ASSETS
Intangible fixed assets comprise content and design of PHARMINFO.COM
(note 4). Intangible fixed assets are recorded at cost and amortized
using the straight line method over their estimated useful lives of two
years. No amortization was recorded in the year ended December 31, 1998,
as PHARMINFO.COM was acquired on December 31, 1998. The recoverability of
these assets is continually evaluated by comparing the remaining
unamortized cost to the estimated future cash flows of the associated
assets. Provisions for estimated losses are recorded in the period in
which such losses are determined.
H) MARKETING AND ADVERTISING
Advertising production costs are recorded as expense the first time an
advertisement appears. All other advertising costs are expensed as
incurred. The Company does not incur any direct-response advertising
costs.
I) PRODUCT AND CONTENT DEVELOPMENT COSTS
The cost of development and enhancement of the technology used in the
Company's Web sites are expensed as incurred.
J) EMPLOYEE STOCK OPTION COMPENSATION
Stock options for common stock granted to employees are expensed over
their vesting period based on their fair value at the date of grant under
Statement of Financial Accounting Standards ("SFAS") No. 123 "ACCOUNTING
FOR STOCK-BASED COMPENSATION." The fair value of stock options is
estimated using an option-pricing model that takes into account the
exercise price, expected life of the options, current market price of the
common stock and their expected volatility, expected dividends on the
common stock, and the risk-free interest rate based on zero-coupon U.S.
government issues with a remaining term equal to the expected life of the
options.
K) BASIC AND DILUTED NET LOSS PER SHARE
The Company adopted SFAS 128, "EARNINGS PER SHARE" during the year ended
December 31, 1997 and retroactively restated all prior periods. Basic
earnings per share is computed using the weighted average number of
common shares outstanding during the period. Diluted earnings per share
is computed using the weighted average number of common and common
equivalent shares outstanding during the period. Common equivalent shares
consist of the incremental common shares issuable upon conversion of the
convertible preferred stock (using the if-converted method) and shares
issuable upon the exercise of stock options and warrants (using the
treasury stock method). Common equivalent shares are excluded from the
computation if their effect is anti-dilutive.
L) COMPREHENSIVE INCOME
In June 1997, the Financial Accounting Standards Board ("FASB") issued
SFAS 130, "REPORTING COMPREHENSIVE INCOME." SFAS 130 establishes
standards for reporting comprehensive income and its components in a
financial statement. Comprehensive income as defined includes all changes
in equity (net assets) during a period from non-owner sources. The
disclosure prescribed by SFAS 130 must be made for the Company's year
ended
F-9
<PAGE>
MEDICONSULT.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
December 31, 1998. For the years presented, the Company's comprehensive
income was equal to net income.
M) SEGMENTS
Additionally in June 1997, the FASB issued SFAS 131, "DISCLOSURES ABOUT
SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION." This statement
establishes standards for the way companies report information about
operating segments in annual financial statements. It also establishes
standards for related disclosures about products and services, geographic
areas, and major customers. The disclosures prescribed by SFAS 131 will
be effective for the year ending December 31, 1998 consolidated financial
statements. The Company believes that it does not operate in more than
one segment.
N) FAIR VALUES OF FINANCIAL INSTRUMENTS
SFAS 107 "DISCLOSURE ABOUT THE FAIR VALUE OF FINANCIAL INSTRUMENTS",
requires disclosure about the fair value of certain financial
instruments. The Company's financial instruments, including cash,
accounts receivable, accounts payable and accrued liabilities and
advances from shareholder are carried at cost which approximates their
fair value because of the short-term maturity of these instruments.
O) ORGANIZATION COSTS
All costs associated with start-up activities and organization costs are
expensed as incurred.
P) RECENT PRONOUNCEMENTS
In March 1998, the Accounting Standards Executive Committee ("AcSEC")
issued Statement of Position ("SOP") issued 98-1, "ACCOUNTING FOR THE
COSTS OF COMPUTER SOFTWARE DEVELOPED OR OBTAINED FOR INTERNAL USE". This
SOP provides guidance on accounting for the costs of computer software
developed or obtained for internal use. SOP 98-1 identifies the
characteristics of internal-use software and provides examples to assist
in determining when computer software is for internal use and whether it
should be expensed or capitalized. The SOP is effective for financial
statements for fiscal years beginning after December 15, 1998. Management
believes that the Company currently complies with the provisions of this
standard and, therefore, believes that the adoption of this standard will
not have a significant impact on the Company's business, financial
condition and results of operations.
The AcSEC SOP 98-5, "REPORTING COSTS OF START-UP ACTIVITIES", is
effective for fiscal years beginning after December 15, 1998. This SOP
requires costs of start-up activities and organization costs to be
expensed as incurred. Currently, the Company expenses such costs as
incurred and, consequently, management believes that the adoption of this
SOP will not have an impact on the Company's business, financial
condition and results of operations.
4. ACQUISITION OF PHARMINFO.COM
On December 31, 1998 the Company acquired the content and design of the
PHARMINFO.COM Web site in exchange for 100,000 shares of the Company. The
acquisition of PHARMINFO.COM was completed through the contribution of the
PharmInfo.com Web site, including its content and design, to a company formed
for the purpose of the transaction and the merger of such newly formed company
into
F-10
<PAGE>
MEDICONSULT.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. ACQUISITION OF PHARMINFO.COM (Continued)
PharmInfoNet, Inc., a newly formed subsidiary of the Company. The content and
design of PHARMINFO.COM was recorded for $818,750, equivalent to the quoted
market price of the Company's shares on December 31, 1998. The value will be
amortized over an estimated useful life of two years.
5. NON-CASH FINANCING ACTIVITIES
On June 30, 1997, notes payable of $500,000 were converted to 1,000,000
shares of common stock. On August 1, 1998 the Company issued 100,000 shares of
common stock to Arnhold and S. Bleichroeder, Inc. as a fee for corporate finance
advisory services. On December 31, 1998 the Company issued 100,000 shares of
common stock to acquire PHARMINFO.COM. Also, during the years ended December 31,
1997 and 1998, $2.5 million and $1.8 million of advances from shareholder,
respectively, were converted to 250,000 and 180,000 shares of Preferred Stock.
6. FIXED ASSETS
Fixed assets comprise:
<TABLE>
<CAPTION>
DECEMBER 31, 1997
------------------------------------
<S> <C> <C> <C>
ACCUMULATED NET BOOK
COST DEPRECIATION VALUE
---------- ------------ ----------
Computer equipment.......................................................... $ 102,401 $ 44,397 $ 58,004
Computer programming........................................................ 223,371 88,371 135,000
---------- ------------ ----------
Total fixed assets.......................................................... $ 325,772 $ 132,768 $ 193,004
---------- ------------ ----------
---------- ------------ ----------
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1998
------------------------------------
<S> <C> <C> <C>
ACCUMULATED NET BOOK
COST DEPRECIATION VALUE
---------- ------------ ----------
Computer equipment.......................................................... $ 132,626 $ 103,152 $ 29,474
Computer programming........................................................ 223,371 200,055 23,316
---------- ------------ ----------
Total fixed assets.......................................................... $ 355,997 $ 303,207 $ 52,790
---------- ------------ ----------
---------- ------------ ----------
</TABLE>
7. ADVANCES FROM SHAREHOLDER
Advances from shareholder are interest free and repayable on demand.
8. CAPITAL STOCK
A) AUTHORIZED CAPITAL STOCK
During the years ended December 31, 1997 and 1998, 250,000 and 750,000
shares of $.001 par value preferred stock, respectively, were designated
as a series called $10 Non-Cumulative Preferred Stock. The Certificate of
Designation was amended on September 30, 1998 to, among other things,
change the $10 Non-Cumulative Preferred Stock to a cumulative preferred
stock and change the name to "Preferred Stock."
F-11
<PAGE>
MEDICONSULT.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. CAPITAL STOCK (CONTINUED)
As of December 31, 1998 and 1997 authorized capital stock comprises:
<TABLE>
<CAPTION>
DECEMBER 31, 1997 DECEMBER 31, 1998
---------------------------------- ----------------------------------
<S> <C> <C> <C> <C>
LIQUIDATION LIQUIDATION
NUMBER OF SHARES VALUE NUMBER OF SHARES VALUE
---------------- ---------------- ---------------- ----------------
Preferred stock
$.001 par value preferred stock......... 4,750,000 $ 4,750 4,000,000 $ 4,000
Preferred stock......................... 250,000 2,500,000 1,000,000 10,000,000
---------------- ---------------- ---------------- ----------------
Total preferred stock................... 5,000,000 2,504,750 5,000,000 10,004,000
---------------- ---------------- ---------------- ----------------
Common stock, $.001 par value........... 50,000,000 $ 50,000 50,000,000 $ 50,000
---------------- ---------------- ---------------- ----------------
</TABLE>
B) SHARE RIGHTS
I) $.001 PAR VALUE PREFERRED STOCK
The preferred stock may be issued from time to time in series as
determined by the Board of Directors. The Board of Directors is
authorized to fix and determine the variations in the relative rights
and preferences as between series. The preferred stock may have
limited, contingent or no voting powers; may have such designations,
preferences, dividends, and relative, participating, optional or
other special rights; and be subject to such qualifications,
limitations and restrictions as the Board of Directors shall
determine. The preferred stock may be subject to redemption by the
Company or at the options of the holders thereof and may be
convertible into common stock or exchangeable for other securities of
the Company. So long as no shares of any class or series established
by resolution of the Board of Directors have been issued, the voting
rights, designations, preferences and relative, optional,
participating or other rights of these shares may be amended by
resolution of the Board of Directors.
II) PREFERRED STOCK
In September 1998 the Board of Directors and the stockholders,
respectively, approved an amendment (the "Amendment") to the
Certificate of Designation of the Preferred Stock to, among other
things, change the existing $10 Non-Cumulative Preferred Stock to a
cumulative preferred stock and change the name to "Preferred Stock".
Under the amendment each issued and outstanding share of Preferred
Stock entitles the holder of record to receive cumulative dividends
payable in additional shares of Preferred Stock at the rate of 8% per
annum, payable semi-annually. Each share of Preferred Stock is
automatically convertible into 8.33 shares of Common Stock, subject
to an adjustment, upon certain occurrences. The conversion rate of
the Preferred Stock has standard anti-dilution protections in the
event of stock splits, dividends, combinations, mergers and
reorganizations, but is not protected from issuances below the base
conversion rate. No dividends were declared during the years ended
December 31, 1997 or prior to September 30, 1998, when dividends on
such shares became cumulative. In the year ended December 31, 1998
accumulated dividends were 8,600 preferred shares which are
convertible into 71,666 common shares.
F-12
<PAGE>
MEDICONSULT.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. CAPITAL STOCK (CONTINUED)
C) ISSUED CAPITAL STOCK
On April 23, 1996, 55,000 shares of common stock were issued in exchange
for the entire share capital of Mediconsult.com Limited. An additional
5,197 shares of common stock were issued on May 24, 1996 for $25,985. On
August 12, 1996 a 20 for 1 share split took place, which resulted in
issued common stock of 1,473,940 shares. On October 25, 1996 a 10 for 1
share split took place, which resulted in issued common stock of
14,739,400 shares. On November 13, 1996 stock options for 500,000 common
stock were exercised for $12,500. On November 20, 1996, the Company
issued 970,000 common stock for $970,000.
On June 30, 1997 notes payable of $500,000 were converted to 1,000,000
shares of common stock. During the year ended December 31, 1997, stock
options for 82,000 shares of common stock were exercised for $3,850 in
total. During 1998, 100,000 shares of common stock were issued as a
corporate finance advisory fee valued at $120,000 at the date of issuance
and 100,000 shares of common stock were issued to acquire PHARMINFO.COM
including rights to content valued at $818,750 at the date of issuance in
non-cash financing activities (see Note 5). Also during the year ended
December 31, 1998, stock options for 790,000, 16,000, and 222,550 common
stock were exercised for $19,750, $800, and $233,678 in total,
respectively.
During the years ended December 31, 1998 and 1997, 180,000 and 250,000
shares of the Preferred Stock were issued on conversion of advances from
shareholder of $1.8 million and $2.5 million, respectively.
As of December 31, 1997 and 1998 issued capital stock comprises:
<TABLE>
<CAPTION>
DECEMBER 31, 1997 DECEMBER 31, 1998
-------------------------- --------------------------
<S> <C> <C> <C> <C>
NUMBER NUMBER
OF SHARES VALUE OF SHARES VALUE
------------ ------------ ------------ ------------
Preferred stock, $10 liquidation value................... 250,000 $ 2,500,000 430,000 $ 4,300,000
Common stock, $.001 par value............................ 17,291,400 1,512,435 18,519,950 2,854,424
------------ ------------
Total capital stock...................................... $ 4,012,424 $ 7,154,424
------------ ------------
------------ ------------
</TABLE>
9. STOCK OPTIONS
The Company has a 1996 Stock Option Plan (the "Plan") to provide incentives
to employees, directors and consultants. The maximum term of options granted
under the Plan is ten years. The Board of Directors has the exclusive power over
the granting of options and their vesting provisions. During the year ended
December 31, 1998 the number of common stock covered by the Plan was increased
from 1,000,000 to 2,500,000.
During 1998, the Company entered into an agreement with Treacy & Co., LLC
that granted options for 2 million shares to Treacy & Co., LLC for consulting
services provided. The options granted have an exercise price of $0.003 and were
vested immediately upon granting.
F-13
<PAGE>
MEDICONSULT.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9. STOCK OPTIONS (CONTINUED)
Stock options for common stock comprise:
<TABLE>
<CAPTION>
1997 1998
------------------------ -------------------------
<S> <C> <C> <C> <C>
WEIGHTED WEIGHTED
AVERAGE AVERAGE
NUMBER OF EXERCISE NUMBER OF EXERCISE
SHARES PRICE SHARES PRICE
------------- --------- ------------- ----------
Outstanding--Beginning of year............................... 980,000 $ 0.03 1,150,000 $ 0.25
Granted during the year...................................... 252,000 1.03 2,605,050 0.38
Exercised during the year.................................... (82,000) 0.05 (1,028,550) 0.23
Cancelled during the year.................................... -- -- (10,500) 0.29
------------- --------- ------------- ----------
Outstanding--End of year..................................... 1,150,000 $ 0.25 2,716,000 $ 0.37
------------- --------- ------------- ----------
Exercisable--End of year..................................... 967,000 $ 0.28 2,318,800 $ 0.12
------------- --------- ------------- ----------
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C>
RANGE OF EXERCISE PRICES
-----------------------------------------------------------
Outstanding--December 31, 1998
Stock options for number of common stock............ 2,000,000 96,000 320,000 200,000 100,000
Weighted average exercise price
contractual life (years).......................... $ 0.003 $ 0.05 $ 1.05 $ 1.50 $ 3.50
Average remaining................................... 4.75 0.75 1.75 1.75 2.0
RANGE OF EXERCISE PRICES
-----------------------------------------------------------
Exercisable--December 31, 1998
Stock options for number of common stock............ 2,000,000 96,000 185,800 30,000 10,000
Exercise price...................................... $ 0.003 $ 0.05 $ 1.05 $ 1.50 $ 3.50
</TABLE>
During the years ended December 31, 1997 and 1998 the fair values of the
options granted to employees were $153,572 and $1,045,976, respectively. The
weighted average exercise price and weighted average fair value of options whose
exercise price exceeded the market value at the grant date during 1998 were
$1.24 and $0.23, respectively. The weighted average exercise price and weighted
average fair value of options whose exercise price was less than the market
value at the grant date during 1998 were $0.18 and $1.03, respectively.
The fair values of the options were estimated using an option-pricing model
based on the weighted average risk-free interest rates ranging between 4.231%
and 5.470%, an expected life of the options of two years, an expected volatility
of the common stock ranging between 105.1% and 185.4% and no expected dividends
on the common stock.
10. ADVERTISING
During the years ended December 31, 1996 and 1997, and 1998 the Company
incurred approximately $0, $252,400 and $314,400 in advertising expenses,
respectively.
F-14
<PAGE>
MEDICONSULT.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
11. RELATED PARTY TRANSACTIONS
During the years ended December 31, 1997 and 1998, advances from
shareholders of $2,591,997 and $2,169,751, respectively, were made to the
Company, of which $2,500,000 and $1,800,000, respectively, were converted to
common stock and $0 and $30,000, respectively, were repaid.
On October 1, 1998, options to acquire 2 million shares of common stock were
granted to Treacy & Co., LLC. Michael Treacy is both a director in the Company
and a principal in Treacy & Co., LLC.
The Company is headquartered in Hamilton, Bermuda, occupying space in the
office of Robert A. Jennings, Chief Executive Officer and shareholder, at no
cost.
12. TAXATION
The Company's operations are conducted by its Bermuda subsidiary. The
Subsidiary has received an undertaking from the Bermuda Government exempting it
from all local income, profits and capital gains taxes until the year 2016. At
the present time, no such taxes are levied in Bermuda. The Company is a Delaware
holding Company and is currently not subject to taxation in the United States.
13. SUBSEQUENT EVENTS
On February 26, 1999, the Company sold in a private placement an aggregate
of 506,329 shares of the newly designated voting senior preferred stock and
warrants exercisable for five years to purchase 224,000 shares of the senior
preferred stock to Nazem & Company IV, L.P. Transatlantic Venture Fund C.V. (a
joint venture of Nazem & Company and Banque Nationale de Paris) and certain
other individual investors, for an aggregate of $3.2 million. The purchase price
and the conversion price of the senior preferred stock and exercise of the
warrants was $6.32 per share. The shares of the senior preferred stock are
convertible at any time at the option of the holder into an equal number of
shares of common stock, subject to adjustment, and will be automatically
converted into an equal number of shares of common stock upon closing of the
public offering.
On February 25, 1999, the Company amended its agreement to grant 400,000
warrants to Arnhold and S. Bleichroeder, Inc. As a result, the Company delivered
warrants to purchase 200,000 shares upon initial filing of its offering
prospectus for a public offering of the Company's common stock. The remaining
200,000 warrants are deliverable in 2000 and are subject to continued
performance of financial advisory services by a particular individual on behalf
of Arnhold and S. Bleichroeder, Inc. The warrants have an exercise price of
$1.22, expire on March 1, 2004 and have cash-less exercise provisions and
anti-dilution provisions comparable to the senior preferred stock warrants.
In February 1999, the Company entered into a memorandum of agreement
outlining the principal terms of an exclusive management arrangement with
CyberDiet, LLC, the owner of CYBERDIET.COM, a Web site providing tailored
nutritional information and programs, that granted the Company the sole right to
place advertisements on the Web site, to link traffic, and to manage the content
on the Web site. The Company has an option to purchase CyberDiet, LLC, and
CyberDiet, LLC has, under certain circumstances, the right to cause the Company
to purchase it, in exchange for 400,000 shares of the Company's common stock.
In February 1999, the Company entered into an exclusive sponsorship
agreement with the InterNational Council of Infertility Information
Dissemination, a not-for-profit organization, relating to
F-15
<PAGE>
MEDICONSULT.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
13. SUBSEQUENT EVENTS (CONTINUED)
INCIID.ORG that granted the Company the sole right to place advertisements on
the Web site, to link traffic, and to manage the content on the Web site. In
connection with this agreement, the Company made commitments to pay the
InterNational Council of Infertility Information Dissemination $0.5 million per
year beginning in 1999, for three years in equal quarterly installments, in cash
or common stock, at the option of the Company.
In February 1999, the Company entered into a memorandum of agreement
outlining the principle terms of a 50/50 joint venture with CommonHealth LLP, a
healthcare advertising firm. The Company expects to advance approximately $0.3
million to the joint venture for the initial capitalization. Under the terms of
the agreement, the Company may borrow the initial capitalization amount from
CommonHealth LLP, which would be repaid through 25% of the Company's share of
profits from the joint venture.
F-16
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE MEMBERS OF CYBERDIET, LLC
In our opinion, the accompanying balance sheets and the related statements
of operations and members' equity and of cash flows present fairly, in all
material respects, the financial position of CyberDiet, LLC at December 31,
1996, 1997 and 1998, and the results of its operations and its cash flows for
each of the three years in the period ended December 31, 1998, in conformity
with generally accepted accounting principles in the United States of America.
These financial statements are the responsibility of the Company's management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards in the United States of America which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
PricewaterhouseCoopers
Hamilton, Bermuda
March 14, 1999
F-17
<PAGE>
CYBERDIET, LLC
BALANCE SHEETS
DECEMBER 31, 1996, 1997 AND 1998
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------
1996 1997 1998
--------- --------- ----------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash........................................................................... $ 3,575 $ 5,124 $ 10,369
Accounts receivable............................................................ 1,000 1,250 5,115
Prepaid services............................................................... -- 250 450
Inventory...................................................................... -- 1,336 --
--------- --------- ----------
Total current assets....................................................... 4,575 7,960 15,934
--------- --------- ----------
Total assets............................................................... $ 4,575 $ 7,960 $ 15,934
--------- --------- ----------
--------- --------- ----------
LIABILITIES AND MEMBERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities....................................... $ 200 $ 3,395 $ 5,517
Notes payable to member........................................................ -- 23,500 53,500
--------- --------- ----------
Total current liabilities.................................................. 200 26,895 59,017
--------- --------- ----------
Members' equity
Contributed capital............................................................ 19,600 49,000 70,500
Retained deficit............................................................... (15,225) (67,935) (113,583)
--------- --------- ----------
Total members' equity (deficit)............................................ 4,375 (18,935) (43,083)
--------- --------- ----------
Total liabilities and members' equity...................................... $ 4,575 $ 7,960 $ 15,934
--------- --------- ----------
--------- --------- ----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-18
<PAGE>
CYBERDIET, LLC
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1996 1997 1998
---------- ---------- ----------
<S> <C> <C> <C>
Revenues...................................................................... $ 3,000 $ 17,294 $ 38,742
---------- ---------- ----------
Operating expenses:
Product and content development............................................. 12,549 43,601 65,109
Marketing, sales and client service......................................... 86 -- 1,000
General and administrative.................................................. 5,590 25,884 13,842
---------- ---------- ----------
Total operating expenses.................................................. 18,225 69,485 79,951
---------- ---------- ----------
Loss from operations.......................................................... (15,225) (52,191) (41,209)
Interest income (expense)..................................................... -- (519) (4,439)
---------- ---------- ----------
Net loss...................................................................... $ (15,225) $ (52,710) $ (45,648)
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
The accompanying notes are an integral part of these financial statements
F-19
<PAGE>
CYBERDIET, LLC
STATEMENTS OF CHANGES IN MEMBERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
<TABLE>
<CAPTION>
CONTRIBUTED
CAPITAL DEFICIT TOTAL
----------- ----------- ----------
<S> <C> <C> <C>
Balance at January 1, 1996.................................................. $ 3,600 -- $ 3,600
Capital contribution...................................................... 16,000 -- 16,000
Net loss.................................................................... -- $ (15,225) (15,225)
----------- ----------- ----------
Balance at December 31, 1996................................................ 19,600 (15,225) 4,375
Capital contribution...................................................... 29,400 -- 29,400
Net loss.................................................................... -- (52,710) (52,710)
----------- ----------- ----------
Balance at December 31, 1997................................................ 49,000 (67,935) (18,935)
Capital contribution...................................................... 21,500 -- 21,500
Net loss.................................................................... -- (45,648) (45,648)
----------- ----------- ----------
Balance at December 31, 1998................................................ $ 70,500 $ (113,583) $ (43,083)
----------- ----------- ----------
----------- ----------- ----------
</TABLE>
The accompanying notes are an integral part of these financial statements
F-20
<PAGE>
CYBERDIET, LLC
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1996 1997 1998
---------- ---------- ----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss...................................................................... $ (15,225) $ (52,710) $ (45,648)
Adjustments to reconcile net loss to net cash used in operating activities:
Changes in assets and liabilities:
Accounts receivable and prepaid services.................................. (1,000) (500) (4,065)
Inventory................................................................. -- (1,336) 1,336
Accounts payable and accrued liabilities.................................. 200 3,195 (2,122)
---------- ---------- ----------
Net cash used in operating activities......................................... (16,025) (51,351) (46,255)
---------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Notes payable to member................................................... -- 23,500 30,000
Contributed capital....................................................... 19,600 29,400 21,500
---------- ---------- ----------
Net cash provided by financing activities..................................... 19,600 52,900 51,500
---------- ---------- ----------
Increase in cash.............................................................. 3,575 1,549 5,245
Cash--Beginning of year....................................................... -- 3,575 5,124
---------- ---------- ----------
Cash--End of year............................................................. $ 3,575 $ 5,124 $ 10,369
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-21
<PAGE>
CYBERDIET, LLC
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1997 AND 1998
1. ORGANIZATION
CyberDiet (the "Company") was formed as a general partnership in Los Altos,
California on August 16, 1995 for the purpose of providing service on the
internet. The general partnership was subsequently dissolved on December 31,
1996 and reorganized as a new limited liability company that was formed on
January 1, 1997 under the Beverly-Killea Limited Liability Company Act of the
California Code. This company was named CyberDiet, LLC. Subsequent to December
31, 1998, the Company was dissolved as a limited liability company and
reorganized as a corporation that was formed on January 5, 1999. This company
was named CyberDiet, Inc.
The Company is a provider of tailored nutritional information and programs
on the World Wide Web. The Company has a Web site located at
hhtp://www.cyberdiet.com, which is designed to serve the consumer demand for
information to assist in decisions about diet and exercise. The Web site offers
its visitors a means of achieving their specific goals through extensive use of
interactive modules and detailed nutritional information and motivation.
2. NEED FOR FUTURE CAPITAL
The Company has sustained losses and negative cash flows from operations
since inception and expects these conditions to continue for the foreseeable
future. As of December 31, 1998, the Company has an accumulated deficit of
$111,233. The implementation of the Company's business plan is dependent on
obtaining additional financing through strategic relationships or other
arrangements. The Company's current cash resources and anticipated cash flow
from operating activities are not expected to be sufficient to meet its
anticipated need for working capital. There can be no assurance that such
additional financing will be available on terms attractive to the Company, or at
all. As described in note 8, in February 1999, the Company entered into an
agreement with Mediconsult.com, Inc. The Company has a commitment from the Chief
Executive Officer of Mediconsult.com, Inc. to provide additional funds as needed
to cover its working capital needs through March 2000.
3. SIGNIFICANT ACCOUNTING POLICIES
These financial statements are prepared in accordance with accounting
principles generally accepted in the United States of America. The following is
a summary of the Company's significant accounting policies:
(A) BASIS OF PRESENTATION
The financial statements have been prepared on a going concern basis with
the assumption that the Company will secure additional financing from the
principal members to fund cash flow deficiencies and the Company will
ultimately become profitable.
F-22
<PAGE>
CYBERDIET, LLC
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996, 1997 AND 1998
(B) USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
(C) CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject the Company to significant
concentration of credit risk consist primarily of cash and cash
equivalents and accounts receivable. Substantially all of the Company's
cash, cash equivalents are managed by one financial institution. Accounts
receivable are typically unsecured and are derived from revenues earned
from customers primarily located in the United States.
(D) REVENUE RECOGNITION
The Company's revenues are derived from the development and
implementation of on-line marketing and advertising programs for
nutritional and diet information and media products and services. Such
revenues are recognized over the period that the development work is
performed.
Revenues provided by the licensing of the Company's content are
recognized ratably over the period of the license agreement.
The Company sells products on-line and receives revenues from electronic
commerce transactions. These revenues are recognized by the Company upon
notification of revenues earned by CyberDiet, LLC and, to date, have not
been material.
(E) MARKETING AND ADVERTISING
Advertising production costs are recorded as expense the first time an
advertisement appears. All other advertising costs are expensed as
incurred. The Company does not incur any direct-response advertising
costs.
(F) PRODUCT AND CONTENT DEVELOPMENT COSTS
The cost of development and enhancement of the technology used in the
Company's Web sites are expensed as incurred.
(G) COMPREHENSIVE INCOME
In June 1997, the Financial Accounting Standards Board ("FASB") issued
SFAS 130, "REPORTING COMPREHENSIVE INCOME." SFAS 130 establishes
standards for reporting comprehensive income and its components in a
financial statement. Comprehensive income as defined includes all changes
in equity (net assets) during a period from non-owner sources. The
disclosure prescribed by SFAS 130 must be made for the Company's year
ended December 31, 1998. For the years presented, the Company's
comprehensive income was equal to net income.
F-23
<PAGE>
CYBERDIET, LLC
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996, 1997 AND 1998
(H) SEGMENTS
Additionally in June 1997, the FASB issued SFAS 131, "DISCLOSURES ABOUT
SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION." This statement
establishes standards for the way companies report information about
operating segments in annual financial statements. It also establishes
standards for related disclosures about products and services, geographic
areas, and major customers. The disclosures prescribed by SFAS 131 will
be effective for the year ending December 31, 1998 consolidated financial
statements. The Company believes that it does not operate in more than
one segment.
(I) FAIR VALUES OF FINANCIAL INSTRUMENTS
SFAS 107 "DISCLOSURE ABOUT THE FAIR VALUE OF FINANCIAL INSTRUMENTS",
requires disclosure about the fair value of certain financial
instruments. The Company's financial instruments, including cash,
accounts receivable, accounts payable and accrued liabilities and notes
payable to member are carried at cost which approximates their fair value
because of the short-term maturity of these instruments.
(J) ORGANIZATION COSTS
All costs associated with start-up activities and organization costs are
expensed as incurred.
(K) RECENT PRONOUNCEMENTS
In March 1998, the Accounting Standards Executive Committee ("AcSEC")
issued Statement of Position ("SOP") issued 98-1, "ACCOUNTING FOR THE
COSTS OF COMPUTER SOFTWARE DEVELOPED OR OBTAINED FOR INTERNAL USE". This
SOP provides guidance on accounting for the costs of computer software
developed or obtained for internal use. SOP 98-1 identifies the
characteristics of internal-use software and provides examples to assist
in determining when computer software is for internal use and whether it
should be expensed or capitalized. The SOP is effective for financial
statements for fiscal years beginning after December 15, 1998. Management
believes that the Company currently complies with the provisions of this
standard and, therefore, believes that the adoption of this standard will
not have a significant impact on the Company's results of operations,
financial position or cash flows.
The AcSEC SOP 98-5, "REPORTING COSTS OF START-UP ACTIVITIES", is
effective for fiscal years beginning after December 15, 1998. This SOP
requires costs of start-up activities and organization costs to be
expensed as incurred. Currently, the Company expenses such costs as
incurred and, consequently, management believes that the adoption of this
SOP will not have an impact on the Company's results of operations,
financial position or cash flows.
4. NOTES PAYABLE TO MEMBER
The Company has received loans amounting to $0, $23,500, and $53,500 at the
years ended December 31, 1996, 1997, and 1998, respectively. These notes bear
interest at a rate of 10% per annum and are repayable on demand. Accrued
interest to December 31, 1996, 1997 and 1998 of $0, $519, and $2,607,
respectively, remain unpaid at December 31, 1998.
F-24
<PAGE>
CYBERDIET, LLC
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996, 1997 AND 1998
5. MEMBERS' EQUITY
<TABLE>
<CAPTION>
TIMI GUSTAFSON CINDI FINK MARK GUSTAFSON TOTAL
-------------- ----------- --------------- ---------
<S> <C> <C> <C> <C>
MEMBERS' EQUITY-1995....................... 1,800 1,800 0 3,600
Capital Contributed
During the Year............................ $ 8,000 $ 8,000 0 16,000
MEMBERS' EQUITY-1996....................... $ 9,800 $ 9,800 0 19,600
Capital Contributed
During the Year............................ $ 14,100 $ 14,100 $ 1,200 29,400
MEMBERS' EQUITY-1997....................... $ 23,900 $ 23,900 $ 1,200 49,000
Capital Contributed
During the Year............................ $ 10,000 $ 10,000 $ 1,500 21,500
MEMBERS' EQUITY-1998....................... $ 33,900 $ 33,900 $ 2,700 70,500
</TABLE>
- ------------------------
a) The Company was formed in 1995 as a general partnership with an initial
capital contribution of $300 by each of its two partners, Timi Gustafson and
Cindi Fink for 50% ownership, respectively.
b) During 1995, each partner contributed $1,500 during the year for a total
contributed capital of $3,600 at the end of 1995.
c) During 1996, each partner contributed amounts of $8,000 each, for a total of
$19,600 at the end of 1996.
d) During 1997, Mark Gustafson entered into the partnership as a 15% partner
with an initial contribution of $1,050 and contributed $150 during the year.
The other partners, Timi Gustafson and Cindi Fink maintained a 47.5%
interest in the partnership and each contributed a total of $14,100 during
the year.
e) During 1998, Timi Gustafson and Cindi Fink contributed $10,000 each during
the year and Mark Gustafson contributed a total of $1,500 during the year.
6. TAXATION
As a limited liability company (LLC), the Company has not been subject to
income taxes because its income has been taxed directly to its owners. There are
no material differences between the tax basis and the amounts reports on the
Company's Balance Sheets.
7. SUBSEQUENT EVENTS
Subsequent to December 31, 1998, the Company dissolved its limited liability
corporation and was incorporated on January 5, 1999. On February 25, 1999, the
Company entered into a Memorandum of Agreement with Mediconsult.com, Inc.,
granting Mediconsult.com, Inc. the sole right to place advertisments on the
Company's Web site, to link traffic and to manage the content of the Web site.
The Company granted Mediconsult.com, Inc. an option to purchase the Company and
the Company has under certain circumstances the right to cause Mediconsult.com,
Inc. to purchase it in exchange for 400,000 shares of Mediconsult.com, Inc.
common stock.
F-25
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS, AND,
IF GIVEN OR MADE, THIS INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY US OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER OF ANY SECURITIES OTHER THAN THOSE TO WHICH IT RELATED OR AN
OFFER TO SELL, OR A SOLICITATION OR AN OFFER TO BUY, TO ANY PERSON IN ANY
JURISDICTION WHERE SUCH AN OFFER OR SOLICITATION WOULD BE UNLAWFUL. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary........................................................ 1
Risk Factors.............................................................. 6
Forward Looking Statements; Market Data................................... 16
Use of Proceeds........................................................... 17
Price Range of Common Stock and Dividend Policy........................... 17
Capitalization............................................................ 18
Dilution.................................................................. 19
Unaudited Pro Forma Consolidated Financial Information.................... 20
Selected Consolidated Financial Data...................................... 23
Management's Discussion and Analysis of Financial Condition and Results of
Operations.............................................................. 24
Description of Business................................................... 34
Management................................................................ 47
Certain Transactions...................................................... 52
Principal and Selling Stockholders........................................ 53
Description of Securities................................................. 54
Underwriting.............................................................. 59
Legal Matters............................................................. 60
Experts................................................................... 60
Additional Information.................................................... 61
Index to Financial Statements............................................. F-1
</TABLE>
UNTIL , 1999 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING
IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS DELIVERY
REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS
WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
5,000,000 SHARES
[LOGO]
MEDICONSULT.COM, INC.
COMMON STOCK
---------------------
PROSPECTUS
---------------------
ING BARING FURMAN SELZ LLC
VOLPE BROWN WHELAN & COMPANY
, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, other than the
underwriting discount, payable by the Registrant in connection with the sale of
common stock being registered. All amounts are estimates except the SEC
registration fee and the NASD filing fees.
<TABLE>
<CAPTION>
TOTAL
--------------
<S> <C>
SEC registration fee.......................................................... $ 21,893
NASD filing fee............................................................... 7,832
Nasdaq National Market listing fee............................................ 95,000
Blue sky and expenses (including legal fees).................................. 5,000
Transfer agent fee............................................................ 5,000
Printing...................................................................... 110,000
Legal Fees and Expenses....................................................... 125,000
Accounting Fees and Expenses.................................................. 150,000
Miscellaneous................................................................. 5,275
--------------
Total..................................................................... $ 525,000
--------------
--------------
</TABLE>
Mediconsult will bear all expenses shown above.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law (DGCL) empowers a
corporation to indemnify its directors and officers and to purchase insurance
with respect to liability arising out of their capacity or status as directors
and officers, provided that this provision shall not eliminate or limit the
liability of a director: (1) for any breach of the director's duty of loyalty to
the corporation or its stockholders, (2) for acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation of law, (3) for
acts in violation of Section 174 of the DGCL, or (4) for any transaction from
which the director derived an improper personal benefit pursuant to section
102(b)(7) of the DGCL. The DGCL provides further that the indemnification
permitted thereunder shall not be deemed exclusive of any other rights to which
the directors and officers may be entitled under a corporation's by-laws, any
agreement, a vote of stockholders or otherwise. The certificate of incorporation
eliminates the personal liability of directors to the fullest extent permitted
by Section 102(b)(7) of the DGCL and provides that we may fully indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding (whether civil,
criminal, administrative or investigative) by reason of the fact that such
person is or was our director or officer or is or was serving at our request as
a director or officer of another corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise, against expenses (including
attorney's fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by such person in connection with such action, suit or
proceeding.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or persons controlling the registrant
pursuant to the foregoing provisions, the registrant has been informed that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is therefore unenforceable.
II-1
<PAGE>
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
The following is a description of the sale of unregistered common stock in
the last three fiscal years. On April 23, 1996, we issued 55,000 shares of
common stock to The Mediconsult Trust and Michel Bazinet, the former
stockholders of Mediconsult.com Limited, in exchange for all the shares of
Mediconsult.com Limited.
In May 1996, 5,197 shares of common stock were sold at $5.00 per share in a
Rule 504 offering. Later that year we effected two forward stock splits in
response to a high demand for its shares. The first was on August 12, 1996,
which was a 20 for 1 share split and the second was on October 23, 1996, which
was a 10 for 1 share split. During October 1996, we issued debentures in the
aggregate amount of $500,000 to four investors who had previously loaned
$500,000 to Mediconsult.com Limited.
During October 1996, Messrs. Bazinet and Sutcliffe, officers of
Mediconsult.com Limited, exercised stock options for total consideration of
$6,250 each. In December 1996, we sold 970,000 shares of common stock at $1.00
per share in a Rule 504 offering.
On June 30, 1997, we issued 1,000,000 shares of common stock to private
investors in exchange for conversion of debentures in the amount of $500,000.
Also, on August 1, 1998, we issued 100,000 shares of common stock and warrants
to purchase 400,000 shares of common stock to Arnhold and S. Bleichroeder, Inc.
in exchange for investment consulting services. As part of a recent acquisition,
on December 31, 1998, we issued 100,000 shares of common stock to Pharmaceutical
Information Associates, Ltd. and VirSci Corporation in exchange for the
PHARMINFO.COM, Web site.
On November 16, 1998 we granted options to purchase 2,000,000 shares of
common stock to Treacy & Co. LLC at an exercise price of $0.003 per share, in
consideration for consulting services, including marketing, sales and client
services advice, strategic planning and the seconding of Mr. Swanson to act in
the capacity of Vice President, Sales.
On February 26, 1999, we sold an aggregate of 506,329 shares of senior
preferred stock and 224,000 warrants to purchase senior preferred stock, for an
aggregate of $3.2 million, to four unrelated investors. The conversion price of
the senior preferred stock and the exercise price of the warrants is $6.32 per
share, subject to adjustments.
Since April 1996, The Mediconsult Trust has advanced funds from time to time
to us on an interest-free basis. Of these advances, $4.3 million were converted
into 430,000 shares of junior preferred stock on September 30, 1998.
ITEM 16. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>
1.1 Underwriting Agreement
3.1 Certificate of Incorporation*
3.2 By-laws(1)
4.1 Specimen common stock certificate*
4.2 Form of Investor Senior Preferred Stock Warrant*
4.3 Form of Warrant issued to Arnhold and S. Bleichroeder, Inc.
5.1 Legal Opinion of Golenbock, Eiseman, Assor & Bell
10.1 1996 Stock Option Plan, as amended*
10.2 Agreement Concerning the Exchange of Common Stock between the Company and Mediconsult.com Limited(1)
10.3 Articles of Merger with Mediconsult.com Limited(1)
10.4 Worldwide Web Server Agreement dated November 6, 1996 between TVisions, Inc. and Mediconsult.com
Limited(1)
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>
10.5 Strategic Consulting Interim Agreement dated November 16, 1998 between the Company and Treacy & Co.,
LLC, as amended February 25, 1999*
10.6 Letter agreement dated December 30, 1998 among the Company, Pharmaceutical Information Associates, Ltd.,
VirSci Corporation and Pharmaceutical Information.Net, Inc.*
10.7 Memorandum of Agreement dated February 23, 1999 between Mediconsult.com Limited. and CommonHealth LLP*
10.8 Memorandum of Agreement dated February 25, 1999 between Timi Gustafson, Cynthia Fink, Mark Gustafson and
Mediconsult*
10.9 Exclusive Sponsorship Agreement dated as of January 15, 1999 between InterNational Council on
Infertility Information Dissemination and Mediconsult.com Limited*
10.10 Employment Agreement effective as of January 1, 1999, between 3542491 Canada Inc. and Bruce Tilden*
10.11 Employment Agreement effective as of January 1, 1999, between 3542491 Canada Inc. and Debora A. Falk*
10.12 Employment Agreement effective as of January 1, 1999, between 3542491 Canada Inc. and David J. Austin*
10.13 Employment Agreement effective as of January 1, 1999, between Mediconsult.com Limited and Robert A.
Jennings*
10.14 Employment Agreement effective as of January 1, 1999, between 3542491 Canada Inc. and Ian Sutcliffe*
10.15 Source Code License Agreement dated February 26, 1999 between TVisions, Inc. and Mediconsult.com
Limited*
10.16 Stock Purchase Agreement dated as of February 26, 1999 between the Company and the Investors named
therein*
10.17 Registration Rights Agreement dated February 26, 1999, among the Company and the Investors named
therein*
10.18 Stockholders' Agreement dated February 26, 1999 among the Company, the Founders identified therein and
the Investors identified on Schedule 1 thereto*
10.19 Registration Rights Agreement dated as of February 26, 1999 between the Company and Arnhold and S.
Bleichroeder, Inc.
10.20 Employment Agreement dated as of April 1, 1999 between the Company and E. Michael Ingram
10.21 Agreement to be entered into between the Company and Novartis Pharma AG (not signed)
21.1 Subsidiaries of the Company*
23.1 Consent of PricewaterhouseCoopers
23.2 Consent of PricewaterhouseCoopers
23.3 Consent of Golenbock, Eiseman, Assor & Bell (included in Exhibit 5.1)
24.1 Powers of Attorney (set forth on the signature page of this Registration Statement)
</TABLE>
- ------------------------
* Previously filed.
** To be filed by Amendment to this Registration Statement
(1) Exhibits are incorporated by reference from Mediconsult's Registration
Statement on Form 10-SB (File No. 333-21883) filed December 16, 1996
II-3
<PAGE>
ITEM 17. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
these liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by the
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether this indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
the issue.
The undersigned Registrant hereby undertakes that:
1. For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained
in a form of prospectus filed by the registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be
part of this registration statement as of the time it was declared
effective.
2. For the purpose of determining any liability under the Securities Act of
1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at the at
time shall be deemed to be the initial bona fide offering thereof.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly
caused this Amendment No. 2 to Registration Statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of New York, State of
New York, on April 2, 1999.
<TABLE>
<S> <C> <C>
By: /s/ ROBERT A. JENNINGS
-----------------------------------------
Robert A. Jennings
CHIEF EXECUTIVE OFFICER
Mediconsult.com, Inc.
</TABLE>
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints Robert A.
Jennings his true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any or all amendments (including post-effective
amendments) to this registration statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agent, full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorney-in-fact and agent, or his substitute, may
lawfully do or cause to be done by virtue hereof.
* * * *
Pursuant to the requirements of the Securities Act, this registration
statement has been signed below by the following persons in the capacities and
on the date included.
SIGNATURE TITLE DATE
- ------------------------------ --------------------------- -------------------
Chairman and Chief
/s/ ROBERT A. JENNINGS Executive Officer
- ------------------------------ (Principal Executive April 2, 1999
Robert A. Jennings Officer)
/s/ IAN SUTCLIFFE Director, President
- ------------------------------ (Principal Financial April 2, 1999
Ian Sutcliffe Officer)
/s/ MICHAEL TREACY Director
- ------------------------------ April 2, 1999
Michael Treacy
Director
- ------------------------------ April 2, 1999
Barry Guld
/s/ JOHN BUCHANAN Director
- ------------------------------ April 2, 1999
John Buchanan
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>
1.1 Underwriting Agreement
3.1 Certificate of Incorporation*
3.2 By-laws(1)
4.1 Specimen common stock certificate*
4.2 Form of Investor Senior Preferred Stock Warrant*
4.3 Form of Warrant issued to Arnhold and S. Bleichroeder, Inc.
5.1 Legal Opinion of Golenbock, Eiseman, Assor & Bell
10.1 1996 Stock Option Plan, as amended*
10.2 Agreement Concerning the Exchange of Common Stock between the Company and Mediconsult.com Limited(1)
10.3 Articles of Merger with Mediconsult.com Limited(1)
10.4 Worldwide Web Server Agreement dated November 6, 1996 between TVisions, Inc. and Mediconsult.com
Limited(1)
10.5 Strategic Consulting Interim Agreement dated November 16, 1998 between the Company and Treacy & Co.,
LLC, as amended February 25, 1999*
10.6 Letter agreement dated December 30, 1998 among the Company, Pharmaceutical Information Associates, Ltd.,
VirSci Corporation and Pharmaceutical Information.Net, Inc.*
10.7 Memorandum of Agreement dated February 23, 1999 between Mediconsult.com Limited. and CommonHealth LLP*
10.8 Memorandum of Agreement dated February 25, 1999 between Timi Gustafson, Cynthia Fink, Mark Gustafson and
Mediconsult*
10.9 Exclusive Sponsorship Agreement dated as of January 15, 1999 between InterNational Council on
Infertility Information Dissemination and Mediconsult.com Limited*
10.10 Employment Agreement effective as of January 1, 1999, between 3542491 Canada Inc. and Bruce Tilden*
10.11 Employment Agreement effective as of January 1, 1999, between 3542491 Canada Inc. and Debora A. Falk*
10.12 Employment Agreement effective as of January 1, 1999, between 3542491 Canada Inc. and David J. Austin*
10.13 Employment Agreement effective as of January 1, 1999, between Mediconsult.com Limited and Robert A.
Jennings*
10.14 Employment Agreement effective as of January 1, 1999, between 3542491 Canada Inc. and Ian Sutcliffe*
10.15 Source Code License Agreement dated February 26, 1999 between TVisions, Inc. and Mediconsult.com
Limited*
10.16 Stock Purchase Agreement dated as of February 26, 1999 between the Company and the Investors named
therein*
10.17 Registration Rights Agreement dated February 26, 1999, among the Company and the Investors named
therein*
10.18 Stockholders' Agreement dated February 26, 1999 among the Company, the Founders identified therein and
the Investors identified on Schedule 1 thereto*
10.19 Registration Rights Agreement dated as of February 26, 1999 between the Company and Arnhold and S.
Bleichroeder, Inc.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>
10.20 Employment Agreement dated as of April 1, 1999 between the Company and E. Michael Ingram
10.21 Agreement to be entered into between the Company and Novartis Pharma AG (not signed)
21.1 Subsidiaries of the Company*
23.1 Consent of PricewaterhouseCoopers
23.2 Consent of PricewaterhouseCoopers
23.3 Consent of Golenbock, Eiseman, Assor & Bell (included in Exhibit 5.1)
24.1 Powers of Attorney (set forth on the signature page of this Registration Statement)
</TABLE>
- ------------------------
* Previously filed.
** To be filed by Amendment to this Registration Statement
(1) Exhibits are incorporated by reference from Mediconsult's Registration
Statement on Form 10-SB (File No. 333-21883) filed December 16, 1996
<PAGE>
Exhibit 1.1
5,000,000 SHARES
MEDICONSULT.COM, INC.
COMMON STOCK
(PAR VALUE $.001 PER SHARE)
UNDERWRITING AGREEMENT
APRIL ___, 1999
ING BARING FURMAN SELZ LLC
VOLPE BROWN WHELAN & COMPANY, LLC
As Representatives of the
several Underwriters
c/o ING Baring Furman Selz LLC
230 Park Avenue
New York, New York 10169
Dear Sirs:
1. INTRODUCTION. Mediconsult.com, Inc., a Delaware corporation
(the "Company"), proposes to issue and sell to the several Underwriters named in
Schedule I hereto (the "Underwriters"), for which ING Baring Furman Selz LLC and
Volpe Brown Whelan & Company, LLC are acting as representatives (the
"Representatives"), and certain stockholders of the Company named in Schedule II
hereto (the "Selling Stockholders") severally propose to sell to the several
Underwriters, an aggregate of 5,000,000 shares of the Company's Common Stock,
par value $.001 per share (the "Common Stock"), of which 4,425,000 shares are to
be sold by the Company and 575,000 shares are to be sold by the Selling
Stockholders, each Selling Stockholder selling the amount set forth opposite
such Selling Stockholder's name in Schedule II hereto. The 4,425,000 shares of
Common Stock to be sold by the Company and the 575,000 shares to be sold by the
Selling Stockholders are collectively referred to herein as the "Firm Shares."
The Company and the Selling Stockholders also propose to issue and sell to the
several Underwriters an aggregate of not more than 750,000 additional shares of
Common Stock (the "Additional Shares"), if requested by the Underwriters in
accordance with Section 10. The Firm Shares and the Additional Shares are
collectively referred to herein as the "Shares." The Company and the Selling
Stockholders are hereinafter sometimes referred to as the "Sellers." The words
"you" and "your" refer to the Representatives of the Underwriters.
The Company and the Selling Stockholders hereby agree with the
several Underwriters as follows:
<PAGE>
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND JHC
LIMITED.
The Company and JHC Limited, a Bermuda corporation and one of
the Selling Stockholders ("JHC Limited"), jointly and severally, each represent,
warrant and agree with each of the Underwriters that:
(i) A registration statement on Form S-1 (File No.
333-73059) under the Securities Act of 1933, as amended (the "Act"),
with respect to the Shares, including a form of prospectus subject to
completion, has been prepared by the Company and filed with the
Securities and Exchange Commission (the "Commission"), and one or more
amendments to such registration statement may also have been so filed.
After the execution of this Agreement, the Company shall file with the
Commission either (A) if such registration statement, as it may have
been amended, has been declared by the Commission to be effective under
the Act, a prospectus in the form most recently included in an
amendment to such registration statement filed with the Commission (or,
if no such amendment shall have been filed, in such registration
statement), with such insertions and changes as are required by Rule
430A under the Act or permitted by Rule 424(b) under the Act as shall
have been provided to and approved by the Representatives prior to the
filing thereof, or (B) if such registration statement, as it may have
been amended, has not been declared by the Commission to be effective
under the Act, an amendment to such registration statement, including a
form of prospectus, a copy of which amendment has been furnished to and
approved by the Representatives prior to the filing thereof. As used in
this Agreement, the term "Registration Statement" means such
registration statement, as amended at the time when it was or is
declared effective, including all financial schedules and exhibits
thereto; the Registration Statement shall be deemed to include any
information omitted therefrom pursuant to Rule 430A under the Act and
included in the Prospectus (as hereinafter defined) and shall also mean
any registration statement filed pursuant to Rule 462(b) under the Act;
the term "Preliminary Prospectus" means each prospectus subject to
completion contained in such registration statement or any amendment
thereto (including the prospectus subject to completion, if any,
included in the Registration Statement or any amendment thereto or
filed pursuant to Rule 424(a) under the Act at the time it was or is
declared effective); and the term "Prospectus" means the prospectus
first filed with the Commission pursuant to Rule 424(b) under the Act
or, if no prospectus is required to be filed pursuant to said Rule
424(b), such term means the prospectus included in the Registration
Statement.
(ii) The Commission has not issued any order preventing
or suspending the use of any Preliminary Prospectus and has not
instituted or, to the Company's knowledge, threatened to institute any
proceedings with respect to such an order. When the Preliminary
Prospectus dated March 15, 1999 was filed with the Commission, and any
amendment thereto filed subsequent to such date, it (A) contained all
statements required to be stated therein in accordance with, and
complied in all material respects with the requirements of, the Act and
the rules and regulations of the Commission thereunder (the "Rules and
Regulations") and (B) did not include any untrue statement of a
material fact or omit to state any material fact necessary in order to
make the statements therein, in the light of the circumstances under
which they were made, not misleading. When the Registration Statement
or any amendment thereto was or is
2
<PAGE>
declared effective, it (A) contained or will contain all statements
required to be stated therein in accordance with, and complied or will
comply in all material respects with the requirements of, the Act and
the Rules and Regulations and (B) did not or will not include any
untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading. When the
Prospectus and when any amendment or supplement thereto is filed with
the Commission pursuant to Rule 424(b) (or, if the Prospectus or such
amendment or supplement is not required to be so filed, when the
Registration Statement and when any amendment thereto containing such
amendment or supplement to the Prospectus was or is declared effective)
and on the Closing Date (as defined in Section 4 hereof) and the Option
Closing Date (as defined in Section 10 hereof), the Prospectus, as
amended or supplemented at any such time, (A) contained or will contain
all statements required to be stated therein in accordance with, and
complied or will comply in all material respects with the requirements
of, the Act and the Rules and Regulations and (B) did not or will not
include any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading.
Notwithstanding anything to the contrary, the foregoing provisions of
this paragraph (ii) shall not apply to statements or omissions made in
any Preliminary Prospectus, the Registration Statement or any amendment
thereto or the Prospectus or any amendment or supplement thereto in
reliance upon, and in conformity with, information furnished in writing
to the Company by or on behalf of the Underwriters through the
Representatives expressly for use therein.
(iii) Each of the Company and its subsidiaries (the
"Subsidiaries") (A) is duly incorporated or organized and validly
existing in good standing under the laws of its jurisdiction of
incorporation or organization, with full corporate power and corporate
authority to own or lease its properties and to conduct its business as
described in the Registration Statement and the Prospectus (or, if the
Prospectus is not in existence, the most recent Preliminary
Prospectus); and (B) is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction in which the
conduct of its business or the ownership or lease of property requires
such qualification (except for those jurisdictions in which the failure
so to qualify has not had and will not have a Material Adverse Effect
(as hereinafter defined)). "Material Adverse Effect" means, when used
in connection with the Company or any of its Subsidiaries, any
development, change or effect that has a materially adverse effect on
the business, financial condition, results of operations or prospects
of the Company and its Subsidiaries taken as a whole.
(iv) The Company at the Closing will have the duly
authorized and validly outstanding capitalization set forth under the
caption "Capitalization" in the Prospectus (or, if the Prospectus is
not in existence, the most recent Preliminary Prospectus) and will have
the adjusted capitalization set forth therein on the Closing Date,
based on the assumptions and adjustments set forth therein or
contemplated thereby. The securities of the Company conform in all
material respects to the descriptions thereof contained in the
Prospectus (or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus). The outstanding shares of Common Stock have
been duly authorized and validly issued by the Company and are fully
paid and nonassessable. Except as created hereby or referred to in the
Prospectus (or, if the
3
<PAGE>
Prospectus is not in existence, the most recent Preliminary
Prospectus), there are no outstanding options, warrants, rights or
other arrangements requiring the Company or any Subsidiary at any time
to issue any capital stock. No holders of outstanding shares of capital
stock of the Company are entitled as such to any preemptive or other
rights to subscribe for any of the Shares and neither the filing of the
registration statement nor the offering or sale of the Shares as
contemplated by this Agreement gives rise to any rights, other than
those which have been waived or satisfied, for or relating to, the
registration of any securities of the Company, except as described in
the Registration Statement. The Shares have been duly authorized; on
the Closing Date or the Option Closing Date (as the case may be), after
payment therefor in accordance with the terms of this Agreement, (A)
the Firm Shares and the Additional Shares to be sold by the Company
hereunder will be validly issued, fully paid and nonassessable, and (B)
good title to the Shares will pass to the Underwriters on the Closing
Date or the Option Closing Date (as the case may be) free and clear of
any lien, encumbrance, security interest, or other claim whatsoever.
All the outstanding shares of capital stock of each Subsidiary has been
duly authorized and validly issued, are fully paid and nonassessable
and are owned directly by the Company, free and clear of any lien,
encumbrance, security interest or other claim whatsoever. The Company
has received, subject to notice of issuance, approval to have the
Shares quoted on the National Market System of the National Association
of Securities Dealers' Automated Quotation System and the Company knows
of no reason or set of facts which is likely to adversely affect such
approval.
(v) The financial statements and the related notes and
schedules thereto included in the Registration Statement and the
Prospectus (or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus) fairly present in all material respects the
consolidated financial condition, results of operations, stockholders'
equity and cash flows of the Company and its Subsidiaries, on the one
hand, and CyberDiet, LLC, on the other hand, at the dates and for the
periods specified therein, subject in the case of interim periods to
normal year-end audit adjustments. Such financial statements and the
related notes and schedules thereto have been prepared in accordance
with generally accepted accounting principles consistently applied
throughout the periods involved (except as otherwise noted therein) and
such financial statements as are audited have been examined by
Pricewaterhouse Coopers, who are independent accountants within the
meaning of the Act and the Rules and Regulations, as indicated in their
reports filed therewith. The financial data set forth under the
captions "Prospectus Summary - Summary Consolidated Financial Data,"
"Capitalization" and "Selected Consolidated Financial Data" in the
Prospectus (or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus) have been prepared on a basis consistent with
the financial statements of the Company and its Subsidiaries, on the
one hand, and CyberDiet, LLC, on the other hand, except as indicated
thereon. The pro forma consolidated financial statements of the Company
and its Subsidiaries and the related notes thereto included under the
caption "Unaudited Pro Forma Consolidated Financial Information" and
elsewhere in the Prospectus and in the Registration Statement present
fairly the information contained therein, have been prepared in
accordance with the Commission's rules and guidelines with respect to
pro forma financial statements and have been properly presented on the
bases described therein, and the assumptions used in the preparation
thereof are reasonable and the adjustments used therein are appropriate
to
4
<PAGE>
give effect to the transaction and circumstances referred to therein.
No other pro forma financial information is required to be included in
the Registration Statement pursuant to Regulation S-X.
(vi) The Company and each of its Subsidiaries have filed
all necessary foreign, federal, state and local income, franchise and
other tax returns and have paid all taxes shown as due thereunder, and
the Company has no knowledge of any tax deficiency which might be
assessed against the Company or any of the Subsidiaries and which has
not been reserved for in accordance with GAAP, except where the failure
to do so or such deficiency would not have a Material Adverse Effect.
(vii) The Company and each of its Subsidiaries maintain
insurance of the types and in amounts which they reasonably believe to
be customary for their business in such amounts and with such
deductibles as is customary for companies similarly situated in the
same or similar business, all of which insurance is in full force and
effect. The Company has obtained a directors' and officers' insurance
policy in an amount and from such insurers as shall be reasonably
satisfactory to the Underwriters, such policy is in full force and
effect and names the Representatives as additional insureds thereunder.
(viii) Except as disclosed in the Prospectus (or, if the
Prospectus is not in existence, the most recent Preliminary
Prospectus), there is no pending action, suit, proceeding or
investigation or, to the Company's knowledge, threatened action, suit,
proceeding or investigation before or by any court, regulatory body or
administrative agency or any other governmental agency or body,
domestic or foreign, which (A) questions the validity of the capital
stock of the Company or this Agreement or of any action taken or to be
taken by the Company pursuant to or in connection with this Agreement,
(B) is required to be disclosed in the Registration Statement which is
not so disclosed (and such proceedings, if any, as are summarized in
the Registration Statement are accurately summarized in all material
respects), or (C) is reasonably likely to have a Material Adverse
Effect.
(ix) The Company has full legal right, corporate power
and corporate authority to enter into this Agreement and to consummate
the transactions provided for herein. This Agreement has been duly
authorized, executed and delivered by the Company and, assuming it is a
legally valid, binding and enforceable agreement of yours, constitutes
a legally valid, binding and enforceable agreement of the Company
enforceable against the Company in accordance with its terms (except as
such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws of general
application relating to or affecting the enforcement of creditors'
rights and the application of equitable principles relating to the
availability of remedies and except as rights to indemnity or
contribution may be limited by federal or state securities laws and the
public policy underlying such laws), and none of the Company's
execution or delivery of this Agreement, its performance hereunder, its
consummation of the transactions contemplated herein, its application
of the net proceeds of the offering in the manner set forth under the
caption "Use of Proceeds" or the conduct of its business as described
in the Prospectus (or, if the Prospectus is not in existence, the
5
<PAGE>
most recent Preliminary Prospectus), conflicts or will conflict with or
results or will result in any breach or violation of any of the terms
or provisions of, or constitutes or will constitute a default under,
causes or will cause (or permits or will permit) the maturation or
acceleration of any liability or obligation or the termination of any
right under, or result in the creation or imposition of any lien,
charge, or encumbrance upon, any property or assets of the Company or
any of its Subsidiaries pursuant to the terms of (A) the certificate of
incorporation or by-laws of the Company or any of its Subsidiaries, (B)
any indenture, mortgage, deed of trust, voting trust agreement,
stockholders' agreement, note agreement or other material agreement or
instrument to which the Company or any of its Subsidiaries is a party
or by which any of them are or may be bound or to which any of their
respective property is or may be subject or (C) any statute, judgment,
decree, order, rule or regulation applicable to the Company or any of
its Subsidiaries of any government, arbitrator, court, regulatory body
or administrative agency or other governmental agency or body, domestic
or foreign, having jurisdiction over the Company, any of its
Subsidiaries or any of their respective activities or properties, and,
in the case of any matter under clause (B) or (C) above, which would
have or is reasonably likely to have a Material Adverse Effect.
(x) All executed agreements or copies of executed
agreements filed or incorporated by reference as exhibits to the
Registration Statement to which the Company or any of its Subsidiaries
is a party have been duly and validly authorized, executed and
delivered by the Company or such Subsidiary, as the case may be, and
constitute the legal, valid and binding agreements of the Company or
such Subsidiary, as the case may be, enforceable against each of them
in accordance with their respective terms (except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization or other similar laws relating to enforcement of
creditors' rights generally, and general equitable principles relating
to the availability of remedies, and except as rights to indemnity or
contribution may be limited by federal or state securities laws and the
public policy underlying such laws). The descriptions in the
Registration Statement of contracts and other documents fairly present
such contracts and documents in all material respects, and there are no
contracts or other documents which are required by the Act or the Rules
and Regulations to be described in the Registration Statement or filed
as exhibits to the Registration Statement which are not described or
filed as required or incorporated therein by reference, and the
exhibits which have been filed are complete and correct copies of the
documents of which they purport to be copies.
(xi) Subsequent to the most recent respective dates as
of which information is given in the Prospectus (or, if the Prospectus
is not in existence, the most recent Preliminary Prospectus), and
except as expressly contemplated therein, neither the Company nor any
of its Subsidiaries has incurred, other than in the ordinary course of
its business, any material liabilities or obligations, direct or
contingent, purchased any of its outstanding capital stock, paid or
declared any dividends or other distributions on its capital stock
(other than cumulative payable-in-kind dividends on its preferred
stock) or entered into any material transactions not in the ordinary
course of business, and there has been no material change in capital
stock (except for the exercise of options and warrants and the
conversion of preferred stock disclosed in the Prospectus and the sale
of shares issued or issuable upon the exercise of options and warrants
so disclosed) or debt
6
<PAGE>
or any material adverse change in the business, financial condition,
results of operations or prospects of the Company and its Subsidiaries
taken as a whole, except as indicated in the Prospectus (or such
Preliminary Prospectus). Neither the Company nor any of its
Subsidiaries (or the manner in which it or any of them conducts its
business) is in breach or violation of, or in default under, any term
or provision of (A) its certificate of incorporation or bylaws, (B) any
indenture, mortgage, deed of trust, voting trust agreement,
stockholders' agreement, note agreement or other agreement or
instrument to which it is a party or by which it is or may be bound or
to which any of its property is or may be subject, or any indebtedness,
or (C) any statute, judgment, decree, order, rule or regulation
applicable to the Company or any of its Subsidiaries or of any
arbitrator, court, regulatory body, administrative agency or any other
governmental agency or body, domestic or foreign, having jurisdiction
over the Company or any of its Subsidiaries or any of their respective
activities or properties, and, in the case of any matter under clause
(B) or (C) above, which would have or is reasonably likely to have a
Material Adverse Effect.
(xii) No labor disturbance by the employees of the
Company or any of its Subsidiaries exists or, to the best knowledge of
the Company, is imminent.
(xiii) Since its inception, the Company has not incurred
any material liability arising under or as a result of the application
of the provisions of the Act.
(xiv) (i) The Company and its Subsidiaries own or
possess valid and enforceable licenses for all inventions, patents,
patent applications, trademarks (registered or unregistered), trademark
applications, tradenames, copyrights, manufacturing processes,
formulae, trade secrets, know-how, and other intangible property and
assets (collectively, "Intellectual Property") used in the conduct of
their business now conducted as described in the Prospectus (except
where the failure to own or possess the same would not have a Material
Adverse Effect) and the Company does not know of any facts which would
form a reasonable basis for a claim that the Company or any of its
Subsidiaries do not own or possess valid and enforceable licenses for
all Intellectual Property necessary to the conduct of their business
proposed to be conducted as described in the Prospectus except where
the failure to own or possess the same would not have a Material
Adverse Effect; (ii) the Company has no knowledge that it or any of its
Subsidiaries lacks or will be unable to obtain any rights or licenses
to use any of the Intellectual Property necessary to conduct the
businesses now conducted or proposed to be conducted by them as
described in the Prospectus, except where the failure to obtain the
same would not have a Material Adverse Effect; (iii) the Company does
not know of any third parties who have or will be able to establish
rights to any of the Intellectual Property, other than the legitimate
rights of licensors; (iv) to the Company's knowledge, there is no
infringement by third parties of any of the Intellectual Property; (v)
the Company's use of the Intellectual Property does not infringe upon
the rights of any third party, except where the same would not have a
Material Adverse Effect; (vi) there is no pending or, to the Company's
knowledge, threatened action, suit, proceeding or claim by others
challenging the Company's or any Subsidiary's rights of title or other
interest in or to any Intellectual Property, and the Company does not
know of any facts which would form a reasonable basis for any such
claim; (vii) there is no pending, or, to the Company's knowledge,
threatened action, suit, proceeding or claim by others challenging the
validity and scope of any Intellectual Property, and the Company does
not know of any facts which would form a reasonable basis for any such
claim; (viii) there is no pending or, to the
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Company's knowledge, threatened action, suit, proceeding or claim by
others that the Company or any of its Subsidiaries infringe or
otherwise violate any patent, trademark, copyright, trade secret or
other proprietary right of others, and the Company is unaware of any
facts which would form a reasonable basis for any such claim; (ix)
neither the Company nor any of the Subsidiaries owns any patents, nor
are there any patent applications pending with the United States Patent
and Trademark Office or similar agency; and (x) there is no pending or,
to the Company's knowledge, threatened action, suit, proceeding or
claim by any current or former employee, consultant or agent of the
Company or any of its Subsidiaries seeking either ownership rights to
any invention or compensation from the Company or any of its
Subsidiaries for any invention made by such employee, consultant or
agent in the course of his/her employment with the Company or any of
its Subsidiaries, nor, to the Company's knowledge, can any such action,
suit, proceeding or claim, if instituted, be sustained.
(xv) No material consent, approval, authorization or
order of or filing with any court, regulatory body, administrative
agency or any other governmental agency or body, domestic or foreign,
is required for the performance by the Company of this Agreement or the
consummation by the Company of the transactions contemplated hereby,
except such as have been or may be obtained under the Act or may be
required under state securities or Blue Sky laws in connection with the
Underwriters' purchase and distribution of the Shares.
(xvi) There are no contracts, agreements or
understandings between the Company and any person granting such person
the right to require the Company to file a registration statement under
the Act with respect to any securities of the Company owned or to be
owned by such person or to require the Company to include such
securities under the Registration Statement (other than those that have
been disclosed in the Prospectus or, if the Prospectus is not in
existence, the most recent Preliminary Prospectus), that have not been
waived with respect to the Registration Statement.
(xvii) Neither the Company nor any of its officers,
directors or affiliates (within the meaning of the Rules and
Regulations) has taken, directly or indirectly, any action designed to
stabilize or manipulate the price of any security of the Company, or
which has constituted or which might in the future reasonably be
expected to cause or result in stabilization or manipulation of the
price of any security of the Company, to facilitate the sale or resale
of the Shares or otherwise.
(xviii) Each of the Company and its Subsidiaries has
good title to, or valid and enforceable leasehold interests in, all
properties and assets owned or leased by it, free and clear of all
liens, encumbrances, security interests, claims, restrictions,
equities, claims and defects, except (A) such as are described in the
Registration Statement and Prospectus (or, if the Prospectus is not in
existence, the most recent Preliminary Prospectus), or such as do not
materially adversely affect the value of any of such properties or
assets taken as a whole and do not materially interfere with the use
made
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and proposed to be made of any of such properties or assets taken as a
whole, and (B) liens for taxes not yet due and payable. The Company
owns or leases all such properties as are necessary to its operations
as now conducted as set forth in the Registration Statement and the
Prospectus (or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus); and the properties of the Company and its
Subsidiaries conform in all material respects to the descriptions
thereof contained in the Registration Statement and the Prospectus (or,
if the Prospectus is not in existence, the most recent Preliminary
Prospectus). All the material leases and subleases of the Company and
its Subsidiaries, and under which the Company or any Subsidiary holds
properties or assets as lessee or sublessee, constitute valid leasehold
interests of the Company or such Subsidiary free and clear of any lien,
encumbrance, security interest or other claim whatsoever, are in full
force and effect, and neither the Company nor any Subsidiary is in
default in respect of any of the material terms or provisions of any
such material leases or subleases, and neither the Company nor any
Subsidiary has notice of any claim which has been asserted by anyone
adverse to the Company's or any of its Subsidiary's rights as lessee or
sublessee under either the material lease or sublease, or affecting or
questioning the Company's or any Subsidiary's right to the continued
possession of the leased or subleased premises under any such material
lease or sublease, which is reasonably likely to have a Material
Adverse Effect.
(xix) Neither the Company nor any Subsidiary has
violated any applicable environmental, safety, health or similar law
applicable to the business of the Company, nor any federal or state law
relating to discrimination in the hiring, promotion, or pay of
employees, nor any applicable federal or state wages and hours law, nor
any provisions of ERISA or the rules and regulations promulgated
thereunder, the consequences of which violation is reasonably likely to
have a Material Adverse Effect.
(xx) Each of the Company and its Subsidiaries hold and
at the Closing Date and any later Option Closing Date, as the case may
be, will hold, all franchises, licenses, permits, approvals,
certificates and other authorizations from federal, state and foreign
and other governmental or regulatory authorities necessary to the
ownership, leasing and operation of their properties or required for
the present conduct of business, and such franchises, licenses,
permits, approvals, certificates and other governmental authorizations
are in full force and effect and the Company and its Subsidiaries are
in compliance therewith in all material respects except where the
failure so to hold, obtain, maintain or comply with would not have a
Material Adverse Effect.
(xxi) Each of the Company and its Subsidiaries is not
(i) in violation of its certificate of incorporation or bylaws, or (ii)
in default in the performance or observance of any obligation,
agreement, covenant or condition contained in any bond, debenture, note
or other evidence of indebtedness, or (iii) in default in the
performance or observance of any contract, indenture, mortgage, loan
agreement joint venture or other agreement or instrument to which it is
a party or by which its or any of its properties are bound, or (iv) in
violation of any law, order, rule, regulation, writ, injunction,
judgment or decree of any court of government agency or body to which
the Company or any of its Subsidiaries is subject, in each case under
clause (ii), (iii) or (iv) where the same would have or is reasonably
likely to have a Material Adverse Effect.
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(xxii) The Company and its Subsidiaries are (i) in
compliance with any and all applicable United States, foreign, state
and local environmental laws, rules, regulations, treaties, statutes
and codes promulgated by any and all governmental authorities relating
to the protection of human health and safety, the environment or toxic
substances or wastes, pollutants or contaminants ("Environmental
Laws"), (ii) have received all permits, licenses or other approvals
required of it under applicable Environmental Laws to conduct their
business as currently conducted, and (iii) are in compliance with all
terms and conditions of any such permit, license or approval, except
where such noncompliance with Environmental Laws, failure to receive
required permit licenses or other approvals would not, individually or
in the aggregate, have a Material Adverse Effect. No action,
proceeding, revocation proceeding, writ, injunction or claim is pending
against the Company or its Subsidiaries or, to the Company's knowledge,
threatened against the Company or its Subsidiaries relating to the
Environmental Laws or to their activities involving Hazardous Materials
which has had, or is reasonably likely to have, a Material Adverse
Effect. "Hazardous Materials" means any material or substance (i) that
is prohibited or regulated by any environmental law, rule, regulation,
order, treaty, statute or code promulgated by any governmental
authority, or any amendment or modification thereto, or (ii) that has
been designated or regulated by any governmental authority as
radioactive, toxic, hazardous or otherwise a danger to health,
reproduction or the environment. The Company and its Subsidiaries have
not engaged in the generation, use, manufacture, transportation or
storage of any Hazardous Materials on any of their properties or former
properties, except where such use, manufacture, transportation or
storage is in compliance in all material respects with Environmental
Laws. The Company and its Subsidiaries have not disposed of any, and to
the Company's knowledge, no parties other than the Company and its
Subsidiaries have disposed of, Hazardous Materials on any of their
properties or on properties formerly owned or leased by them during the
time of such ownership or lease, except in material compliance with
Environmental Laws. To the Company's knowledge, no spills, discharges,
releases, deposits, emplacements, leaks or disposal of any Hazardous
Materials have occurred on or under or have emanated from any of the
Company's or its Subsidiaries' properties or former properties during
the time of the ownership or lease thereof by the Company or a
Subsidiary except in compliance with Environmental Laws and except as
disclosed in the Prospectus, the Company has no knowledge of any
spills, discharges, releases, deposits, emplacements, leaks or disposal
of any Hazardous Materials that have occurred on or under or have
emanated from any of the Company's or Subsidiaries' properties or
former properties prior to the Company's or Subsidiaries' ownership or
lease thereof.
(xxiii) There are no outstanding loans, advances (except
normal advances for business expenses in the ordinary course of
business) or guarantees of indebtedness by the Company or any
Subsidiary to or for the benefit of any of the officers or directors of
the Company or any of the members of the families of any of them that
are required to be disclosed in the Registration Statement and the
Prospectus that are not so disclosed.
(xxiv) The Company and its Subsidiaries maintain a
system of internal accounting controls sufficient to provide reasonable
assurances that (i) transactions are executed in accordance with
management's general or specific authorization; and (ii) transactions
are recorded as necessary to permit preparation of financial statements
in
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<PAGE>
conformity with generally accepted accounting principles and to
maintain accountability for assets.
(xxv) The Company and its Subsidiaries have not at any
time during the last five years (i) made any unlawful contribution to
any candidate for foreign office, or failed to disclose fully any
contribution in violation of law, or (ii) made any payment to any
foreign, United States or state governmental officer or official, or
other person charged with similar public or quasi-public duties, other
than payments required or permitted by applicable law.
(xxvi) The Company is not and, after giving effect to
the offering and sale of the Shares and the application of the proceeds
thereof as described in the Prospectus, will not be, an "investment
company" as such term is defined in the Investment Company Act of 1940,
as amended.
(xxvii) Each certificate signed by any officer of the
Company and delivered to the Underwriters or counsel for the
Underwriters shall be deemed to be a representation and warranty by the
Company to the Underwriters as to the matters covered thereby.
(xxviii) All internal computer systems and each
Constituent Component (as defined below) of those systems and all
computer-related products and each Constituent Component of those
products of the Company and each of its Subsidiaries will not be
affected by the Year 2000 Problem. The "Year 2000 Problem" as used
herein means any significant risk that computer hardware or software
used by the Company or any of the Subsidiaries in the receipt,
transmission, processing, manipulation, storage, retrieval,
retransmission or other utilization of data or in the operation of
mechanical or electrical systems of any kind will not, in the case of
dates or time periods occurring after December 31, 1999, function at
least as effectively as in the case of dates or time periods occurring
prior to January 1, 2000. "Constituent Component" means all software
(including operating systems, programs, packages and utilities),
firmware, hardware, networking components, and peripherals provided as
part of the configuration.
(xxix) The Company has timely and properly filed with
the Commission all reports and other documents required to have been
filed by it with the Commission pursuant to the Act, the Rules and
Regulations and the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), except that it filed late certain reports on Form
10-QSB for the quarters ended on or before June 30, 1998 and except as
set forth in the report on Form 10-KSB for the year ended December 31,
1998.
(xxx) No relationship, direct or indirect, exists
between or among the Company or any of its Subsidiaries on the one
hand, and the directors, officers, stockholders, customers or suppliers
of the Company or any of its Subsidiaries on the other hand, which is
required by the Act to be described in the Registration Statement or
the Prospectus which is not so described.
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3. REPRESENTATIONS AND WARRANTIES OF THE SELLING STOCKHOLDERS.
Each Selling Stockholder, severally and not jointly, represents and warrants to
each Underwriter that:
(i) Such Selling Stockholder is the lawful owner of the
Shares to be sold by such Selling Stockholder pursuant to this
Agreement and has, and on the Closing Date will have, good and clear
title to such Shares, free of all restrictions on transfer, liens,
encumbrances, security interests, equities and claims whatsoever.
(ii) Such Selling Stockholder has, and on the Closing
Date will have, full legal right, power and authority, and all
authorization and approval required by law, to enter into this
Agreement, the Custody Agreement signed by such Selling Stockholder and
[Standard Registrar & Transfer Agency], as Custodian, relating to the
deposit of the Shares to be sold by such Selling Stockholder (the
"Custody Agreement") and the Power of Attorney of such Selling
Stockholder appointing certain individuals as such Selling
Stockholder's attorneys-in-fact (the "Attorneys") to the extent set
forth therein, relating to the transactions contemplated hereby and by
the Registration Statement and the Custody Agreement (the "Power of
Attorney") and to sell, assign, transfer and deliver the Shares to be
sold by such Selling Stockholder in the manner provided herein and
therein.
(iii) This Agreement has been duly authorized, executed
and delivered by or on behalf of such Selling Stockholder.
(iv) The Custody Agreement of such Selling Stockholder
has been duly authorized, executed and delivered by such Selling
Stockholder and is a valid and binding agreement of such Selling
Stockholder, enforceable in accordance with its terms.
(v) The Power of Attorney of such Selling Stockholder
has been duly authorized, executed and delivered by such Selling
Stockholder and is a valid and binding instrument of such Selling
Stockholder, enforceable in accordance with its terms, and, pursuant to
such Power of Attorney, such Selling Stockholder has, among other
things, authorized the Attorneys, or any one of them, to execute and
deliver on such Selling Stockholder's behalf, this Agreement and any
other document that they, or any one of them, may deem necessary or
desirable in connection with the transactions contemplated hereby and
thereby and to deliver the Shares to be sold by such Selling
Stockholder pursuant to this Agreement.
(vi) Upon delivery of and payment for the Shares to be
sold by such Selling Stockholder pursuant to this Agreement, good and
clear title to such Shares will pass to the Underwriters, free of all
restrictions on transfer, liens, encumbrances, security interests,
equities and claims whatsoever.
(vii) The execution, delivery and performance of this
Agreement and the Custody Agreement and Power of Attorney of such
Selling Stockholder by or on behalf of such Selling Stockholder, the
compliance by such Selling Stockholder with all the provisions hereof
and thereof and the consummation of the transactions contemplated
hereby and thereby will not (i) require any consent, approval,
authorization or other order of, or qualification with, any court or
governmental body or agency (except such as may
12
<PAGE>
be required under the securities or Blue Sky laws of the various
states), (ii) conflict with or constitute a breach of any of the terms
or provisions of, or a default under, the organizational documents of
such Selling Stockholder, if such Selling Stockholder is not an
individual, or any indenture, loan agreement, mortgage, lease or other
material agreement or instrument to which such Selling Stockholder is a
party or by which such Selling Stockholder or any property of such
Selling Stockholder is bound or (iii) violate or conflict with any
applicable law or any rule, regulation, judgment, order or decree of
any court or any governmental body or agency having jurisdiction over
such Selling Stockholder or any property of such Selling Stockholder.
(viii) The information in the Registration Statement
under the caption "Principal and Selling Stockholders" which
specifically relates to such Selling Stockholder does not, and will not
on the Closing Date, 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, in the light of the
circumstances under which they were made, not misleading. The foregoing
provisions of this paragraph shall not apply to statements or omissions
made in any Preliminary Prospectus, the Registration Statement or any
amendment thereto or the Prospectus or any amendment or supplement
thereto in reliance upon, and in conformity with, information furnished
in writing to the Company by or on behalf of the Underwriters through
the Representatives expressly for use therein.
(ix) If there is any change in the information referred
to in Section 3(ix), such Selling Stockholder will immediately notify
you of such change.
(x) Each certificate signed by or on behalf of such
Selling Stockholder and delivered to the Underwriters or counsel for
the Underwriters shall be deemed to be a representation and warranty by
such Selling Stockholder to the Underwriters as to the matters covered
thereby.
4. PURCHASE, SALE AND DELIVERY OF THE SHARES AND LOCK-UP
AGREEMENTS. On the basis of the representations, warranties, covenants and
agreements herein contained, but subject to the terms and conditions herein set
forth, (i) the Company agrees to sell 4,425,000 Firm Shares, (ii) each Selling
Stockholder agrees, severally and not jointly, to sell the number of Firm Shares
set forth opposite its name in Schedule II hereto, and (iii) each Underwriter
agrees, severally and not jointly, to purchase from each Seller at a purchase
price of $___ per Share the number of Firm Shares (subject to adjustments to
eliminate fractional shares as you may determine) that bears the same proportion
to the total number of Firm Shares to be sold by such Seller as the number of
Firm Shares set forth opposite the name of such Underwriter in Schedule I hereto
bears to the total number of Firm Shares in Schedule I.
Delivery of certificates, and payment of the purchase price,
for the Firm Shares shall be made at the offices of Brobeck, Phleger & Harrison
LLP, 1633 Broadway, New York, New York 10019, or such other location as shall be
agreed upon by the Company and the Representatives. Such delivery and payment
shall be made at 10:00 a.m., New York City time, on __________, 1999 or at such
other time and date not more than ten business days thereafter as shall be
agreed upon by the Representatives and the Company. The time and date of such
delivery and payment are herein called the "Closing Date." Delivery of the
certificates for the
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<PAGE>
Firm Shares shall be made to the Representatives for the respective accounts of
the several Underwriters against payment by the several Underwriters through the
Representatives of the purchase price for the Firm Shares by wire transfer of
immediately available funds to an account designated to the Representatives by
the Company and the Selling Stockholders in writing at least two business days
preceding the Closing Date. The certificates for the Shares to be so delivered
will be in definitive, fully registered form, will bear no restrictive legends
and will be in such denominations and registered in such names as the
Representatives shall request, not less than two full business days prior to the
Closing Date. The certificates for the Firm Shares will be made available to the
Representatives at such office or such other place as the Representatives may
designate for inspection, checking and packaging not later than 9:30 a.m., New
York time on the business day prior to the Closing Date.
Each Seller will not, directly or indirectly, without the
prior written consent of the Representatives, directly or indirectly offer,
sell, solicit an offer to buy, make any short sale, pledge, grant any option to
purchase, contract to sell, or otherwise dispose of or transfer (collectively, a
"Disposition") of any shares of Common Stock (including, without limitation,
shares of Common Stock which may be deemed to be beneficially owned by the
undersigned in accordance with the rules and regulations of the Securities and
Exchange Commission) or any securities convertible into or exercisable or
exchangeable for, or any rights to purchase or acquire, shares of Common Stock
now owned or hereafter acquired, for a period of 180 days after the date hereof,
except (i) pursuant to this Agreement; (ii) as a bona fide gift or gifts,
provided the donee or donees thereof agree in writing to be bound by this
restriction, (iii) as a distribution to partners, beneficiaries or stockholders
of the undersigned, provided that the distributees thereof agree in writing to
be bound by the terms of this restriction or (iv) upon death, by will or
pursuant to the laws of descent and distribution.
5. PUBLIC OFFERING OF THE SHARES. It is understood that the
Underwriters propose to make a public offering of the Shares at the price and
upon the other terms set forth in the Prospectus.
6. COVENANTS OF THE COMPANY. The Company covenants and agrees
with each of the Underwriters that:
(i) The Company will use its best efforts to cause the
Registration Statement, if not effective at the time of execution of
this Agreement, and any amendments thereto to become effective as
promptly as practicable. If required, the Company will file the
Prospectus and any amendment or supplement thereto with the Commission
in the manner and within the time period required by Rule 424(b) under
the Act. During any time when a prospectus relating to the Shares is
required to be delivered under the Act, the Company (A) will use its
best efforts to comply with all requirements imposed upon it by the Act
and the Rules and Regulations to the extent necessary to permit the
continuance of sales of or dealings in the Shares in accordance with
the provisions hereof and of the Prospectus, as then amended or
supplemented, and (B) will not file with the Commission the prospectus
or the amendment referred to in the third sentence of Section 2(a)(i)
hereof, any amendment or supplement to such prospectus or any amendment
to the Registration Statement of which the Representatives shall not
previously have been advised and furnished with a copy a reasonable
period of time prior
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<PAGE>
to the proposed filing and as to which filing the Representatives shall
not have given their consent.
(ii) As soon as the Company is advised or obtains
knowledge thereof, the Company will advise the Representatives (A) when
the Registration Statement, as amended, has become effective; if the
provisions of Rule 430A promulgated under the Act will be relied upon,
when the Prospectus has been filed in accordance with said Rule 430A
and when any post-effective amendment to the Registration Statement
becomes effective; (B) of any request made by the Commission for
amending the Registration Statement, for supplementing any Preliminary
Prospectus or the Prospectus or for additional information, or (C) of
the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or any post-effective
amendment thereto or any order preventing or suspending the use of any
Preliminary Prospectus or the Prospectus or any amendment or supplement
thereto or the institution or threat of any investigation or proceeding
for that purpose, and will use its best efforts to prevent the issuance
of any such order and, if issued, to obtain the lifting thereof as soon
as possible.
(iii) The Company will use its best efforts to (A)
arrange for the qualification of the Shares for offer and sale under
the state securities or blue sky laws of such jurisdictions as the
Representatives may designate, (B) continue such qualifications in
effect for as long as may be necessary to complete the distribution of
the Shares, and (C) make such applications, file such documents and
furnish such information as may be required for the purposes set forth
in clauses (A) and (B); provided, however, that the Company shall not
be required to qualify as a foreign corporation or file a general or
unlimited consent to service of process in any such jurisdiction.
(iv) The Company consents to the use of the Prospectus
(and any amendment or supplement thereto) by the Underwriters and all
dealers to whom the Shares may be sold, in connection with the offering
or sale of the Shares and for such period of time thereafter as the
Prospectus is required by law to be delivered in connection therewith.
If, at any time when a prospectus relating to the Shares is required to
be delivered under the Act, any event occurs as a result of which the
Prospectus, as then amended or supplemented, would include any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements therein not misleading, or if it becomes
necessary at any time to amend or supplement the Prospectus to comply
with the Act or the Rules and Regulations, the Company promptly will so
notify the Representatives and, subject to Section 6(i) hereof, will
prepare and file with the Commission an amendment to the Registration
Statement or an amendment or supplement to the Prospectus which will
correct such statement or omission or effect such compliance, each such
amendment or supplement to be reasonably satisfactory to counsel to the
Underwriters.
(v) As soon as practicable, but in any event not later
than 45 days after the end of the 12-month period beginning on the day
after the end of the fiscal quarter of the Company during which the
effective date of the Registration Statement occurs (90 days in the
event that the end of such fiscal quarter is the end of the Company's
fiscal
15
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year), the Company will make generally available to its security
holders, in the manner specified in Rule 158(b) of the Rules and
Regulations, and to the Representatives, an earnings statement which
will be in the detail required by, and will otherwise comply with, the
provisions of Section 11(a) of the Act and Rule 158(a) of the Rules and
Regulations, which statement need not be audited unless required by the
Act or the Rules and Regulations, covering a period of at least 12
consecutive months after the effective date of the Registration
Statement.
(vi) The Company will maintain a Transfer Agent and, if
necessary under the jurisdiction of incorporation of the Company, a
Registrar (which may be the same entity as the Transfer Agent) for its
Common Stock.
(vii) The Company will furnish, without charge, to the
Representatives or on the Representatives' order, at such place as the
Representatives may designate, copies of each Preliminary Prospectus,
the Registration Statement and any pre-effective or post-effective
amendments thereto (two of which copies will be signed and will include
all financial statements and exhibits) and the Prospectus, and all
amendments and supplements thereto, in each case as soon as available
and in such quantities as the Representatives may reasonably request.
(viii) The Company will cause the Shares to be duly
included for quotation on the National Association of Securities
Dealers Automated Quotations National Market System prior to the
Closing Date and will use reasonable commercial efforts to maintain
such listing.
(ix) Neither the Company nor any of its officers or
directors, nor affiliates of any of them (within the meaning of the
Rules and Regulations) will take, directly or indirectly, any action
designed to, or which might in the future reasonably be expected to
cause or result in, stabilization or manipulation of the price of any
securities of the Company in violation of applicable law.
(x) The Company will apply the net proceeds of the
offering received by it in the manner set forth under the caption "Use
of Proceeds" in the Prospectus.
(xi) The Company will timely file all such reports,
forms or other documents as may be required from time to time, under
the Act, the Rules and Regulations, the Exchange Act, and the rules and
regulations thereunder, and all such reports, forms and documents filed
will comply as to form and substance with the applicable requirements
under the Act, the Rules and Regulations, the Exchange Act and the
rules and regulations thereunder.
(xii) To use its reasonable commercial efforts to do and
perform all things required or necessary to be done and performed under
this Agreement by the Company prior to the Closing Date or any Option
Closing Date, as the case may be, and to satisfy all conditions
precedent to the delivery of the Shares.
(xiii) If the Registration Statement at the time of the
effectiveness of this Agreement does not cover all of the Shares, to
file a Rule 462(b) Registration Statement
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with the Commission registering the Shares not so covered in compliance
with Rule 462(b) by 10:00 p.m., New York City time, on the date of this
Agreement and to pay to the Commission the filing fee for such Rule
462(b) Registration Statement at the time of the filing thereof or to
give irrevocable instructions for the payment of such fee pursuant to
Rule 111(b) under the Act.
7. EXPENSES.
(a) If the transactions contemplated in this Agreement
are not consummated because any condition to the obligations of the Underwriters
set forth in Section 8 hereof is not satisfied or the Underwriters terminate
this Agreement pursuant to Section 12 hereof, the Company will pay, and hereby
agrees to indemnify each Underwriter against, all fees and expenses incident to
the performance of the obligations of the Sellers under this Agreement,
including, but not limited to, (i) fees and expenses of accountants and counsel
for the Company and the Selling Stockholders, (ii) all out-of-pocket costs and
expenses incurred in connection with the preparation, duplication, printing,
filing, delivery and shipping of copies of the Registration Statement and any
pre-effective or post-effective amendments thereto, any Preliminary Prospectus
and the Prospectus and any amendments or supplements thereto (including postage
costs related to the delivery by the Underwriters of any Preliminary Prospectus
or Prospectus, or any amendment or supplement thereto), this Agreement, the
Agreement Among Underwriters, any Selected Dealer Agreement, Underwriters'
Questionnaire, Underwriters' Power of Attorney, and all other documents in
connection with the transactions contemplated herein, including the cost of all
copies thereof, (iii) out-of-pocket fees and expenses relating to qualification
of the Shares under state securities or blue sky laws, including the cost of
preparing and mailing the preliminary and final blue sky memoranda and filing
fees and reasonable disbursements and fees of counsel and other related
expenses, if any, in connection therewith, (iv) filing fees of the Commission
and the NASD relating to the Shares, (v) any fees and expenses in connection
with the quotation of the Shares on the National Association of Securities
Dealers Automated Quotations National Market System, (vi) costs and expenses
incident to the preparation, issuance and delivery to the Underwriters of any
certificates evidencing the Shares, including transfer agent's and registrar's
fees and any applicable transfer taxes incurred in connection with the delivery
to the Underwriters of the Shares to be sold by the Sellers pursuant to this
Agreement, (vii) out-of-pocket costs and expenses incident to any meetings with
prospective investors in the Shares (other than as shall have been specifically
approved by the Representatives to be paid for by the Underwriters) and (viii)
out-of-pocket costs and expenses of advertising relating to the offering of the
Shares (other than as shall have been specifically approved by the
Representatives to be paid for by the Underwriters).
(b) If the purchase of the Shares as herein contemplated
is not consummated for any reason other than the Underwriters' default under
this Agreement or other than by reason of Section 12(a), the Company shall
reimburse the several Underwriters for their out-of-pocket expenses (including
reasonable counsel fees and disbursements) in connection with any investigation
made by them, and any preparation made by them in respect of marketing of the
Shares or in contemplation of the performance by them of their obligations
hereunder.
8. CONDITIONS OF THE UNDERWRITERS' OBLIGATIONS. The obligation
of each Underwriter to purchase and pay for the Shares set forth opposite the
name of such Underwriter
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in Schedule I and to purchase its pro rata portion of the Shares offered by the
Selling Stockholders in Schedule II is subject to the representations and
warranties of the Company, JCH Limited and the Selling Stockholders herein that
are qualified by reference to a Material Adverse Effect or materiality being
true and correct, and the representations and warranties that are not so
qualified being true and correct in all material respects, as of the date hereof
and as of the Closing Date as if they had been made on and as of the Closing
Date; the accuracy on and as of the Closing Date of the statements of officers
of the Company made pursuant to the provisions hereof; the performance by the
Sellers on and as of the Closing Date of their covenants and agreements
hereunder; and the following additional conditions:
(a) If the Company has elected to rely on Rule 430A
under the Act, the Registration Statement shall have been declared effective,
and the Prospectus (containing the information omitted pursuant to Rule 430A)
shall have been filed with the Commission not later than the Commission's close
of business on the second business day following the date hereof or such later
time and date to which the Representatives shall have consented; if the Company
does not elect to rely on Rule 430A, the Registration Statement shall have been
declared effective not later than 11:00 A.M., New York time, on the date hereof
or such later time and date to which the Representatives shall have consented;
if the Company is required to file a Rule 462(b) Registration Statement after
the effectiveness of this Agreement, such 462(b) Registration Statement shall
become effective by 10:00 p.m. New York City time, on the date of this
Agreement; if required, in the case of any changes in or amendments or
supplements to the Prospectus in addition to those contemplated above, the
Company shall have filed such Prospectus as amended or supplemented with the
Commission in the manner and within the time period required by Rule 424(b)
under the Act; no stop order suspending the effectiveness of the Registration
Statement or any amendment thereto shall have been issued, and no proceedings
for that purpose shall have been instituted or, to the knowledge of the Company
or the Representatives, shall be threatened by the Commission.
(b) The Registration Statement, or any amendment
thereto, shall not contain an untrue statement of fact which is material, or
omit to state a fact which is material and is required to be stated therein or
is necessary to make the statements therein not misleading, and the Prospectus,
or any supplement thereto, shall not contain an untrue statement of fact which
is material, or omit to state a fact which is material and is required to be
stated therein or is necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(c) On or prior to the Closing Date, the Representatives
shall have received from counsel to the Underwriters, such opinion or opinions
with respect to the issuance and sale of the Firm Shares, the Registration
Statement and the Prospectus and such other related matters as the
Representatives reasonably may request and such counsel shall have received such
documents and other information as they request to enable them to pass upon such
matters.
(d) On the Closing Date, the Underwriters shall have
received the opinions, dated the Closing Date, of (i) Golenbock, Eiseman, Assor
& Bell, counsel to the Company ("Company Counsel"), (ii) Conyers Dill & Pearman,
special counsel to JHC Limited, (iii) Irwin, White & Jennings, special counsel
to Michel Bazinet, (iv) Shearman & Sterling, special counsel to Arnhold & S.
Bleichroeder, Inc., and (v) such other opinions with respect to
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the Subsidiaries incorporated in Bermuda and Canada (the "Significant
Subsidiaries") in the forms attached hereto as Appendix A-1, A-2 and A-3,
respectively, addressed to the Underwriters.
(e) On or prior to the Closing Date, counsel to the
Underwriters shall have been furnished such documents and certificates as they
may reasonably require in order to evidence the accuracy, completeness or
satisfaction of any of the representations or warranties of the Company, or
conditions herein contained.
(f) On the Closing Date, the Representatives shall have
received a letter from the Pricewaterhouse Coopers LLP addressed to the Company
and the Underwriters, dated the Closing Date, confirming that it is an
independent accountant with respect to the Company within the meaning of the Act
and the Rules and Regulations thereunder and based upon the procedures described
in its letter delivered to you concurrently with the execution of this Agreement
(herein called the "Original Letter"), but carried out to a date not more than
three days prior to the Closing Date, (i) confirming that the statements and
conclusions set forth in the Original Letter are accurate as of the Closing
Date; and (ii) setting forth any revisions and additions to the statements and
conclusions set forth in the Original Letter that are necessary to reflect any
changes in the facts described in the Original Letter since the date of such
letter, or to reflect the availability of more recent financial statements, data
or information. The letter shall not disclose any change, or any development
involving a prospective change, in or affecting the business or properties of
the Company which, in your reasonable judgment, makes it impracticable or
inadvisable to proceed with the public offering of the Shares as contemplated by
the Prospectus. All such letters shall be in a form reasonably satisfactory to
the Underwriters and their counsel.
(g) On the Closing Date, the Underwriters shall have
received a certificate of the Company, dated the Closing Date, signed on its
behalf by the principal executive officer and the principal financial or
accounting officer of the Company, to the effect that each of such persons has
carefully examined the Registration Statement and the Prospectus and that:
(i) The representations and warranties of the Company in
this Agreement that are qualified by reference to a Material Adverse
Effect or materiality are true and correct, and the representations and
warranties that are not so qualified are true and correct in all
material respects, as if made on and as of the Closing Date, and the
Company has complied with all agreements and covenants and satisfied
all conditions contained in this Agreement on its part to be performed
or satisfied at or prior to the Closing Date;
(ii) No stop order suspending the effectiveness of the
Registration Statement has been issued, and no proceedings for that
purpose have been instituted or are pending or, to the best knowledge
of each of such persons, are threatened under the Act and any and all
filings required by Rule 424 and Rule 430A have been timely made;
(iii) The Registration Statement and Prospectus contain
all statements and information required to be included therein, the
Registration Statement does not include any untrue statement of a
material fact or omit to state any material fact required
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to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading
and neither the Prospectus nor any Preliminary Prospectus includes or
included any untrue statement of a material fact or omits or omitted to
state any 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; and
(iv) Subsequent to the respective dates as of which
information is given in the Registration Statement and the Prospectus
up to and on the Closing Date, neither the Company nor any of the
Subsidiaries has incurred any material adverse change to the business,
financial condition, results of operations or prospects of the Company
and its Subsidiaries taken as a whole; neither the Company nor any of
the Subsidiaries has sustained any material loss or damage to its
property or assets, whether or not insured; and there has not occurred
any event required to be set forth in an amended or supplemented
Prospectus which has not been set forth.
References to the Registration Statement and the Prospectus in this
paragraph (g) are to such documents as amended and supplemented at the
date of the certificate.
(h) Subsequent to the respective dates as of which
information is given in the Registration Statement and the Prospectus up to and
on the Closing Date, there has not been (i) any change or decrease specified in
the letter or letters referred to in paragraph (f) of this Section 8 or (ii) any
change, or any development involving a prospective change, in the business or
properties of the Company or its Subsidiaries which change or decrease in the
case of clause (i) or change or development in the case of clause (ii) is so
material and adverse as to make it impractical or inadvisable in the
Representatives' reasonable judgment to proceed with the public offering or the
delivery of the Shares as contemplated by the Prospectus.
(i) No order suspending the sale of the Shares in any
jurisdiction designated by you pursuant to Section 6(iii)(A) hereof has been
issued on or prior to the Closing Date and no proceedings for that purpose have
been instituted or to the knowledge of the Company, are threatened.
(j) The Representatives shall have received from each
person identified on Appendix B attached hereto an agreement to the effect that
such person will not, directly or indirectly, without the prior written consent
of the Representatives, offer, sell, grant any option to purchase or otherwise
dispose (or announce any offer, sale, grant of an option to purchase or other
disposition) of any shares of Common Stock or any securities convertible into,
or exchangeable or exercisable for, shares of Common Stock for a period of 180
days after the date of this Agreement.
(k) All the representations and warranties of each
Selling Stockholder contained in this Agreement shall be true and correct on the
Closing Date with the same force and effect as if made on the Closing Date and
you shall have received on the Closing Date a certificate dated the Closing Date
from each Selling Stockholder to such effect and to the effect that such Selling
Stockholder has complied with all of the agreements and satisfied all of the
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conditions herein contained and required to be complied with or satisfied by
such Selling Stockholder on or prior to the Closing Date.
(l) You shall have received on the Closing Date, a
certificate of each Selling Stockholder who is not a U.S. Person (as defined
under applicable U.S. federal tax legislation) to the effect that such Selling
Stockholder is not a U.S. Person, which certificate may be in the form of a
properly completed and executed United States Treasury Department Form W-8 (or
other applicable form or statement specified by Treasury Department regulations
in lieu thereof).
(m) The Company shall have furnished the Underwriters
with such further certificates or documents consistent with the foregoing as you
or counsel for the Underwriters may reasonably request. All opinions,
certificates, letters and documents to be furnished by the Company will comply
with the provisions hereof only if they are reasonably satisfactory in all
material respects to the Underwriters and to counsel for the Underwriters. The
Company shall furnish the Underwriters with conformed copies of such opinions,
certificates, letters and documents in such quantities as you reasonably
request. The certificates delivered under this Section 8 shall constitute
representations, warranties and agreements of the Company, as to all matters set
forth therein as fully and effectively as if such matters had been set forth in
Sections 2 and 3 of this Agreement.
(n) The Shares have been duly authorized for quotation
on the National Association of Securities Dealers Automated Quotation National
Market System, subject to notice of issuance at the time of purchase.
9. INDEMNIFICATION.
(a) The Company and JHC Limited, jointly and severally,
agree to indemnify and hold harmless each Underwriter and each person, if any,
who controls such Underwriter within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act, against any and all losses, claims, damages or
liabilities, joint or several (and actions in respect thereof), to which such
Underwriter or such controlling person may become subject, under the Act or
other federal or state statutory law or regulation, at common law or otherwise,
insofar as such losses, claims, damages, liabilities or actions arise out of or
are based upon any untrue statement or alleged untrue statement of any material
fact contained in the Registration Statement or the Prospectus or any
Preliminary Prospectus, or any amendment or supplement thereto, or any blue sky
application or other document executed by the Company specifically for the
purpose of qualifying, or based upon written information furnished by the
Company filed in any state or other jurisdiction in order to qualify, any or all
of the Shares under the securities or blue sky laws thereof (any such
application, document or information being hereinafter called a "Blue Sky
Application"), or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements not misleading, and will reimburse, as
incurred, such Underwriter or such controlling persons for any legal or other
expenses incurred by such Underwriter or such controlling persons in connection
with investigating, defending or appearing as a third party witness in
connection with any such loss, claim, damage, liability or action; PROVIDED,
HOWEVER, that the Company and JHC Limited will not be liable in any such case to
the extent that any such loss, claim, damage, liability or
21
<PAGE>
action arises out of or is based upon any untrue statement or alleged untrue
statement or omission or alleged omission made in any of such documents in
reliance upon and in conformity with information furnished in writing to the
Company on behalf of such Underwriter through the Representatives expressly for
use therein; and provided, further, that such indemnity with respect to any
Preliminary Prospectus shall not inure to the benefit of any Underwriter (or to
the benefit of any person controlling such Underwriter) from whom the person
asserting any such loss, claim, damage, liability or action purchased Shares
which are the subject thereof to the extent that any such loss, claim, damage,
liability or action (i) results from the fact that such Underwriter failed to
send or give a copy of the Prospectus (as amended or supplemented) to such
person at or prior to the confirmation of the sale of such Shares to such person
in any case where such delivery is required by the Act and (ii) arises out of or
is based upon an untrue statement or omission of a material fact contained in
such Preliminary Prospectus that was corrected in the Prospectus (as amended and
supplemented), unless such failure resulted from non-compliance by the Company
with Section 6(vii) hereof. Notwithstanding the foregoing, the aggregate
liability of JHC Limited pursuant to this paragraph (a) shall be limited to an
amount equal to the proceeds (after deducting underwriting discounts and
commissions) received by JHC Limited from the Underwriters for the sale of the
Shares sold by JHC Limited hereunder.
The indemnity agreement in this paragraph (a) shall be in
addition to any liability which the Company and JHC Limited may otherwise have.
(b) Each of the Selling Stockholders, severally and not
jointly, agree to indemnify and hold harmless each Underwriter and each person,
if any, who controls such Underwriter within the meaning of Section 15 of the
Act or Section 20 of the Exchange Act, against any and all losses, claims,
damages or liabilities, joint or several (and actions in respect thereof), to
which such Underwriter or such controlling person may become subject, under the
Act or other federal or state statutory law or regulation, at common law or
otherwise, insofar as such losses, claims, damages, liabilities or actions arise
out of or are based (i) upon any untrue statement or alleged untrue statement of
any material fact contained in the Registration Statement or the Prospectus or
any Preliminary Prospectus, or any amendment or supplement thereto; or (ii) upon
the omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements not misleading, in the case
of subparagraphs (i) and (ii) above to the extent, but only to the extent, that
such untrue statement or alleged untrue statement or omission or alleged
omission was made in reliance upon and conformity with written information
furnished to the Company or such Underwriter by such Selling Stockholder,
directly or through such Selling Stockholder's representatives, specifically for
use in the preparation thereof; or (iii) in whole or in part upon any inaccuracy
in the representations and warranties of the Selling Stockholders contained
herein; or (iv) in whole or in part upon any failure of the Selling Stockholders
to perform their respective obligations hereunder or under law, and will
reimburse, as incurred, such Underwriter or such controlling persons for any
legal or other expenses incurred by such Underwriter or such controlling persons
in connection with investigating, defending or appearing as a third party
witness in connection with any such loss, claim, damage, liability or action;
PROVIDED, HOWEVER, that the Selling Stockholders will not be liable in any such
case to the extent that any such loss, claim, damage, liability or action arises
out of or is based upon any untrue statement or alleged untrue statement or
omission or alleged omission made in any of such documents in reliance upon and
in conformity with information furnished in writing to the Company on behalf of
such Underwriter
22
<PAGE>
through the Representatives expressly for use therein; and provided, further,
that such indemnity with respect to any Preliminary Prospectus shall not inure
to the benefit of any Underwriter (or to the benefit of any person controlling
such Underwriter) from whom the person asserting any such loss, claim, damage,
liability or action purchased Shares which are the subject thereof to the extent
that any such loss, claim, damage, liability or action (i) results from the fact
that such Underwriter failed to send or give a copy of the Prospectus (as
amended or supplemented) to such person at or prior to the confirmation of the
sale of such Shares to such person in any case where such delivery is required
by the Act and (ii) arises out of or is based upon an untrue statement or
omission of a material fact contained in such Preliminary Prospectus that was
corrected in the Prospectus (as amended and supplemented), unless such failure
resulted from non-compliance by the Company with Section 6(vii) hereof.
Notwithstanding the foregoing, the aggregate liability of any Selling
Stockholder pursuant to this paragraph (b) shall be limited to an amount equal
to the proceeds (after deducting underwriting discounts and commissions)
received by such Selling Stockholder from the Underwriters for the sale of the
Shares sold by such Selling Stockholder hereunder.
The indemnity agreement in this paragraph (b) shall be in
addition to any liability which the Selling Stockholders may otherwise have.
(c) Each of the Underwriters agrees severally, but not
jointly, to indemnify and hold harmless the Company, each of its directors, each
of its officers who has signed the Registration Statement, each person, if any,
who controls the Company within the meaning of Section 15 of the Act or Section
20 of the Exchange Act, each Seller Stockholder and each person, if any, who
controls such Selling Stockholder within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act, against any and all losses, claims, damages or
liabilities (and actions in respect thereof) to which the Company or any Selling
Stockholder or any such director, officer, or controlling person may become
subject, under the Act or other federal or state statutory law or regulation, at
common law or otherwise, insofar as such losses, claims, damages, liabilities or
actions arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in the Registration Statement or the
Prospectus or any Preliminary Prospectus, or any amendment or supplement thereto
or in any Blue Sky Application, or arise out of or are based upon the omission
or the alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements not misleading, in each case to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in reliance upon and in
conformity with information furnished in writing by that Underwriter through the
Representatives to the Company expressly for use therein; and will reimburse, as
incurred, all legal or other expenses reasonably incurred by the Company or any
Selling Stockholder or any such director, officer, controlling person in
connection with investigating or defending any such loss, claim, damage,
liability or action. The Company, JHC Limited and the Selling Stockholders
acknowledge that the statements with respect to the public offering of the
Shares set forth under the heading "Underwriting" has been furnished by the
Underwriters to the Company expressly for use therein and constitutes the only
information furnished in writing by or on behalf of the Underwriters for
inclusion in the Prospectus. The indemnity agreement contained in this paragraph
(c) shall be in addition to any liability which the Underwriters may otherwise
have.
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(d) Promptly after receipt by an indemnified party under
this Section 9 of notice of the commencement of any action, such indemnified
party will, if a claim in respect thereof is to be made against one or more
indemnifying parties under this Section 9, notify such indemnifying party or
parties of the commencement thereof; but the omission so to notify the
indemnifying party shall not relieve it from any liability which it may have to
any indemnified party otherwise than under paragraph (a), (b) or (c) of this
Section 9 or to the extent that the indemnifying party was not adversely
affected by such omission. In case any such action is brought against an
indemnified party and it notifies an indemnifying party or parties of the
commencement thereof, the indemnifying party or parties against which a claim is
to be made will be entitled to participate therein and, to the extent that it or
they may wish, to assume the defense thereof, with counsel reasonably
satisfactory to such indemnified party; provided however, that if the defendants
in any such action include both the indemnified party and the indemnifying party
and the indemnified party has reasonably concluded that there may be legal
defenses available to it and/or other indemnified parties which are different
from or additional to those available to the indemnifying party, the indemnified
party or parties shall have the right to select separate counsel to assume such
legal defenses and otherwise to participate in the defense of such action on
behalf of such indemnified party or parties. Upon receipt of notice from the
indemnifying party to such indemnified party of its election so to assume the
defense of such action and approval by the indemnified party of such counsel,
the indemnifying party will not be liable to such indemnified party under this
Section 9 for any legal or other expenses (other than the reasonable costs of
investigation) subsequently incurred by such indemnified party in connection
with the defense thereof unless (i) the indemnified party has employed such
counsel in connection with the assumption of such different or additional legal
defenses in accordance with the proviso to the immediately preceding sentence,
(ii) the indemnifying party has not employed counsel reasonably satisfactory to
the indemnified party to represent the indemnified party within a reasonable
time after notice of commencement of the action, or (iii) the indemnifying party
has authorized in writing the employment of counsel for the indemnified party at
the expense of the indemnifying party.
(e) If the indemnification provided for in this Section
9 is unavailable or insufficient to hold harmless an indemnified party under
paragraph (a), (b) or (c) above in respect of any losses, claims, damages,
expenses or liabilities (or actions in respect thereof) referred to therein,
then each indemnifying party shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages or
liabilities (or actions in respect thereof) (i) in such proportion as is
appropriate to reflect the relative benefits received by each of the Sellers, on
the one hand, and the Underwriters, on the other hand, from the offering of the
Shares or (ii) if the allocation provided by clause (i) above is not permitted
by applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault of
the Sellers, on the one hand, and the Underwriters, on the other hand in
connection with the statements or omissions that resulted in such losses,
claims, damages or liabilities, as well as any other relevant equitable
considerations. The relative benefits received by the Sellers, on the one hand,
and the Underwriters, on the other, shall be deemed to be in the same proportion
as the total net proceeds from the offering of the Shares (before deducting
expenses) bear to the total underwriting discounts received by the Underwriters
hereunder, in each case as set forth in the table on the cover page of the
Prospectus. Relative fault shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material
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fact relates to information supplied by the Company, the Selling Stockholders or
the Underwriters, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such untrue statement or
omission. The amount paid or payable by an indemnified party as a result of the
losses, claims, damages or liabilities (or actions in respect thereof) referred
to above in this paragraph (e) shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this paragraph (e), the Underwriters shall not be required to
contribute any amount in excess of the underwriting discount applicable to the
Shares purchased by the Underwriters hereunder. The Underwriters' obligations to
contribute pursuant to this paragraph (e) are several in proportion to their
respective underwriting obligations, and not joint. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of this paragraph (e), (i) each
person, if any, who controls an Underwriter within the meaning of Section 15 of
the Act or Section 20 of the Exchange Act shall have the same rights to
contribution as such Underwriter and (ii) each director of the Company, each
officer of the Company who has signed the Registration Statement, and each
person, if any, who controls the Company or a Selling Stockholder within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act shall have
the same rights to contribution as the Company, subject in each case to this
paragraph (e). Any party entitled to contribution will, promptly after receipt
of notice of commencement of any action, suit or proceeding against such party
in respect to which a claim for contribution may be made against another party
or parties under this paragraph (e), notify such party or parties from whom
contribution may be sought, but the omission so to notify such party or parties
shall not relieve the party or parties from whom contribution may be sought from
any other obligation (x) it or they may have hereunder or otherwise than under
this paragraph (e) or (y) to the extent that such party or parties were not
adversely affected by such omission. The contribution agreement set forth above
shall be in addition to any liabilities which any indemnifying party may
otherwise have.
(f) Each Selling Stockholder hereby designates
Mediconsult.com, Inc., 33 Reid Street, 4th Floor, Hamilton HM 12, Bermuda, as
its authorized agent, upon which process may be served in any action which may
be instituted in any state or federal court in the State of New York by any
Underwriter, any director or officer of any Underwriter or any person
controlling any Underwriter asserting a claim for indemnification or
contribution under or pursuant to this Section 9, and each Selling Stockholder
will accept the jurisdiction of such court in such action, and waives, to the
fullest extent permitted by applicable law, any defense based upon lack of
personal jurisdiction or venue. A copy of any such process shall be sent or
given to such Selling Stockholder at the address for notices specified herein.
10. RIGHT TO INCREASE OFFERING. At anytime during a period of
30 days from the date of the Prospectus, the Underwriters, by no less than two
business days' prior notice to the Company may designate a closing (which may be
concurrent with, and part of, the closing on the Closing Date with respect to
the Firm Shares or may be a second closing held on a date subsequent to the
Closing Date, in either case such date shall be referred to herein as the
"Option Closing Date") at which the Underwriters may purchase all or less than
all of the Additional Shares in accordance with the provisions of this Section
10 at the purchase price per share to be
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paid for the Firm Shares. In no event shall the Option Closing Date be later
than 10 business days after written notice of election to purchase Additional
Shares is given.
The Company agrees to sell to the several Underwriters on the
Option Closing Date the number of Additional Shares specified in such notice and
the Underwriters agree, severally and not jointly, to purchase such Additional
Shares on the Option Closing Date. If the Underwriters elect to purchase all of
the 375,000 Additional Shares to be sold by the Company, the Selling
Stockholders agree to sell to the several Underwriters on the Option Closing
Date the number of Additional Shares specified in such notice to be sold by the
Selling Stockholders, on a pro rata basis between the Selling Stockholders, and
the Underwriters agree, severally and not jointly, to purchase such Additional
Shares from the Selling Stockholders on the Option Closing Date.
All such Additional Shares shall be purchased for the account
of each Underwriter in the same proportion as the number of Firm Shares set
forth opposite the name of such Underwriter in Column (3) of Schedule I bears to
the total number of Firm Shares in Schedule I (subject to adjustment by you to
eliminate fractions) and may be purchased by the Underwriters only for the
purpose of covering over-allotments made in connection with the sale of the Firm
Shares.
No Additional Shares shall be sold or delivered unless the
Firm Shares previously have been, or simultaneously are, sold and delivered. The
right to purchase the Additional Shares or any portion thereof may be
surrendered and terminated at any time upon notice by you to the Company.
Except to the extent modified by this Section 10, all
provisions of this Agreement relating to the transactions contemplated to occur
on the Closing Date for the sale of the Firm Shares shall apply, mutatis
mutandis, to the Option Closing Date for the sale of the Additional Shares.
11. REPRESENTATIONS, ETC. TO SURVIVE DELIVERY. The respective
representations, warranties, agreements, covenants, indemnities and statements
of, and on behalf of, the Company and its officers, JHC Limited, the Selling
Stockholders, and the Underwriters, respectively, set forth in or made pursuant
to this Agreement will remain in full force and effect, regardless of any
investigation made by or on behalf of the Underwriters, and will survive
delivery of and payment for the Shares. Any successors to the Underwriters shall
be entitled to the indemnity, contribution and reimbursement agreements
contained in this Agreement.
12. EFFECTIVE DATE AND TERMINATION.
(a) This Agreement shall become effective at 11:00 A.M.,
New York time on the first business day following the date hereof, or at such
earlier time after the Registration Statement becomes effective as the
Representatives, in their sole discretion, shall release the Shares for the sale
to the public unless prior to such time the Representatives shall have received
written notice from the Company that it elects that this Agreement shall not
become effective, or the Representatives shall have given written notice to the
Company that the Representatives on behalf of the Underwriters elect that this
Agreement shall not become effective; PROVIDED,
26
<PAGE>
HOWEVER, that the provisions of this Section and of Section 7 and Section 9
hereof shall at all times be effective. For purposes of this Section 12(a), the
Shares to be purchased hereunder shall be deemed to have been so released upon
the earlier of notification by the Representatives to securities dealers
releasing such Shares for offering or the release by the Representatives for
publication of the first newspaper advertisement which is subsequently published
relating to the Shares.
(b) This Agreement (except for the provisions of
Sections 7 and 9 hereof) may be terminated by the Representatives by notice to
the Company that it has failed to comply in any respect with any of the
provisions of this Agreement required on its part to be performed at or prior to
the Closing Date or the Option Closing Date, or if any representation or
warranty of the Company, JHC Limited or the Selling Stockholders is not accurate
in any respect or if the covenants, agreements or conditions of, or applicable
to the Company, JHC Limited and the Selling Stockholders herein contained have
not been complied with in any respect or satisfied within the time specified on
the Closing Date or the Option Closing Date, respectively, or if prior to the
Closing Date or the Option Closing Date:
(i) the Company or any of its Subsidiaries shall have
sustained a loss by strike, fire, flood, accident or other calamity of
such a character as to interfere materially with the conduct of the
business and operations of the Company and its Subsidiaries takes as a
whole regardless of whether or not such loss was insured;
(ii) trading in the Common Stock shall have been
suspended by the Commission or the National Association of Securities
Dealers Automated Quotations National Market System or trading in
securities generally on the New York Stock Exchange or the National
Association of Securities Dealers Automated Quotations National Market
System shall have been suspended or a material limitation on such
trading shall have been imposed or minimum or maximum prices shall have
been established on any such exchange or market system;
(iii) a banking moratorium shall have been declared by
New York or United States authorities;
(iv) there shall have been an outbreak or escalation of
hostilities between the United States and any foreign power or an
outbreak or escalation of any other insurrection or armed conflict
involving the United States; or
(v) there shall have been a material adverse change in
(A) general economic, political or financial conditions or (B) the
present or prospective business or condition (financial or other) of
the Company and its Subsidiaries taken as a whole that, in each case,
in the Representatives' judgment makes it impracticable or inadvisable
to make or consummate the public offering, sale or delivery of the
Shares on the terms and in the manner contemplated in the Prospectus
and the Registration Statement.
(c) Termination of this Agreement under this Section 12
or Section 14 after the Firm Shares have been purchased by the Underwriters
hereunder shall be applicable
27
<PAGE>
only to the Additional Shares. Termination of this Agreement shall be without
liability of any party to any other party other than as provided in Sections 7
and 9 hereof.
13. AGREEMENTS OF THE SELLING STOCKHOLDERS. Each Selling
Stockholder agrees with you and the Company:
(a) To pay or to cause to be paid all transfer taxes
payable in connection with the transfer of the Shares to be sold by such Selling
Stockholder to the Underwriters.
(b) To do and perform all things to be done and
performed by such Selling Stockholder under this Agreement prior to the Closing
Date and to satisfy all conditions precedent to the delivery of the Shares to be
sold by such Selling Stockholder pursuant to this Agreement.
14. SUBSTITUTION OF UNDERWRITERS. If one or more of the
Underwriters shall fail or refuse (otherwise than for a reason sufficient to
justify the termination of this Agreement under the provisions of Section 8 or
12 hereof) to purchase and pay for (a) in the case of the Closing Date, the
number of Firm Shares agreed to be purchased by such Underwriter or Underwriters
upon tender to you of such Firm Shares in accordance with the terms hereof or
(b) in the case of the Option Closing Date, the number of Additional Shares
agreed to be purchased by such Underwriter or Underwriters upon tender to you of
such Additional Shares in accordance with the terms hereof, and the number of
such Shares shall not exceed 10% of the Firm Shares or Additional Shares
required to be purchased on the Closing Date or the Option Closing Date, as the
case may be, then each of the non-defaulting Underwriters shall purchase and pay
for (in addition to the number of such Shares which it has severally agreed to
purchase hereunder) that proportion of the number of Shares which the defaulting
Underwriter or Underwriters shall have so failed or refused to purchase on such
Closing Date or Option Closing Date, as the case may be, which the number of
Shares agreed to be purchased by such non-defaulting Underwriter bears to the
aggregate number of Shares so agreed to be purchased by all such non-defaulting
Underwriters on such Closing Date or Option Closing Date, as the case may be. In
such case, you shall have the right to postpone the Closing Date or the Option
Closing Date, as the case may be, to a date not exceeding seven full business
days after the date originally fixed as such Closing Date or the Option Closing
Date, as the case may be, pursuant to the terms hereof in order that any
necessary changes in the Registration Statement, the Prospectus or any other
documents or arrangements may be made.
If one or more of the Underwriters shall fail or refuse
(otherwise than for a reason sufficient to justify the termination of this
Agreement under the provisions of Section 8 or 12 hereof) to purchase and pay
for (a) in the case of the Closing Date, the number of Firm Shares agreed to be
purchased by such Underwriter or Underwriters upon tender to you of such Firm
Shares in accordance with the terms hereof or (b) in the case of the Option
Closing Date, the number of Additional Shares agreed to be purchased by such
Underwriter or Underwriters upon tender to you of such Additional Shares in
accordance with the terms hereof, and the number of such Shares shall exceed 10%
of the Firm Shares or Additional Shares required to be purchased by all the
Underwriters on the Closing Date or the Option Closing Date, as the case may be,
then (unless within 48 hours after such default arrangements to your
satisfaction shall have been made
28
<PAGE>
for the purchase of the defaulted Shares by an Underwriter or Underwriters) and
subject to the provisions of Section 12(b) hereof, this Agreement will terminate
without liability on the part of any non-defaulting Underwriter or on the part
of the Company or the Selling Stockholders except as otherwise provided in
Sections 7 and 9 hereof. As used in this Agreement, the term "Underwriter"
includes any person substituted for an Underwriter under this paragraph. Nothing
in this Section 14, and no action taken hereunder, shall relieve any defaulting
Underwriter from liability in respect of any default of such Underwriter under
this Agreement.
15. NOTICES. All communications hereunder shall be in writing
and if sent to the Representatives shall be mailed or delivered or telegraphed
and confirmed by letter or telecopied and confirmed by letter to c/o ING Baring
Furman Selz LLC at 230 Park Avenue, New York, New York 10169, Attention:
Syndicate Department or, if sent to the Company, shall be mailed or delivered or
telegraphed and confirmed to the Company at 33 Reid Street, 4th Floor, Hamilton
HM 12, Bermuda, or if sent to JHC Limited, c/o Robert A. Jennings, 33 Reid
Street, 4th Floor, Hamilton HM 12, Bermuda, or if sent to the Selling
Stockholders, to Robert A. Jennings, Attorney-in-Fact, at 33 Reid Street, 4th
Floor, Hamilton HM 12, Bermuda, in each case with a copy to Lawrence M. Bell,
Esq., Golenbock, Eiseman, Assor & Bell, 437 Madison Avenue, New York, New York
10022.
16. SUCCESSORS. This Agreement shall inure to the benefit of
and be binding upon the Company, JHC Limited, the Selling Stockholders and each
Underwriter and the Company's, JHC Limited's, the Selling Stockholders' and each
Underwriter's respective successors and legal representatives, and nothing
expressed or mentioned in this Agreement is intended or shall be construed to
give any other person any legal or equitable right, remedy or claim under or in
respect of this Agreement, or any provisions herein contained, this Agreement
and all conditions and provisions hereof being intended to be and being for the
sole and exclusive benefit of such persons and for the benefit of no other
person, except that the representations, warranties, indemnities and
contribution agreements of the Company, JHC Limited and the Selling Stockholders
contained in this Agreement shall also be for the benefit of any person or
persons, if any, who control any Underwriter within the meaning of Section 15 of
the Act or Section 20 of the Exchange Act, and except that the Underwriters'
indemnity and contribution agreements shall also be for the benefit of the
directors of the Company, the officers of the Company who have signed the
Registration Statement, any person or persons, if any, who control the Company
or the Selling Stockholders within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act. No purchaser of Shares from the Underwriters
will be deemed a successor because of such purchase.
17. APPLICABLE LAW; JURISDICTION. This Agreement shall be
governed by and construed in accordance with the laws of the State of New York,
without giving effect to the choice of law or conflict of law principles
thereof. Each party hereto consents to the jurisdiction of each court in which
any action is commenced seeking indemnity or contribution pursuant to Section 9
above and agrees to accept, either directly or through an agent, service of
process of each such court.
18. COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original, and all of
which together shall be deemed to be one and the same instrument.
29
<PAGE>
If the foregoing correctly sets forth our understanding,
please indicate the Underwriters' acceptance thereof in the space provided below
for that purpose, whereupon this letter shall constitute a binding agreement
between us.
Very truly yours,
MEDICONSULT.COM, INC.
By:
-------------------------------
Name: Robert A. Jennings
Title: Chief Executive Officer
THE SELLING STOCKHOLDERS NAMED
IN SCHEDULE II HERETO, ACTING
SEVERALLY
By:
-------------------------------
Attorney-in-fact
JHC LIMITED
By:
-------------------------------
Robert A. Jennings
Chief Executive Officer
Accepted as of the date first above written:
ING BARING FURMAN SELZ LLC
By: ING Baring Furman Selz LLC Acting on its own
behalf and as one of the Representatives of the
several Underwriters referred to in the
foregoing Agreement
By:
-------------------------------
Title:
-------------------------------
30
<PAGE>
SCHEDULE I
UNDERWRITERS
Underwriting Agreement dated ______________, 1999
<TABLE>
<CAPTION>
(2)
(1) Maximum Number (3)
Number of Firm of Additional Aggregate Maximum
Shares to be Shares to be Number of Shares
Purchased from Purchased from to be Purchased
NAME the Company the Company from the Company
- ---- ----------- ----------- ----------------
<S> <C> <C> <C>
ING Baring Furman Selz LLC.............
Volpe Brown Whelan & Company, LLC .....................
Total.................................................. 5,000,000 375,000 5,375,000
--------- ------- ---------
--------- ------- ---------
</TABLE>
<PAGE>
SCHEDULE II
SELLING STOCKHOLDERS
<TABLE>
<CAPTION>
(2)
(1) Maximum Number (3)
Number of Firm of Additional Aggregate Maximum
Shares to be Sold Shares to be Number of Shares
to the Sold to the to be Sold to the
NAME AND ADDRESS Underwriters Underwriters Underwriters
- ---------------- ------------ ------------ ------------
<S> <C> <C> <C>
JHC Limited 375,000 250,000 625,000
------- ------- -------
33 Reid Street, 4th Floor
Hamilton HM 12
Bermuda
Michel Bazinet 100,000 125,000 225,000
------- ------- -------
343 Brookfield Avenue
Mount-Royal
P. Quebec
Canada H3P 2A7
Arnhold and S. Bleichroeder, Inc. 100,000 100,000
------- ------- -------
1345 Avenue of the Americas
New York, New York 10105-4300
Total.................................................. 575,000 375,000 950,000
------- ------- -------
------- ------- -------
</TABLE>
<PAGE>
APPENDIX A-1
OPINION OF COUNSEL TO THE COMPANY
(a) Each of the Company and each Significant Subsidiary
is a corporation, validly existing and in good standing under the laws of the
state or other jurisdiction of its incorporation. The Company has all requisite
corporate power and corporate authority to own or lease its properties and to
conduct its business as described in the Prospectus; based on the business of
the Company and each Significant Subsidiary as described in the Registration
Statement, each Significant Subsidiary has all requisite corporate power and
corporate authority to own or lease its properties and to conduct its business
as described in such minute books;
(b) The authorized capital stock of the Company is as
set forth under the caption "Capitalization" in the Prospectus; the issued and
outstanding shares of the Company's capital stock have been duly authorized and
validly issued by the Company, are fully paid and nonassessable and, to the
knowledge of such counsel, have not been issued in violation of any preemptive
right arising under the Delaware General Corporation Law or, to such counsel's
knowledge, similar rights that entitle or will entitle any person to acquire any
shares of capital stock of the Company upon the issuance and sale of Shares of
the Company, which rights have not been waived, or in violation of any co-sale
right, registration right, right of first refusal or other similar right;
(c) All of the outstanding shares of capital stock of
each Significant Subsidiary have been duly authorized and validly issued and are
fully paid and non-assessable, are owned by the Company, directly or indirectly,
through one or more subsidiaries, and, to the knowledge of such counsel, are
free and clear of any pledge, lien, security interest, encumbrance, or claim;
(d) The Company has duly authorized the issuance and
sale of the Shares to be sold by it hereunder on the Closing Date; such Shares,
when issued and delivered by the Company and paid for in accordance with the
terms hereof, will be validly issued, fully paid and nonassessable and will
conform in all material respects to the description thereof contained in the
Prospectus and will be sold free and clear of any pledge, lien, security
interest, encumbrance or claim, and, to the knowledge of such counsel, not in
violation of or subject to any preemptive right, co-sale right, right of first
refusal or similar rights that entitle or will entitle any person to acquire any
shares of capital stock of the Company upon the issuance and sale of Shares of
the Company which rights have not previously been waived, in connection with the
purchase or sale of any of the Shares;
(e) The Registration Statement has been declared
effective under the Act; any required filing of the Prospectus pursuant to Rule
424(b) has been made in the manner and within the time period required by Rule
424(b) and any required filing of an abbreviated registration statement pursuant
to Rule 462(b) of the Rules and Regulations has been made in the manner and
within the time period required by such rule 462(b); and to such counsel's
knowledge, no stop order suspending the effectiveness of the Registration
Statement or any amendment thereto has been issued, and to such counsel's
knowledge, no proceedings for that
<PAGE>
purpose have been instituted or are pending or, to the knowledge of such
counsel, are threatened under the Act;
(f) The Registration Statement, as amended, and the
Prospectus and, if any, each amendment and supplement thereto (except for the
financial statements and notes thereto, schedules and other data or information
of an accounting, financial or statistical nature included therein, as to which
such counsel need not express any opinion), as of their respective effective or
issue dates, comply as to form in all material respects with the requirements of
the Act and the Rules and Regulations;
(g) To the knowledge of such counsel, there are no
contracts or documents to which the Company or any Subsidiary is a party which
are required by the Act to be filed as exhibits to the Registration Statement
which are not filed as required by the Act and the Rules and Regulations;
(h) To the knowledge of such counsel, there is not
pending or threatened against the Company or any Subsidiary any action, suit,
proceeding or investigation before or by any court, regulatory body, or
administrative agency or any other governmental agency or body, domestic or
foreign, of a character required to be disclosed in the Registration Statement
or the Prospectus which is not disclosed therein;
(i) The statements set forth under the headings
"Description of Capital Stock", "Shares Eligible for Future Sale", and "Risk
Factors-Shares Eligible for Future Sale", and statements in response to Items 14
and 15 of Part II of the Registration Statement, in each case insofar as such
statements constitute a summary of the legal matters, documents or proceedings
referred to therein, provide a fair summary of such legal matters, documents and
proceedings in all material respects;
(j) The Company has all requisite corporate right,
power, and authority to enter into this Agreement and to consummate the
transactions provided for herein; this Agreement has been duly authorized,
executed and delivered by the Company and JHC Limited;
(k) None of the Company's execution or delivery of this
Agreement, its performance hereof, and its consummation of the transactions
contemplated herein conflicts with or results in any breach or violation of any
of the terms or provisions of, or constitutes a default under, the terms of the
certificate of incorporation or by-laws of the Company; the terms of any
indenture, mortgage, deed of trust, voting trust agreement, stockholder's
agreement, note agreement or other agreement or instrument to which the Company
or any of its Subsidiaries is a party filed as an exhibit to the Registration
Statement; any statute, rule or regulation of any state or Federal regulatory
body or administrative agency or other governmental agency or body, or to such
counsel's knowledge, any judgment, order or decree of any state or Federal
government, arbitrator, court, regulatory body or administrative agency or other
governmental agency or body, having such jurisdiction over the Company, any of
its subsidiaries or their respective properties, except that with regard to this
paragraph (l), no opinion is expressed as to state securities or Blue Sky laws
or any rules or regulations thereunder;
2
<PAGE>
(l) No consent, approval, authorization or order of any
state or Federal court, regulatory body or administrative agency or other state
or Federal governmental agency or body, has been or is required for the
Company's performance of this Agreement or the consummation of the transactions
contemplated hereby, except (1) such as have been obtained under the Act or may
be required under state securities or Blue Sky laws in connection with the
purchase and distribution by the Underwriters of the Shares, it being understood
that no opinion is expressed with respect to state securities or Blue Sky laws
and (2) such as have been made or obtained under the Act;
(m) All holders of securities of the Company who, to
such counsel's knowledge, have rights to cause the Company to register shares of
Common Stock or other securities because of the filing of the Registration
Statement by the Company have waived such rights, such rights have expired by
reason of lapse of time following notification of the Company's intent to file
the Registration Statement or such rights have been satisfied in accordance with
their respective terms, in each case except as disclosed in the Prospectus;
(n) No transfer taxes under the laws of the State of New
York are required to be paid in connection with the sale or delivery to the
Underwriters of the Firm Shares or the Additional Shares which have not been
paid;
In addition, such counsel shall state that they have
participated in conferences with officers and other representatives of the
Company, representatives of the independent accountants for the Company,
representatives of the Underwriters and representatives of counsel for the
Underwriters, at which conferences the contents of the Registration Statement
and the Prospectuses and related matters were discussed and, although such
counsel may state that it has not independently checked or verified and is not
passing upon and assumes no responsibility for the accuracy, completeness or
fairness of the statements contained in the Registration Statement and the
Prospectuses (other than with respect to the opinions set forth in paragraph (g)
above, on the basis of the foregoing (relying as to materiality upon discussions
with, and representations and opinions of, officers and other representatives of
the Company), such counsel has no reason to believe that the Registration
Statement, on the effective date thereof contained an untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements contained therein, in light of the
circumstances under which they were made, not misleading or that the Prospectus,
on the date thereof or on the Closing Date, contained or contains an untrue
statement of a material fact or omitted or omits to state a material fact
required to be stated therein or necessary to make the statements contained
therein, in the light of the circumstances under which they were made, not
misleading (it being understood that such counsel need express no view with
respect to the financial statements and notes thereto, the schedules and other
data or information of an accounting, financial or statistical nature included
in the Registration Statement or the Prospectus).
In rendering any such opinion, such counsel may rely, as to
matters of fact, to the extent such counsel deems proper, on certificates of
responsible officers of the Company and or other written statements of public
officials and, as to matters involving the application of laws of any
jurisdiction other than the State of New York or the United States or the
General Corporation law of the State of Delaware, solely on the opinions of
local counsel, and, as to matters relating
3
<PAGE>
to JHC Limited or any of the Selling Stockholders, solely on opinions of counsel
to JHC Limited and such Selling Stockholders.
References to the Registration Statement and the Prospectus in
such opinion shall include any amendment or supplement thereto at the date of
such opinion.
4
<PAGE>
APPENDIX A-2
OPINION OF COUNSEL TO EACH SELLING STOCKHOLDER
(a) Each Selling Stockholder is the lawful owner of the
Shares to be sold by such Selling Stockholder pursuant to this Agreement and has
good and clear title to such Shares, free of all restrictions on transfer,
liens, encumbrances, security interests, equities and claims whatsoever;
(b) Each Selling Stockholder has full legal right, power
and authority, and all authorization and approval required by law, to enter into
this Agreement and the Custody Agreement and the Power of Attorney of such
Selling Stockholder and to sell, assign, transfer and deliver the Shares to be
sold by such Selling Stockholder in the manner provided herein and therein;
(c) The Custody Agreement of each Selling Stockholder
has been duly authorized, executed and delivered by such Selling Stockholder and
is a valid and binding agreement of such Selling Stockholder, enforceable in
accordance with its terms;
(d) The Power of Attorney of each Selling Stockholder
has been duly authorized, executed and delivered by such Selling Stockholder and
is a valid and binding instrument of such Selling Stockholder, enforceable in
accordance with its terms, and, pursuant to such Power of Attorney, such Selling
Stockholder has, among other things, authorized the Attorneys, or any one of
them, to execute and deliver on such Selling Stockholder's behalf this Agreement
and any other document they, or any one of them, may deem necessary or desirable
in connection with the transactions contemplated hereby and thereby and to
deliver the Shares to be sold by such Selling Stockholder pursuant to this
Agreement;
(e) Upon delivery of and payment for the Shares to be
sold by each Selling Stockholder pursuant to this Agreement, good and clear
title to such Shares will pass to the Underwriters, free of all restrictions on
transfer, liens, encumbrances, security interests, equities and claims
whatsoever; and
The execution, delivery and performance of this Agreement and
the Custody Agreement and Power of Attorney of each Selling Stockholder by such
Selling Stockholder, the compliance by such Selling Stockholder with all the
provisions hereof and thereof and the consummation of the transactions
contemplated hereby and thereby do not (A) require any consent, approval,
authorization or other order of, or qualification with, any court or
governmental body or agency (except such as may be required under the securities
or Blue Sky laws of the various states), (B) conflict with or constitute a
breach of any of the terms or provisions of, or a default under, the
organizational documents of such Selling Stockholder, if such Selling
Stockholder is not an individual, or any indenture, loan agreement, mortgage,
lease or other agreement or instrument known to such counsel to which such
Selling Stockholder is a party or by which any property of such Selling
Stockholder is bound or (C) violate or conflict with any applicable law or any
rule, regulation, or to such counsel's knowledge, any judgment, order or decree
of any court or any governmental body or agency having jurisdiction over such
Selling Stockholder or any property of such Selling Stockholder.
5
<PAGE>
APPENDIX A-3
OPINION OF COUNSEL TO EACH SIGNIFICANT SUBSIDIARY
(a) The Significant Subsidiary is a corporation, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation. Based on the business of the Company and the Significant
Subsidiary as described in the Registration Statement, the Significant
Subsidiary has all requisite corporate power and corporate authority to own or
lease its properties and to conduct its business as described in such
Registration Statement;
(b) Based solely upon a review of the stock ledger or
register and the minute books of the Significant Subsidiary on __________, 1999,
the share capital of the Significant Subsidiary is _________, all of which are
registered in the name of the Company, have been duly authorized and validly
issued and are fully paid and non-assessable, and to the knowledge of such
counsel, are owned by the Company, free and clear of any pledge, lien, security
interest, encumbrance or claim;
(c) Neither the execution or delivery of this Agreement
by the Company, nor the performance by the Company of its obligations
thereunder, will violate the certificate of incorporation or by-laws of the
Significant Subsidiary; or any applicable law, rule or regulation of any
regulatory body or administrative agency or other governmental agency or body in
the jurisdiction of incorporation of the Significant Subsidiary, or to such
counsel's knowledge any judgment, order or decree of any government, arbitrator,
court, regulatory body or administrative agency or other governmental agency or
body in the jurisdiction of incorporation of the Significant Subsidiary, having
such jurisdiction over the Significant Subsidiary.
(d) No order, consent, approval, license, authorization
or validation of or exemption by any government or public body or authority of
the jurisdiction of incorporation of the Significant Subsidiary or any
sub-division thereof is required to authorize or is required in connection with
the execution, delivery, performance and enforcement of this Agreement.
(e) It is not necessary to ensure the enforceability in
the jurisdiction of incorporation of the Significant Subsidiary of this
Agreement that it be registered in any register kept by, or filed with, any
governmental authority or regulatory body in the jurisdiction of incorporation
of the Significant Subsidiary.
In rendering any such opinion, such counsel may rely, as to matters of fact, to
the extent such counsel deems proper, on certificates of responsible officers of
the Company and public officials.
6
<PAGE>
APPENDIX B
List of Persons Subject to Lockups
JHC Limited
Robert A. Jennings
Ian Sutcliffe
Michel Bazinet
David J. Austin
Debora A. Falk
Michael Swanson
Bruce Tilden
Michael Treacy
Treacy & Co., LLC
John Buchanan
Barry Guld
Arnhold & S. Bleichroeder, Inc.
Nazem & Company IV, L.P.
Transatlantic Venture Fund C.V.
Peter May
Nelson Peltz
<PAGE>
Exhibit 4.3
[FORM OF COMMON STOCK WARRANT]
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT
AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AS AMENDED. THESE
SECURITIES MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER SAID
ACT OR LAWS OR AN OPINION OF COUNSEL SATISFACTORY TO THE CORPORATION THAT SUCH
REGISTRATION IS NOT REQUIRED.
MEDICONSULT.COM, INC.
STOCK PURCHASE WARRANT
February 26, 1999
1. GENERAL.
(a) THIS CERTIFIES that, for value received, ARNHOLD AND S. BLEICHROEDER,
INC., or assigns, is entitled to subscribe for and purchase from
MEDICONSULT.COM, INC., a Delaware corporation (the "Corporation"), at any
time or from time to time during the period (the "Exercise Period")
commencing with the date hereof and ending on March 1, 2004, on the terms and
subject to the provisions hereinafter set forth, One Hundred Thousand
(100,000) of shares (subject to adjustment as provided herein) of fully paid
and non-assessable shares of Common Stock, $.001 par value, of the
Corporation (the "Common Stock"), at a price per share (the "Warrant Price")
of $1.22.
This Warrant is being issued pursuant to an engagement letter dated July 28,
1998 between Arnhold and S. Bleichroeder, Inc. ("ASB") and the Corporation as
modified by letter agreement dated February 22, 1999. This Warrant is one of an
issue of the Company's Stock Purchase Warrants (the "Warrants", such term to
include all Warrants issued in substitution therefor) identical in all respects
except as to the number of shares of Common Stock purchasable thereunder,
originally issued in consideration of investment advisory services related to a
certain public offering by the Corporation pursuant to a registration statement
on Form S-1 that the Corporation is planning to file with the Securities and
Exchange Commission as soon as practicable and have declared effective in April
1999 (the "Offering"), subject to market conditions. The shares of capital stock
of the Corporation issuable upon exercise or exchange of this Warrant are
sometimes hereinafter referred to as the "Warrant Shares" and, in connection
therewith, all references herein to Warrant Shares shall mean Common Stock.
2. EXERCISE OF WARRANT. The rights represented by this Warrant may be exercised
by the holder hereof, in whole or in part, at any time or from time to time
during the Exercise Period, by the surrender of this Warrant (properly endorsed)
at the principal office of the Corporation at 33
<PAGE>
Reid Street, 4th Floor, Hamilton HM12, Bermuda, or at such other agency or
office of the Corporation in the United States of America as it may designate by
notice in writing to the holder hereof at the address of such holder appearing
on the books of the Corporation, and by payment (either in cash, by check, by
cancellation of indebtedness and/or in shares of Common Stock of the Corporation
valued at Fair Market Value (as hereinafter defined) on the date of such
exercise) to the Corporation of the Warrant Price for each Warrant Share being
purchased. In the event of the exercise of the rights represented by this
Warrant, a certificate or certificates for the Warrant Shares so purchased,
registered in the name of the holder, and if this Warrant shall not have been
exercised for all of the Warrant Shares, a new Warrant, registered in the name
of the holder hereof, of like tenor to this Warrant, shall be delivered to the
holder hereof within a reasonable time, not exceeding ten days, after the rights
represented by this Warrant shall have been so exercised. The person in whose
name any certificate for Warrant Shares is issued upon exercise of this Warrant
shall for all purposes be deemed to have become the holder of record of such
shares on the date on which the Warrant was surrendered and payment of the
Warrant Price and any applicable taxes was made, irrespective of the date of
delivery of such certificate, except that, if the date of such surrender and
payment is a date when the stock transfer books of the Corporation are closed,
such person shall be deemed to have become the holder of such shares at the
close of business on the next succeeding date on which the stock transfer books
are open.
3. EXCHANGE OF WARRANT.
(a) In addition to, and independent of, the rights of the holder of this Warrant
set forth in Section 2 hereof, the holder hereof may at any time or from time to
time elect to receive, without the payment by the holder of any additional
consideration, that number of Warrant Shares determined as hereinafter provided
in this Section 3 by the surrender of this Warrant or any portion hereof to the
Corporation, accompanied by an executed Notice of Exchange in substantially the
form thereof attached hereto (the "Net Issue Election"). Thereupon, the
Corporation shall issue to the holder hereof such number of fully paid and
nonassessable Warrant Shares as is computed using the following formula:
X = Y (A-B)
-------
A
where X = the number of Warrant Shares to be issued to the holder pursuant
to this Section 3.
Y = the number of Warrant Shares covered by this Warrant in respect
of which the Net Issue Election is made pursuant to this Section
3.
A = the Fair Market Value (as hereinafter defined) of one Warrant
Share determined at the time the Net Issue Election is made
pursuant to this Section 3 (the "Determination Date").
B = the Warrant Price in effect under this Warrant at the time the
Net Issue Election is made pursuant to this Section 3.
For purposes of the above calculation, "Fair Market Value" of one Warrant Share
as of the Determination Date shall mean:
2
<PAGE>
(i) if the Common Stock of the Corporation is publicly traded, (A) the
average of the closing prices quoted on the National Association of Securities
Dealers, Inc. Automated Quotation National Market System, if applicable, or the
average of the last bid and asked prices of the Common Stock quoted in the
over-the-counter-market or (B) if the Common Stock is then traded on a national
securities exchange, the average of the high and low prices of the Common Stock
listed on the principal national securities exchange on which the Common Stock
is so traded, in each case for the twenty (20) trading days immediately
preceding the Determination Date or, if such date is not a business day on which
shares are traded, the next immediately preceding trading day;
(ii) in the event of a Warrant Exchange in connection with a Corporate
Transaction, the value per share of Common Stock received or receivable by each
holder thereof (assuming, in the case of a sale of assets, the Corporation is
liquidated immediately following such sale and the consideration paid to the
Corporation is immediately distributed to its stockholders); and
(iii) in all other circumstances, the fair market value per share of
Common Stock as determined by a nationally recognized independent investment
banking firm jointly selected by the Corporation and the holders of Warrants
representing in the aggregate a majority of Warrant Shares issuable upon the
exercise of all Warrants then outstanding (the "Requisite Warrant Holders") or,
if such selection cannot be made within five business days after delivery of the
Notice of Exchange referred to above, by a nationally recognized independent
investment banking firm selected by the American Arbitration Association.
The closing of any Warrant Exchange shall take place at the agency offices of
the Corporation set forth in Section 2 on the date specified in the Notice of
Exchange (the "Exchange Date"), which shall be not less than five and not more
than 30 days after the delivery of such Notice. At such closing, the Corporation
shall issue and deliver to the holder or its designee a certificate or
certificates for the Warrant Shares to be issued upon such Warrant Exchange,
registered in the name of the holder or such designee, and if such Warrant
Exchange shall not have been for all Warrant Shares, a new Warrant, registered
in the name of the holder, of like tenor to this Warrant for the number of
shares still subject to this Warrant following such Warrant Exchange.
4. ADJUSTMENT OF WARRANT PRICE. If, at any time during the Exercise Period, the
number of outstanding shares of Common Stock is (i) increased by a stock
dividend payable in shares of Common Stock or by a subdivision or split-up of
shares of Common Stock, or (ii) decreased by a combination of shares of Common
Stock, then, following the record date fixed for the determination of holders of
Common Stock entitled to receive the benefits of such stock dividend,
subdivision, split-up, or combination, the Warrant Price shall be adjusted on
the effective date of such stock dividend, subdivision, split-up or combination
to a new amount equal to the product of (A) the Warrant Price in effect on such
record date and (B) the quotient obtained by dividing (x) the number of shares
of Common Stock outstanding on such record date (without giving effect to the
event referred to in the foregoing clause (i) or (ii), by (y) the number of
shares of Common Stock which would be outstanding immediately after the event
referred to in the foregoing clause (i) or (ii), if such event had occurred
immediately following such record date.
3
<PAGE>
4.1 ADJUSTMENT OF WARRANT SHARES. Upon each adjustment of the Warrant
Price as provided in Section 4, the holder hereof shall thereafter be entitled
to subscribe for and purchase, at the Warrant Price resulting from such
adjustment, the number of Warrant Shares equal to the product of (i) the number
of Warrant Shares existing prior to such adjustment and (ii) the quotient
obtained by dividing (A) the Warrant Price existing prior to such adjustment by
(B) the new Warrant Price resulting from such adjustment. No fractional shares
shall be issued upon exercise of this Warrant. The Corporation shall, in lieu of
issuing any fractional share, pay the holder entitled to such fraction a sum in
cash equal to such fraction multiplied by the then Fair Market Value of one
Warrant Share.
5. COVENANTS AS TO COMMON STOCK. The Corporation covenants and agrees that all
shares of Common Stock which may be issued upon the exercise of the rights
represented by this Warrant will, upon issuance, be validly issued, fully paid
and non-assessable and free from all taxes, liens and charges with respect to
the issue thereof. The Corporation further covenants and agrees that the
Corporation will from time to time take all such action as may be requisite to
assure that the stated or par value per share of the Common Stock is at all
times equal to or less than the then effective Warrant Price per share of Common
Stock issuable upon exercise of this Warrant. The Corporation further covenants
and agrees that the Corporation will at all times have authorized and reserved,
free from preemptive rights, a sufficient number of (a) shares of its Common
Stock to provide for the exercise of the rights represented by this Warrant. The
Corporation further covenants and agrees that if any shares of capital stock to
be reserved for the purpose of the issuance of shares of Common Stock upon the
exercise of this Warrant require registration with or approval of any
governmental authority under any Federal or state law before such shares may be
validly issued or delivered upon exercise, then the Corporation will in good
faith and expeditiously as possible endeavor to secure such registration or
approval, as the case may be. If and so long as the Common Stock issuable upon
the exercise of this Warrant is listed on any national securities exchange, the
Corporation will, if permitted by the rules of such exchange, list and keep
listed on such exchange, upon official notice of issuance, all shares of such
capital stock.
6. NO SHAREHOLDER RIGHTS. This Warrant shall not entitle the holder hereof to
any voting rights or other rights as a shareholder of the Corporation.
7. RESTRICTIONS ON TRANSFER. The holder of this Warrant acknowledges that
neither this Warrant nor the Warrant Shares have been registered under the
Securities Act of 1933, as amended (the "Securities Act") and the holder of this
Warrant agrees that no sale, transfer, assignment, hypothecation or other
disposition of this Warrant or the Warrant Shares shall be made (other than to a
partner of the holder) in the absence of (a) current registration statement
under the Securities Act as to this Warrant or the Warrant Shares and the
registration or qualification of this Warrant or the Warrant Shares under any
applicable state securities laws is then in effect or (ii) an opinion of counsel
reasonably satisfactory to the Corporation to the effect that such registration
or qualification is not required. Each certificate or other instrument for
Warrant Shares issued upon exercise of this Warrant shall, if required under the
Securities Act or the rules promulgated thereunder, be imprinted with a legend
substantially to the foregoing effect.
4
<PAGE>
8. RIGHTS OF THE HOLDER. Anything contained herein to the contrary
notwithstanding, the shares of Common Stock issuable upon exercise of this
Warrant shall be entitled to all rights and benefits accorded thereto in the
Registration Rights Agreement dated as of even date herewith between ASB and the
Corporation, and the Corporation shall take all actions and shall execute and
deliver all documents necessary or desirable, including any amendments to such
agreement(s) to make the holder a party thereto.
9. TRANSFER OF WARRANT; AMENDMENT. Subject to the restriction set forth in
Section 7, this Warrant and all rights hereunder are transferable, in whole, or
in part, at the agency or office of the Corporation referred to in Section 2, by
the holder hereof in person or by duly authorized attorney, upon surrender of
this Warrant properly endorsed. Each taker and holder of this Warrant, by taking
or holding the same, consents and agrees that this Warrant, when endorsed, in
blank, shall be deemed negotiable, and, when so endorsed the holder hereof may
be treated by the Corporation and all other persons dealing with this Warrant as
the absolute owner hereof for any purposes and as the person entitled to
exercise the rights represented by this Warrant, or to the transfer hereof on
the books of the Corporation, any notice to the contrary notwithstanding; but
until each transfer on such books, the Corporation may treat the registered
holder hereof as the owner hereof for all purposes.
10. REORGANIZATIONS, ETC. In case, at any time during the Exercise Period, of
any capital reorganization, of any reclassification of the stock of the
Corporation (other than a change in par value or from par value to no par value
or from no par value to par value or as a result of a stock dividend or
subdivision, split-up or combination of shares), or the consolidation or merger
of the Corporation with or into another corporation (other than a consolidation
or merger in which the Corporation is the continuing corporation and which does
not result in any change in the Common Stock) or of the sale of all or
substantially all the properties and assets of or all of the capital stock of
the Corporation to any other corporation, this Warrant shall, after such
reorganization, reclassification, consolidation, merger or sale, be exercisable
for the kind and number of shares of stock or other securities or property of
the Corporation or of the corporation resulting from such consolidation or
surviving such merger or to which such properties and assets shall have been
sold to which such holder would have been entitled if he had held the Common
Stock issuable upon the exercise hereof immediately prior to such
reorganization, reclassification, consolidation, merger or sale. In any such
reorganization or other action or transaction described above, appropriate
provision shall be made with respect to the rights and interests of the holder
of this Warrant to the end that the provisions hereof (including, without
limitation, provisions for adjustments of the Warrant Price and of the number of
shares purchasable and receivable upon the exercise of this Warrant) shall
thereafter be applicable, as nearly as may be, in relation to any shares of
stock, securities or assets thereafter deliverable upon the exercise hereof. The
Corporation will not effect any such consolidation, merger or sale unless, prior
to the consummation thereof, the successor corporation or entity (if other than
the Corporation) resulting from such transaction or the corporation or entity
purchasing such assets shall assume by written instrument, executed and mailed
or delivered to the registered holder hereof at the last address of such holder
appearing on the books of the Corporation, the obligation to deliver to such
holder such shares of stock, securities or assets as, in accordance with the
foregoing provisions, such holder may be entitled to purchase.
5
<PAGE>
11. LOST, STOLEN, MUTILATED OR DESTROYED WARRANT. If this Warrant is lost,
stolen, mutilated or destroyed, the Corporation may, on such terms as to
indemnity or otherwise as it may in its discretion impose (which shall, in the
case of a mutilated Warrant, include the surrender thereof), issue a new Warrant
of like denomination and tenor as the Warrant so lost, stolen, mutilated or
destroyed. Any such new Warrant shall constitute an original contractual
obligation of the Corporation, whether or not the allegedly lost, stolen,
mutilated or destroyed Warrant shall be at any time enforceable by anyone.
12. MODIFICATION AND WAIVER. This Warrant and any provision hereof may be
waived, discharged or terminated only by an instrument in writing signed by the
party against which enforcement of the same is sought. This Warrant and any
portion hereof may be modified or changed only by an instrument signed in
writing by the Corporation and by the Requisite Warrant Holders.
13. NOTICES. All notices, advices and communications to be given or otherwise
made to any party to this Agreement shall be deemed to be sufficient if
contained in a written instrument delivered in person or by telecopier or duly
sent by first class registered or certified mail, return receipt requested,
postage prepaid, or by overnight courier, addressed to such party at the address
set forth below or at such other address as may hereafter be designated in
writing by the addressee to the addresser listing all parties:
(a) if to the Corporation, to:
Mediconsult.com, Inc.
33 Reid Street, 4th Floor
Hamilton HM12, Bermuda
Attention: Robert A. Jennings, Chief Executive Officer
Telecopier: 441-295-0560
and
(b) if to the holder of this Warrant, to the address set forth below the name
of such holder on the signature page hereof,
or to such other address as the party to whom notice is to be given may have
furnished to the other parties hereto in writing in accordance herewith. Any
such notice or communication shall be deemed to have been delivered and received
(i) in the case of personal delivery or delivery by telecopier, on the date of
such delivery, (ii) in the case of nationally-recognized overnight courier, on
the next business day after the date when sent and (iii) in the case of mailing,
on the third business day following that on which the piece of mail containing
such communication is posted. As used in this Section 13, "business day" shall
mean any day other than a day on which banking institutions in the State of New
York are legally closed for business.
14. BINDING EFFECT ON SUCCESSORS; SURVIVAL. This Warrant shall be binding upon
any corporation succeeding the Corporation by merger, consolidation or
acquisition of all or substantially all of the Corporation's assets. All of the
obligations of the Corporation relating to the Common Stock issuable upon the
exercise of this Warrant shall survive the exercise and
6
<PAGE>
termination of this Warrant. All of the covenants and agreements of the
Corporation shall inure to the benefit of the successors and assigns of the
initial holder hereof.
15. CONSENT TO JURISDICTION; VENUE.
(a) The Corporation hereby irrevocably and unconditionally
submits, for itself and its property, to the exclusive
jurisdiction of the United States District Court of the
Southern District of New York, and any appellate court from
such court, in any action or proceeding arising out of or
relating to this Agreement, or for recognition or enforcement
of any judgment, and the Corporation hereby irrevocably and
unconditionally agrees that all claims in respect of any such
action or proceeding may be heard and determined in such
Federal court. The Corporation agrees that a final judgment in
any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in
any other manner provided by law.
(b) The Corporation hereby irrevocably and unconditionally waives,
to the fullest extent it may legally and effectively do so,
any objection which it may now or hereafter have to the laying
of venue of any suit, action or proceeding arising out of or
relating to this Agreement in any court referred to in
paragraph (a) of this Section. The Corporation hereby
irrevocably waives, to the fullest extent permitted by law,
the defense of FORUM NON CONVENIENS to the maintenance of such
action or proceeding in any such court.
(c) The Corporation hereby irrevocably appoints and designates
Golenbock, Eiseman, Assor & Bell located at 437 Madison
Avenue, New York, New York 10022, or any other person having
and maintaining a place of business in the State of New York
whom the Corporation may from time to time hereafter designate
(having given 30 days' notice thereof to the parties hereto),
as the true and lawful attorney and duly authorized agent for
acceptance of service of legal process from the Corporation or
such holder, as the case may be. Without prejudice to the
foregoing, the Corporation irrevocably consents to service of
process in the manner provided for notices in Section 13.
Nothing in this Warrant will affect the right of the
Corporation to serve process in any other manner permitted by
law.
16. DESCRIPTIVE HEADINGS AND GOVERNING LAW. The description headings of the
several sections and paragraphs of this Warrant are inserted for convenience
only and do not constitute a part of this Warrant. This Warrant shall be
construed and enforced in accordance with, and the rights of the parties shall
be governed by, the laws of the State of New York.
* * *
7
<PAGE>
IN WITNESS WHEREOF, the undersigned have caused this Warrant and Warrant
Agreement to be executed by their duly authorized officers on the date first
above written.
MEDICONSULT.COM, INC.
By:
------------------------------
Name:
Title:
ACCEPTED AND AGREED TO BY:
ARNHOLD AND S. BLEICHROEDER, INC.
By:
------------------------------
Name:
Title:
Address: 1345 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10105-4300
8
<PAGE>
FORM OF SUBSCRIPTION
[To be signed upon exercise of Warrant]
The undersigned, the holder of the Warrant, hereby irrevocably
elects to exercise the purchase rights represented by such Warrant for, and to
purchase thereunder, _________ shares of _________ of MEDICONSULT.COM, INC. and
herewith makes payment of $_________ therefor, and requests that the
certificates for such shares be issued in the name of and delivered to,
_________________________________, whose address is
Date:
-----------------------
------------------------------
Signature
------------------------------
Address
9
<PAGE>
NOTICE OF EXCHANGE
(To be executed by the Holder in
order to exchange the Warrant.)
The undersigned hereby irrevocably elects to exchange this
Warrant into __________ shares (the foregoing number constituting the number of
Warrant Shares to be issued pursuant to Section 3 of this Warrant) of ________
of MEDICONSULT.COM, INC., minus any shares to be deducted from the foregoing
number in accordance with the terms of this Warrant, according to the conditions
thereof. The undersigned desires to consummate such exchange on
________________.
Dated:
Name of Holder:
By:
------------------------
10
<PAGE>
FORM OF ASSIGNMENT
[To be signed only upon transfer of Warrant]
For value received, the undersigned hereby sells, assigns and
transfers unto the right represented by the Warrant to purchase _______ shares
of _________ of MEDICONSULT.COM, INC., to which the Warrant relates, and
appoints Attorney to transfer such right on the books of MEDICONSULT.COM, INC.,
with full power of substitution in the premises.
Dated:
--------------------
(Signature)
Signed in the presence of:
- ------------------------------
11
<PAGE>
Exhibit 5.1
GOLENBOCK, EISEMAN, ASSOR & BELL
437 Madison Avenue
New York, New York 10022-7302
(212) 907-7300
FAX (212) 754-0330
April 2, 1999
Mediconsult.com, Inc.
33 Reid Street - 4th Floor
Hamilton HM 12, Bermuda
Ladies and Gentlemen:
We have acted as counsel to Mediconsult.com, Inc., a Delaware
corporation (the "Company"), in connection with the preparation and filing with
the Securities and Exchange Commission (the "Commission") of a Registration
Statement (File No. 333-73059) on Form S-1 by the Company on February 26, 1999,
as amended by Amendment No. 1 filed by the Company on March 15, 1999 and by
Amendment No. 2 filed by the Company on April 2, 1999 (the "Registration
Statement"), under the Securities Act of 1933, as amended (the "Act"), relating
to the offer and sale of up to 5,000,000 shares of common stock, par value $.001
per share, of the Company (the "Common Stock").
The Common Stock is to be sold pursuant to an Underwriting Agreement
(the "Underwriting Agreement") to be entered into among the Company, the selling
stockholders named in Schedule II thereto (the "Selling Stockholders"), and ING
Baring Furman Selz LLC and Volpe Brown Whelan & Company, LLC, as representatives
of the several underwriters named in Schedule I thereto (collectively, the
"Underwriters"). The form of the Underwriting Agreement is filed as an exhibit
to the Registration Statement.
The Common Stock is to be sold as follows: (a) 4,425,000 shares of
Common Stock will be purchased by the Underwriters from the Company, (b) 575,000
shares of Common Stock will be purchased by the Underwriters from the Selling
Stockholders, and (c) up to 750,000 shares of Common Stock may be purchased by
the Underwriters from the Company and the Selling Stockholders to cover
over-allotments, if any.
We have examined originals, telecopies or copies, certified or
otherwise identified to our satisfaction, of such
<PAGE>
records of the Company and all such agreements, certificates of public
officials, certificates of officers or representatives of the Company and
others, and such other documents, certificates and corporate or other records as
we have deemed necessary or appropriate as a basis for this opinion.
In our examination, we have assumed the genuineness of all signatures,
the legal capacity of natural persons signing or delivering any instrument, the
authenticity of all documents submitted to us as originals, the conformity of
original documents of all documents to us as certified or photostatic copies and
the authenticity of the originals of such latter documents. As to any facts
material to this opinion, we have relied upon statements and representations of
officers and other representatives of the Company and others, but we have not
independently established or verified such factual matters.
We are attorneys admitted to practice in the State of New York and the
opinion set forth below is limited to the laws of the Untied States of America,
the laws of the State of New York and the Delaware General Corporation Law.
Based on the foregoing, and having regard for such legal considerations
as we deem relevant, we are of the opinion that:
(a) The 4,425,000 shares of Common Stock to be issued and sold
by the Company have been duly authorized and, when issued and delivered to and
paid for by the Underwriters pursuant to the Underwriting Agreement, will be
validly issued, fully paid and nonassessable.
(b) The 575,000 shares of Common Stock to be sold by the
Selling Stockholders have been duly authorized and validly issued and are fully
paid and nonassessable.
(c) The maximum of 750,000 shares of Common Stock which may be
sold by the Company and the Selling Stockholders upon exercise of the
Underwriters' over-allotment option have been duly authorized and, with respect
to such shares of Common Stock being sold by the Selling Stockholders, have been
validly issued, fully paid and nonassessable, and with respect to such shares of
Common Stock being sold by the Company, when issued and delivered to and paid
for by the Underwriters pursuant to the Underwriting Agreement, will be validly
issued, fully paid and nonassessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to this firm under the heading
"Legal Matters" in the Registration
<PAGE>
Statement and the Prospectus which forms a part thereof. In giving such consent,
we do not thereby admit that we are in the category of persons whose consent is
required under Section 7 of the Act or the General Rules and Regulations of the
Commission promulgated thereunder.
This opinion is being delivered to you in connection with the
transactions described above, and except as provided in the preceding paragraph,
may not be used, circulated, quoted, filed with a governmental agency or
otherwise referred to or relied upon in any manner by any other person or for
any other purpose without our prior written approval in each instance.
Very truly yours,
/s/ Golenbock, Eiseman, Assor & Bell
<PAGE>
Exhibit 10.19
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made
the 26th day of February, 1999, by and between Mediconsult.com, Inc., a Delaware
corporation (the "Company"), and Arnhold and S. Bleichroeder, Inc., a Delaware
corporation ("ASB").
RECITALS
WHEREAS, ASB owns or has the right to acquire (by exercise,
exchange or conversion of securities that are exercisable or exchangeable for or
convertible into) Common Stock of the Company, par value $.001 per share (the
"Common Stock"). The parties hereto deem it to be in their respective best
interests to set forth the rights of ASB in connection with public offerings and
sales of Common Stock.
NOW, THEREFORE, in consideration of the mutual promises and
covenants set forth herein, the parties hereto agree as follows:
1. REGISTRATION RIGHTS. The Company covenants and agrees as follows:
1.1 DEFINITIONS. For purposes of this Section 1:
(a) The term "Act" means the Securities Act of 1933,
as amended.
(b) The term "1934 Act" means the Securities Exchange
Act of 1934, as amended.
(c) The term "register," "registered," and
"registration" refer to a registration effected by preparing and filing a
registration statement or similar document in compliance with the Act, and the
declaration or ordering of effectiveness of such registration statement or
document.
(d) The term "Registrable Securities" means with
respect to ASB, shares of Common Stock of the Company held by ASB which are
issued as or issuable upon the conversion or exercise of any warrant, right or
other security which by their terms are exercisable or exchangeable for or
convertible into Common Stock and any securities received in respect thereof, in
any case, which are held by ASB and which have not theretofore been sold to the
public pursuant to a registration statement under the Act or pursuant to Rule
144 under the Act.
(e) The term "SEC" shall mean the Securities and
Exchange Commission.
1.2 PIGGYBACK REGISTRATION. If (but without any
obligation to do so) the Company proposes to register (including for this
purpose a registration effected by the Company
<PAGE>
for stockholders other than ASB) any of its stock or other securities under the
Act in connection with the public offering of such securities (other than a
registration relating solely to the sale of securities to current or former
employees, officers, advisors, consultants or directors of the Company acting in
such capacity or any subsidiary of the Company in each case pursuant to a stock
purchase plan or stock option or stock awards or other similar arrangement
approved by the Board of Directors of the Company, a registration on any form
which does not include substantially the same information as would be required
to be included in a registration statement covering the sale of the Registrable
Securities or a registration in which the only Common Stock being registered is
Common Stock issuable upon conversion of debt securities which are also being
registered), the Company shall, at such time, promptly give ASB written notice
of such registration. Upon the written request of ASB given within thirty (30)
days after giving of such notice by the Company in accordance with Section 3.5,
the Company shall use its best efforts to cause to be registered under the Act
all of the Registrable Securities that ASB has requested to be registered on the
same terms and conditions as the securities otherwise being sold in such
registration. Notwithstanding the foregoing, if a managing underwriter delivers
a notice to the Company that the inclusion of all Registrable Securities
proposed to be included in such registration would interfere with the successful
marketing (including pricing) of securities proposed to be registered by the
Company, then the Company shall be required to include in the offering only that
number of such securities, including Registrable Securities, which the
underwriters determine in their sole discretion will not jeopardize the success
of the offering and such securities shall be included in such registration in
the following order: (i) FIRST, the authorized but unissued shares of Common
Stock or shares of Common Stock held by the Company in its treasury and proposed
to be registered by the Company; (ii) SECOND, the shares of Common Stock which
are held by the holders of other securities and which have the right to be
included in such underwriting under the terms of any registration rights
agreement with the Company and requested to be registered in such registration;
(iii) THIRD, such number of shares of Common Stock which are held by JHC Limited
as shall yield gross proceeds of $4.3 million, cumulatively, with respect to all
registered public offerings, FOURTH, the Registrable Securities requested to be
included in such registration and shares offered in such registration by Michael
Bazinet and the former shareholders of CyberDiet, Inc., pro rata, based on the
number of shares owned or exercisable by each at the time of such registration;
and (iv) FIFTH, the shares of Common Stock requested to be included in such
registration and which do not constitute the Common Stock described in clauses
(i)-(iv) above and which are owned by the officers and directors of the Company.
1.3 FURNISH INFORMATION. It shall be a condition
precedent to the obligations of the Company to take any action pursuant to this
Section 1 with respect to the Registrable Securities of ASB that ASB shall
furnish to the Company such information regarding itself, the Registrable
Securities held by it, and the intended method of disposition of such securities
as shall be required to effect the registration of ASB's Registrable Securities.
1.4 EXPENSES OF PIGGYBACK REGISTRATION. The Company
shall bear and pay all expenses incurred in connection with any registration,
filing or qualification of
<PAGE>
Registrable Securities with respect to the registrations pursuant to Section
1.2 for ASB, including (without limitation) all registration, filing, and
qualification fees, printers' and accounting fees relating or apportionable
thereto and the reasonable fees and disbursements of one counsel for ASB, but
excluding underwriting discounts and commissions relating to Registrable
Securities.
1.5 UNDERWRITING REQUIREMENTS. In connection with any
offering involving an underwriting of shares of the Company's capital stock, the
Company shall not be required under Section 1.2 to include ASB's securities in
such underwriting unless ASB accepts the terms of the underwriting as agreed
upon between the Company and the underwriters selected by it (or by other
persons entitled to select the underwriters), and then only in such quantity as
the underwriters determine in their sole discretion will not jeopardize the
success of the offering by the Company.
1.6 DELAY OF REGISTRATION. ASB shall not have any
right to obtain or seek an injunction restraining or otherwise delaying any such
registration as the result of any controversy that might arise with respect to
the interpretation or implementation of this Section 1.
1.7 INDEMNIFICATION. In the event any Registrable
Securities are included in a registration statement under this Section 1:
(a) To the extent permitted by law, the Company will
indemnify and hold harmless ASB, the officers and directors of ASB participating
in such registration, any underwriter (as defined in the Act) for ASB and each
person, if any, who controls ASB or such underwriter within the meaning of the
Act or the 1934 Act (a "controlling person"), against any losses, claims,
damages, or liabilities (joint or several) to which they may become subject
under the Act, or the 1934 Act, or otherwise insofar as such losses, claims,
damages, or liabilities (or actions in respect thereof) arise out of or are
based upon any of the following statements, omissions or violations
(collectively a "Violation"): (i) any untrue statement or alleged untrue
statement of a material fact contained in such registration statement, including
any preliminary prospectus or final prospectus contained therein or any
amendments or supplements thereto, (ii) the omission or alleged omission to
state therein a material fact required to be stated therein, or necessary to
make the statements therein not misleading, or (iii) any violation or alleged
violation by the Company of the Act, the 1934 Act, or any rule or regulation
promulgated under the Act, or the 1934 Act, and the Company will pay to ASB,
underwriter or controlling person, as incurred, any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, damage, liability, or action; provided, however, that the
indemnity agreement contained in this Subsection 1.7(a) shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability, or action
if such settlement is effected without the consent of the Company, nor shall the
Company be liable in any such case for any such loss, claim, damage, liability,
or action to the extent that it arises out of or is based upon a Violation which
occurs in reliance upon and in conformity with written information furnished
expressly for use in connection with such registration by ASB, underwriter or
controlling person.
<PAGE>
With respect to any untrue statement or alleged untrue statement made in, or
omission or alleged omission from, any preliminary prospectus or prospectus, the
indemnity agreement contained in this Subsection 1.7(a) with respect to such
preliminary prospectus or prospectus, to the extent it is based on the claim of
a person who purchased any Registrable Securities directly from ASB shall not
inure to the benefit of ASB (or to the benefit of any of its officers and
directors or any person controlling ASB if the prospectus (or the prospectus as
amended or supplemented if the Company shall have filed with the Commission any
amendment or supplement thereto) which shall have been furnished to ASB by the
Company in a timely manner and in sufficient quantities, does not contain such
statement, alleged statement, omission, or alleged omission and a copy of the
prospectus (or the prospectus as amended or supplemented if the Company shall
have filed with the Commission any amendment or supplement thereto) shall not
have been sent or given to such person by ASB (and ASB shall have been obligated
so to furnish such a prospectus) and such person shall not otherwise have
received a copy thereof at or prior to the written confirmation of such sale to
such person.
(b) To the extent permitted by law, ASB will
indemnify and hold harmless the Company, each of its directors, each of its
officers who has signed the registration statement, each person, if any, who
controls the Company within the meaning of the Act, any underwriter and any
controlling person of any such underwriter, against any losses, claims, damages,
or liabilities (joint or several) to which any of the foregoing persons may
become subject, under the Act, or the 1934 Act, insofar as such losses, claims,
damages, or liabilities (or actions in respect thereto) arise out of or are
based upon any Violation, in each case to the extent (and only to the extent)
that such Violation occurs in reliance upon and in conformity with written
information furnished by ASB expressly for use in connection with such
registration; and ASB will pay, as incurred, any legal or other expenses
reasonably incurred by any person intended to be indemnified pursuant to this
Subsection 1.7(b), in connection with investigating or defending any such loss,
claim, damage, liability, or action; provided, however, that the indemnity
agreement contained in this Subsection 1.7(b) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of ASB; which consent shall not be
unreasonably withheld provided, that, in no event shall ASB's liability under
this Subsection 1.7(b) exceed the proceeds received by ASB from the offering
(net of any underwriting discounts and commissions).
(c) Promptly after receipt by an indemnified party
under this Section 1.7 of notice of the commencement of any action (including
any governmental action), such indemnified party will, if a claim in respect
thereof is to be made against any indemnifying party under this Section 1.7,
deliver to the indemnifying party a written notice of the commencement thereof
and the indemnifying party shall have the right to participate in, and, to the
extent the indemnifying party so desires, jointly with any other indemnifying
party similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party
(together with all other indemnified parties which may be represented without
conflict by one counsel) shall have the right to retain one separate counsel,
with the fees and expenses to be paid by the indemnifying party, if
representation of such indemnified party by
<PAGE>
the counsel retained by the indemnifying party would be inappropriate due to
actual or potential differing interests between such indemnified party and any
other party represented by such counsel in such proceeding. The failure to
deliver written notice to the indemnifying party within a reasonable time of the
commencement of any such action, if prejudicial to its ability to defend such
action, shall relieve such indemnifying party of any liability to the
indemnified party under this Section 1.7, but the omission so to deliver written
notice to the indemnifying party will not relieve it of any liability that it
may have to any indemnified party otherwise than under this Section 1.7.
(d) If the indemnification provided for in this
Section 1.7 is held by a court of competent jurisdiction to be unavailable to an
indemnified party with respect to any loss, liability, claim, damage, or expense
referred to therein, then the indemnifying party, in lieu of indemnifying such
indemnified party hereunder, shall contribute to the amount paid or payable by
such indemnified party as a result of such loss, liability, claim, damage, or
expense in such proportion as is appropriate to reflect the relative fault of
the indemnifying party on the one hand and of the indemnified party on the other
in connection with the statements or omissions that resulted in such loss,
liability, claim, damage, or expense as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information, and opportunity to correct or prevent such
statement or omission.
(e) Notwithstanding the foregoing, to the extent that
the provisions on indemnification and contribution contained in the underwriting
agreement entered into in connection with the underwritten public offering are
in conflict with the foregoing provisions, the provisions in the underwriting
agreement shall control.
(f) The obligations of the Company and ASB under this
Section 1.7 shall survive the completion of any offering of Registrable
Securities in a registration statement under this Section 1, and otherwise.
1.8 REPORTS UNDER SECURITIES EXCHANGE ACT OF 1934.
With a view to making available to ASB the benefits of Rule 144 and any other
rule or regulation of the SEC that may at any time permit ASB to sell securities
of the Company to the public without registration, the Company agrees to:
(a) make and keep public information available, as
those terms are understood and defined in Rule 144, at all times after ninety
(90) days after the effective date of the first registration statement filed
under the Act by the Company for the offering of its securities to the general
public;
(b) file with the SEC in a timely manner all reports
and other documents
<PAGE>
required of the Company under the Act and the 1934 Act; and
(c) furnish to ASB, so long as ASB owns any
Registrable Securities, forthwith upon request (i) a written statement by the
Company that it has complied with the reporting requirements of Rule 144 (at any
time after ninety (90) days after the effective date of the first registration
statement filed by the Company), the Act and the 1934 Act (at any time after it
has become subject to such reporting requirements), (ii) a copy of the most
recent annual or quarterly report of the Company and such other reports and
documents so filed by the Company, and (iii) such other information as may be
reasonably requested in availing ASB of any rule or regulation of SEC which
permits the selling of any such securities without registration or pursuant to
such form.
1.9 "MARKET STAND-OFF" AGREEMENT. In connection with
the planned underwritten secondary offering of 5,000,000 shares of Common Stock
of the Company pursuant to a registration statement filed under the Act
substantially contemporaneously herewith (the "Planned Secondary Offering"), ASB
hereby agrees that, during the period of duration specified by the Company and
an underwriter of Common Stock or other securities of the Company, following the
effective date of such registration statement, it shall not, to the extent
requested by the Company and such underwriter, directly or indirectly, sell,
offer to sell, contract to sell (including, without limitation, any short sale),
grant any option to purchase or otherwise transfer or dispose of (other than to
donees who agree to be similarly bound) any securities of the Company held by it
at any time during such period except Common Stock included in such
registration; provided, however:
(a) that such market stand-off time period shall not
exceed one hundred eighty (180) days following the effective date of the closing
of the Company's Planned Secondary Offering; and
(b) all officers and directors of the Company and all
five percent (5%) or greater stockholders of the Company enter into similar
agreements.
In order to enforce the foregoing covenant, the
Company may impose stop-transfer instructions with respect to the Registrable
Securities of ASB (and the shares or securities of every other person subject to
the foregoing restriction) until the end of such period.
Notwithstanding the foregoing, the obligations
described in this Section 1.9 shall not apply to a registration relating solely
to the sale of securities to current or former employees, officers, advisors,
consultants or directors of the Company or any subsidiary of the Company
pursuant to a stock purchase plan or stock option or stock awards or other
similar arrangement approved by the Board of Directors of the Company.
1.10 TERMINATION OF REGISTRATION RIGHTS. This
Agreement shall terminate and be of no further force and effect as to ASB at
such time as ASB may sell immediately all
<PAGE>
Registrable Securities held or entitled to be held by ASB under Rule 144 without
limitation as to volume.
1.11 AVAILABILITY OF RULE 144. Notwithstanding
anything contained in Section 1 to the contrary, after the Company has completed
its first registered underwritten public offering after the date hereof, the
Company shall have no obligations pursuant to Section 1.2 for the registration
of Registrable Securities held by ASB or its affiliates (i) where ASB or
affiliate would then be entitled to sell under Rule 144 within any three-month
period (or such other unitary period prescribed under Rule 144 as may be
provided by amendment thereof) all of the Registrable Securities held by ASB or
affiliate, and (ii) the number of Registrable Securities held by ASB or
affiliate is within the volume limitations under paragraph (e) of Rule 144
(calculated as if ASB were an affiliate within the meaning of Rule 144).
2. COVENANTS OF THE COMPANY.
2.1 FINANCIAL STATEMENTS AND OTHER INFORMATION. The
Company will promptly deliver to ASB, for so long as ASB holds any shares of the
Company's Common Stock, copies of all financial statements, proxy statements,
reports and any other written communications which the Company sends to its
stockholders generally and copies of all registration statements and all
regular, special or periodic reports which it files with the SEC or with any
securities exchange on which any of its securities are then listed, and copies
of all press releases and other statements made available generally by the
Company to the public promptly after transmission thereof.
3. MISCELLANEOUS.
3.1 SUCCESSORS AND ASSIGNS. Except as otherwise
provided herein, the terms and conditions of this Agreement shall inure to the
benefit of and be binding upon the respective successors and assigns of the
parties (excluding transferees of any shares of Registrable Securities). Nothing
in this Agreement, express or implied, is intended to confer upon any party
other than the parties hereto or their respective successors and assigns any
rights, remedies, obligations, or liabilities under or by reason of this
Agreement, except as expressly provided in this Agreement.
3.2 GOVERNING LAW. This Agreement shall be governed
by and construed under the laws of the State of New York, disregarding New York
principles of conflicts of laws which would otherwise provide for the
application of the substantive laws of another jurisdiction.
3.3 COUNTERPARTS. This Agreement may be executed in
two or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
3.4 TITLES AND SUBTITLES. The titles and subtitles
used in this Agreement are used for convenience only and are not to be
considered in construing or interpreting this
<PAGE>
Agreement.
3.5 NOTICES. Unless otherwise provided, any notice
required or permitted under this Agreement shall be given in writing and shall
be deemed effectively given upon personal delivery to the party to be notified
or four (4) days after deposit with the United States Post Office, by registered
or certified mail, postage prepaid and addressed to the party to be notified at
the address indicated for such party on the signature page hereof, or at such
other address as such party may designate by ten (10) days' advance written
notice to the other parties with a copy for the Company to Golenbock, Eiseman,
Assor & Bell 437 Madison Avenue, New York, New York 10022, attention Lawrence M.
Bell.
3.6 EXPENSES. If any action at law or in equity is
necessary to enforce or interpret the terms of this Agreement, the prevailing
party shall be entitled to reasonable attorneys' fees, costs and necessary
disbursements in addition to any other relief to which such party may be
entitled.
3.7 AMENDMENTS AND WAIVERS. Any term of this
Agreement may be amended and the observance of any term of this Agreement may be
waived (either generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and ASB, except
that the observance of any term of this Agreement which benefits only ASB may be
waived by ASB. Any amendment or waiver effected in accordance with this Section
3.7 shall be binding upon ASB and each future holder of all such Registrable
Securities, and the Company.
3.8 SEVERABILITY. If one or more provisions of this
Agreement are held to be unenforceable under applicable law, such provision
shall be excluded from this Agreement and the balance of the Agreement shall be
interpreted as if such provision were so excluded and shall be enforceable in
accordance with its terms.
3.9 ENTIRE AGREEMENT. This Agreement constitutes the
full and entire understanding and agreement between the parties with regard to
the subjects hereof.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.
MEDICONSULT.COM, INC.
By:
--------------------------------------
Name:
Title:
Address: 33 Reid Street, 4th Floor
Hamilton HM12, Bermuda
Attention: Robert A. Jennings
ARNHOLD AND S. BLEICHROEDER, INC.
By:
--------------------------------------
Name:
Title:
Address:
--------------------------------------
--------------------------------------
<PAGE>
Exhibit 10.20
EMPLOYMENT AGREEMENT
Employment Agreement, dated as of the 1st day of April, 1999, by and
between Mediconsult.com, Inc., a Delaware corporation with offices c/o
Medicondult.com, Ltd., 33 Reid Street, 4th Floor, Hamilton HM 12, Bermuda (the
CORPORATION"), and E. Michael Ingram, an individual residing at 3278 Timberloch
Dr., Marietta, Georgia 30068 (the "EXECUTIVE").
W I T N E S S E T H:
- - - - - - - - - -
In consideration of the mutual covenants herein contained and other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged by the parties hereto, the parties hereto hereby agree as follows:
1. EMPLOYMENT. The Corporation hereby agrees to employ the Executive
in an executive capacity, and the Executive hereby accepts and agrees to such
employment, commencing as of the date hereof, upon the terms and conditions
hereinafter set forth.
2. TERM. The term of the Executive's employment under this Agreement
shall commence as of the date hereof and shall continue until the close of
business on March 31, 2003, and shall automatically be renewed for twelve (12)
month periods thereafter unless either party gives the other written notice of
termination at least three (3) months prior to the expiration of the initial or
any renewal term, unless sooner terminated as provided elsewhere in this
Agreement (the "TERM").
3. DUTIES AND SERVICES. (a) The Executive agrees to serve the
Corporation as Chief Financial Officer and General Counsel of the Corporation
and shall also serve such of its subsidiaries and affiliated companies as may be
designated by the Corporation, faithfully, diligently and to the best of his
ability, subject to and under the direction and control of the President, Chief
Executive Officer and Board of Directors of the Corporation, devoting his entire
business time, energy and skill to such employment, and to perform from time to
time such executive services, advisory or otherwise, as the President, Chief
Executive Officer or Board of Directors shall request, and to act in such
capacities or other offices for the Corporation and for any of its subsidiary or
affiliated companies as the Board of Directors shall request without further
compensation other than that for which provision is made in this Agreement. The
Executive acknowledges that while there are no strict guidelines pertaining to
work hours, he shall be expected to work a longer than average week, and spend
the necessary time and effort to consistently deliver high quality results in a
time sensitive manner. The Executive acknowledges that his position with the
Corporation will require significant business trips, much of which will involve
travel during off-peak and non-business hours.
(b) The Executive acknowledges that the Corporation may
experience dramatic growth and it may in the future need or desire someone else
as Chief Financial Officer.
1
<PAGE>
The Executive agrees that the Corporation shall be entitled to replace Executive
as Chief Financial Officer at such time as it shall determine. Until such time,
however, as the Chief Financial Officer of the Corporation, the Executive will
primarily be responsible for all reports and other filings with the Securities
and Exchange Commission. For the time being, the Chief Executive Officer will
continue to be responsible for investor relations. The Executive may also be
involved in the management of business development and/or human resource
functions. The Executive acknowledges that the Corporation retains the right to
move senior management personnel to different positions, and the Executive will
be flexible in such respect.
(c) The principal place of employment of the Executive shall be
at corporate offices of the Corporation to be established in Parsippany, New
Jersey, or such other new offices of the Corporation in the New York
metropolitan area as shall be determined by the Board of Directors.
(d) If and when requested by the Chief Executive Officer, the
Executive shall relocate from Atlanta, Georgia to a place in the New York
metropolitan area proximate to the Corporation's office. In the case of such
relocation, the Corporation shall pay or reimburse the Executive, including the
tax effect (gross up) for any taxable payments, his reasonable, qualified moving
expenses, up to an aggregate amount of $50,000.
4. COMPENSATION. (a) SALARY. The Corporation agrees to pay to the
Executive, and the Executive agrees to accept, a basic salary for all his
services (the "SALARY") at the rate of $200,000 per annum, payable in accordance
with the Corporation's standard payroll policies from time to time.
(b) STOCK OPTIONS. The Executive shall be eligible to
participate in the 1996 Stock Option Plan of the Corporation, and effective
within ten (10) days after the date this Agreement is executed shall be granted
options to purchase 200,000 shares of Common Stock of the Corporation at an
exercise price equal to the fair market value on the date of grant, which shall
vest (subject to continued employment) at the rate of 50,000 options shares per
year, beginning on the first anniversary of the date of grant and on the same
day of each of the next three years thereafter, and shall also be subject to the
terms and conditions of the applicable option grant agreement and the 1996 Stock
Option Plan.
(c) PERFORMANCE BONUS PLAN. Executive shall be included as a
participant in any performance bonus plan introduced by the Corporation. This
bonus is not guaranteed by the Corporation and is extended at the sole
discretion of the Corporation.
(d) NON-ACCOUNTABLE EXPENSE ALLOWANCE. The Executive shall be
entitled to a non-accountable expense allowance of $50,000 per year, for the
first two years of this Agreement.
5. EMPLOYEE BENEFITS. (a) BUSINESS. The Corporation shall reimburse
the
2
<PAGE>
Executive for the reasonable business expenses incurred by him for or on behalf
of the Corporation in furtherance of the performance of his duties hereunder.
Such reimbursement shall be subject to receipt by the Corporation from the
Executive of such an expense statements and such vouchers and other reasonable
verifications as the Corporation shall require to satisfactorily evidence such
expenses, and shall also be subject to such policies as the Corporation shall
establish from time to time.
(b) BENEFIT PROGRAMS. The Executive shall be entitled to
participate, in accordance with the terms thereof, in employee benefit plans and
programs maintained for the executives of the Corporation, including, without
limitation, any health, hospitalization and medical insurance programs and in
any pension or retirement or other similar plans or programs. The foregoing
shall not be construed to require the Corporation to establish any such plans or
programs, or to prevent the Corporation from modifying or terminating any such
plans or programs once established.
(c) VACATION. The Executive shall be entitled to four (4) weeks
of vacation each employment year during the term of this Agreement, taken
consecutively or in segments, subject to the effective discharge of the duties
of the Executive hereunder. Vacation not taken during any such year cannot be
rolled over to the following or any subsequent year.
6. TERMINATION OF BENEFITS. (a) TERMINATION. Notwithstanding
anything to the contrary contained herein, the Executive's employment with the
Corporation, as well as the Executive's right to any compensation which
thereafter otherwise would accrue to him hereunder or in connection therewith,
shall terminate upon the earliest to occur of the following events:
(i) the death or disability (as defined below) of the
Executive,
(ii) the expiration of the Term of this Agreement,
(iii) the Executive's termination of such employment, or
(iv) upon delivery of written notice, with or without "cause"
(as defined below), to the Executive from the
Corporation of such termination.
(b) CERTAIN DEFINITIONS. For the purpose of this Section 6, (i)
the term "cause" is defined as (A) the commission by the Executive of a felony
or an offense involving moral turpitude, the Executive's engaging in theft,
embezzlement, fraud, obtaining funds or property under false pretenses, or
similar acts of misconduct with respect to the property of the Corporation or
its employees, stockholders, affiliates, customers, licensees, licensers or
suppliers, (B) the repeated failure by the Executive to perform his duties
hereunder or comply with reasonable policies or directives of the Board of
Directors of the Corporation, (C) misfeasance or malfeasance, or (D) the breach
of this Agreement or the Conditions of Employment referred to below by the
Executive in any material respect, which breach is not cured within thirty (30)
days after Executive's receipt of written notice of the breach and (ii) the
Executive shall be deemed
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<PAGE>
"disabled" if, at the Corporation's option, it gives notice to the Executive or
his representative that due to a disabling mental or physical condition, he has
been prevented, for a continuous period of 90 days during the Term or for an
aggregate of 120 days during any six month period during the Term, from
substantially performing those duties which he was required to perform pursuant
to the provisions of this Agreement prior to incurring such disability.
(c) SEVERANCE; RELEASE. In the event of and upon the termination
by the Corporation of the employment of the Executive under this Agreement
without "cause", in addition to the Salary and other compensation (including
accrued vacation, cash bonuses, incentive and performance compensation) earned
hereunder and unpaid or not delivered through the date of termination and any
benefits referred to in Section 5(b) hereof in which the Executive has a vested
right under the terms and conditions of the plan or program pursuant to which
such benefits were granted (without regard to such termination), the Corporation
shall pay the Executive a cash payment (the "SEVERANCE PAYMENT") equal in the
aggregate to the sum of twelve months' Salary and all bonuses earned by the
Executive during the twelve (12) months preceding such termination. In the event
of termination of this Agreement by the Corporation by reason of the death or
disability of the Executive, the Corporation shall not be obligated to make the
Severance Payment to the Executive. The Severance Payment shall be paid to the
Executive in consecutive, equal monthly installments, on the fifteenth day of
each calendar month commencing during the month next following the (1) the first
to occur of the month in which the Executive is no longer employed by the
Corporation and (2) the effective date of a general release from the Executive
in customary form for such circumstances. The Severance Payment shall be in lieu
of any other claim for compensation under this Agreement, any wage continuation
law or at common law, or any claim to severance or similar payments or benefits
which the Executive may otherwise have or make. Without limiting any other
rights or remedies which the Corporation may have, it is understood that the
Corporation shall be under no further obligation to make any such severance
payments and shall be entitled to be reimbursed therefor by the Executive or his
estate if the Executive violates any of the covenants set forth in this
Agreement or in the Conditions of Employment attached as Exhibit A hereto. In
the event that the Severance Payment shall become payable to the Executive, the
Executive shall not be required, either in mitigation of damages or by the terms
of any provisions of this Agreement or otherwise, to seek or accept other
employment, and if the Executive does accept other employment, any benefits or
payments under this Agreement shall not be reduced by any compensation earned or
other benefits received as a result of such employment. Further, in the event
that the Severance Payment shall become payable to the Executive, the
Corporation shall continue to provide during such twelve-month period coverage
to Executive under the Corporation's health, hospitalization and medical
programs, to the same extent and at the same cost to the Executive as provided
during the term of Executive's employment with the Corporation (the "Health
Benefit").
(d) CHANGE OF CONTROL. In the event that the employment of the
Executive under this Agreement shall be terminated by the Corporation without
"cause" or by the Executive for "Good Reason" (as hereinafter defined) within
twelve (12) months after a Change
4
<PAGE>
of Control (as hereinafter defined) of the Corporation, in addition to the
Salary and other compensation (including accrued vacation, cash bonuses,
incentive and performance compensation) earned hereunder and unpaid or not
delivered through the date of termination and any benefits referred to in
Section 5(b) hereof in which the Executive has a vested right under the terms
and conditions of the plan or program pursuant to which such benefits were
granted (without regard to such termination) but in lieu of the Severance
Payment and any other payments under Section 6(c) hereof, the Corporation shall
pay the Executive a cash payment (the "Change of Control Payment") equal in the
aggregate to the sum of twenty-four months' Salary and all bonuses earned by the
Executive during the twenty-four (24) months preceding such termination. The
Change of Control Payment shall be paid to the Executive in consecutive, equal
monthly installments, on the fifteenth day of each calendar month commencing
during the month next following the (1) the first to occur of the month in which
the Executive is no longer employed by the Corporation and (2) the effective
date of a general release from the Executive in customary form for such
circumstances. The Change of Control Payment shall be in lieu of any other claim
for compensation under this Agreement, any wage continuation law or at common
law, or any claim to severance or similar payments or benefits which the
Executive may otherwise have or make. If group health plan benefits continue for
employees of the Corporation following such Change of Control, the Health
Benefit referred to in Section 6(c) shall also continue for such twenty-four
month period. Without limiting any other rights or remedies which the
Corporation may have, it is understood that the Corporation shall be under no
further obligation to make any such Change of Control Payments and shall be
entitled to be reimbursed therefor by the Executive or his estate if the
Executive violates any of the covenants set forth in this Agreement on in the
Conditions of Employment attached as Exhibit A hereto. In the event that the
Change of Control Payment shall become payable to the Executive, the Executive
shall not be required, either in mitigation of damages or by the terms of any
provisions of this Agreement or otherwise, to seek or accept other employment,
and if the Executive does accept other employment, any benefits or payments
under this Agreement shall not be reduced by any compensation earned or other
benefits received as a result of such employment.
For purposes of this Section, "GOOD REASON" shall mean the occurrence
of any of the following events: (x) a material adverse change in the nature or
scope of the Executive's responsibilities, authorities, title, powers,
functions, reporting procedures (including the status of the person to whom the
Executive reports directly and the status of the persons who report directly to
the Executive, but other than the appointment of a Chief Financial Officer) or
duties, in all cases in a manner inconsistent with Section 3 above and giving
due regard to the flexibility contemplated thereby, from the responsibilities,
authorities, title, powers, functions reporting procedures (including the status
of the person to whom the Executive reports directly and the status of the
persons which report directly to the Executive) or duties exercised by the
Executive prior to a Change of Control (other than changes to reflect the
integration of the Corporation with an acquiror's operations which do not amount
to the functional equivalent of a demotion); (y) a reduction in the Executive's
annual base Salary as in effect immediately prior to a Change of Control; or (z)
the relocation of the office at which the Executive is principally employed
immediately prior to a Change of Control to a location more than 50 miles from
such office or
5
<PAGE>
the requirement by the acquiror for the Executive to be based anywhere other
than such current office, except for required business travel to an extent
substantially consistent with the Executive's business travel obligations
immediately prior to the Change or Control.
For purposes of this Section, "CHANGE OF CONTROL" shall mean the
consummation of (i) a merger, combination, reorganization or consolidation of
the Corporation with or into another corporation (with respect to which less
than a majority of the outstanding voting power of the surviving or consolidated
corporation is held by shareholders of the Corporation immediately prior to such
event), (ii) the sale, transfer or other disposition of all or substantially all
of the properties and assets of the Corporation and its subsidiaries, (whether
tangible or intangible) or (iii) the sale to or purchase by (or a series of
sales to or purchases by) a person or entity (or an affiliated group of persons
or entities) which shall not be a stockholder of the Corporation (or a profit
sharing or other employee benefit plan of the Corporation) of securities of the
Corporation in a private transaction or transactions such that such unrelated
person or entity (or group of affiliated persons or entities) shall as a result
of such sale or sales or purchase or purchases beneficially own, directly or
indirectly, securities of the Corporation representing more than fifty percent
(50%) of the combined voting power of the Corporation's then outstanding
securities or have the right to designate a majority of the members of the Board
of Directors of the Corporation.
7. DEDUCTIONS AND WITHHOLDING. The Executive agrees that the
Corporation shall withhold from any and all payments required to be made to the
Executive pursuant to this Agreement (including the travel allowance) all
federal, state, local and/or other taxes which are required to be withheld in
accordance with applicable statutes and/or regulations from time to time in
effect.
8. NON-SOLICITATION, RESTRICTIVE COVENANTS, CONFIDENTIALITY AND
INJUNCTIVE RELIEF.(a) The Executive shall execute and deliver to and for the
benefit of the Corporation, the Conditions of Employment attached as EXHIBIT A
hereto, pertaining, among other matters, to proprietary information,
confidentiality obligations, and non-competition obligations, the provisions of
which shall be deemed incorporated herein by reference as if set forth herein
(the "CONDITIONS OF EMPLOYMENT"). In the event of any ambiguity and/or
inconsistency between this Agreement (not including Exhibit A) and the
Conditions of Employment attached as Exhibit A hereto, the terms of this
Agreement (not including Exhibit A) shall control. Without limiting the
forgoing, the following shall be applicable:
(i) NON-COMPETITION. In view of the fact that activity of
the Executive in violation of the terms hereof is likely to adversely affect the
Corporation and its subsidiaries and affiliates and would deprive the
Corporation of the benefits of its bargain hereunder, and to preserve the
goodwill associated with the Corporation's business, the Executive hereby agrees
that during the period commencing on the date hereof and ending on the first
(1st) anniversary of the date on which the Executive's employment with the
Company and its subsidiaries and affiliates terminates for any reason (the
"Non-Compete Period"), he will not, without the express written consent of the
Corporation, directly or indirectly, anywhere in the
6
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United States or Canada, engage in any activity which is, or participate or
invest in, or provide or facilitate the provision of financing to, or assist
(whether as owner, part-owner, shareholder, member, partner, director,
officer, trustee, employee, agent or consultant, or in any other capacity),
any business, organization or person other than the Corporation (or any
subsidiary or affiliate of the Corporation), whose business, activities,
products or services are directly competitive with any of the business,
activities, products or services conducted by the Corporation on the date the
Executive's employment with the Corporation terminates and which are in the
Corporation's Field of Interest (each a "Competitive Business"); provided
that the Executive shall be permitted to be employed by an entity which
operates an ancillary business in the Corporation's Field of Interest so long
as the Executive is not involved in such ancillary business. For purposes of
this Section 8(a)(i), the Corporation's "Field of Interest" shall include,
without limitation, the development, implementation or sale of on-line
marketing or advertising programs to pharmaceutical and other healthcare
organizations and any other business activity engaged in, or conducted by the
Corporation or its subsidiaries or affiliates on the date the Executive's
employment with the Corporation terminates. Notwithstanding anything in this
Section 8(a)(i) to the contrary, the Executive shall not be prohibited from
participating, directly or indirectly, in any activity or business with
Internet operations, including companies providing goods or services through
or providing e-commerce and content or otherwise, that is not a Competitive
Business.
Notwithstanding anything herein to the contrary, the Executive may
make passive investments in any enterprise the shares of which are publicly
traded if such investment constitutes less than five percent (5%) of the
equity of such enterprise.
(ii) NON-SOLICITATION In addition to the restrictions in
Section 8(a)(i) above, the Executive also agrees that he will not during the
Non-Compete Period: (1) hire, attempt to hire, or participate in any way in
any effort by any person or entity (other than the Corporation or any of its
direct and/or indirect subsidiaries and affiliates) to hire or attempt to
hire any person who is at the time (or was within the immediately preceding
six (6) months) an officer or employee of the Corporation or its direct
and/or indirect subsidiaries or affiliates; (2) encourage any officer or
employee of the Corporation or its direct or indirect subsidiaries or
affiliates to terminate his or her relationship or employment with such
entity; or (3) on behalf of himself or any persons or entity, other than the
Corporation or any of its direct or indirect subsidiaries and affiliates,
solicit or accept business from any client of the Corporation or its direct
or indirect subsidiaries in the Corporation's Field of Interest; PROVIDED,
HOWEVER, that the foregoing provision will not prevent the Executive from
employing or offering to employ any such person who has been terminated by
the Corporation or a subsidiary or affiliate prior to the commencement of
employment discussions between the Executive and such employee, and the
Executive will be permitted to hire and offer to hire non-executive employees
of the Corporation who are contacted as a result of the use of general
newspaper or electronic advertisement and other general non-targeted
recruitment techniques in the ordinary course of business and consistent with
past practices as opposed to targeted solicitations of any one or more of the
Corporation's employees.
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For purposes of this Agreement, any reference to the
subsidiaries of the Corporation shall be deemed to include all entities directly
or indirectly controlled by it through an ownership of more than fifty percent
(50%) of the voting interests, the term "affiliate" shall mean, with respect to
any person or entity, any person or entity which directly or indirectly
controls, is controlled by or is under common control with such person or
entity, and the term "person" shall mean an individual, a corporation, an
association, a partnership, a limited liability company, an estate, a trust, and
any other entity or organization. .
(iii) SCOPE OF AGREEMENT. The parties acknowledge that the
time, scope, geographic area and other provisions of this Section 8 have been
specifically negotiated by the sophisticated commercial parties and agree that
(1) all such provisions are reasonable under the circumstances of this
Agreement, (2) are given as an integral and essential part of this Agreement and
(3) but for the covenants of the Executive contained in this Section 8, the
Corporation would not have entered into this Agreement. The Executive has
independently consulted with his counsel and has been advised in all respects
concerning the reasonableness and propriety of the covenants contained herein,
with specific regard to the business to be conducted by the Corporation and its
subsidiaries and affiliates, and represents that this Agreement is intended to
be, and shall be, fully enforceable and effective in accordance with its terms.
(iv) SEVERABILITY. In the event that any covenant contained
in this Agreement shall be determined by any court of competent jurisdiction to
be unenforceable by reason of its extending for too great a period of time or
over too great a geographical area or by reason of its being too extensive in
any other respect, it shall be interpreted to extend only over the maximum
period of time for which it may be enforceable and/or over the maximum
geographical area as to which it may be enforceable and/or to the maximum extent
in all other respects as to which it may be enforceable, all as determined by
such court in such action.
(v) CONFIDENTIAL INFORMATION. As used in this Agreement,
"Confidential Information" means information belonging to the Corporation which
is of value to the Corporation in the course of conducting its business and the
disclosure of which is reasonably likely to result in a competitive or other
disadvantage to the Corporation. Confidential Information includes, without
limitation, financial information, reports, and forecasts; inventions,
improvements and other intellectual property; trade secrets; know-how; designs,
processes or formulae, software; market or sales information or plans; customer
lists; and business plans, prospects and opportunities (such as possible
acquisitions or dispositions of businesses or facilities) which have been
discussed or considered by the management of the Corporation. Confidential
Information includes information developed by the Executive in the course of the
Executive's employment by the Company, as well as other information to which the
Executive may have access in connection with the Executive's employment.
Confidential Information also includes the confidential information of others
with which the Corporation has a business relationship. Notwithstanding the
foregoing, Confidential Information does not include information in the public
domain, unless due to breach of the Executive's duties under Section
8
<PAGE>
8(a)(vi) or information known to the Executive prior to his employment by the
Company.
(vi) CONFIDENTIALITY. The Executive understands and agrees
that the Executive's employment creates a relationship of confidence and trust
between the Executive and the Company with respect to all Confidential
Information. At all times, both during the Executive's employment with the
Corporation and after his termination, the Executive will keep in confidence and
trust all such Confidential Information, and will not use or disclose any such
Confidential Information without the written consent of the Corporation, except
as may be necessary in the ordinary course of performing the Executive's duties
to the Corporation.
(vii) INVENTIONS. The Executive recognizes that the
Corporation possess a proprietary interest in all of the Confidential
Information and has the exclusive right and privilege to use, protect by
copyright, patent or trademark, or otherwise exploit the processes, ideas and
concepts described therein to the exclusion of the Executive, except as
otherwise agreed between the Corporation and the Executive in writing. The
Executive expressly agrees that any products, inventions, discoveries or
improvements made by the Executive or his agents in the course of the
Executive's employment or during any period that the Executive has heretofore
been a consultant to the Corporation, including any of the foregoing which is
based on or arises out of the Confidential Information, shall be the property of
and inure to the exclusive benefit of the Corporation. The Executive further
agrees that any and all products, inventions, discoveries or improvements
developed by the Executive (whether or not able to be protected by copyright,
patent or trademark) during the course of his employment or during any period
that the Executive has heretofore been a consultant to the Corporation, or
involving the use of the time, materials or other resources of the Corporation
or any of its subsidiaries or affiliates, shall be promptly disclosed to the
Corporation and shall become the exclusive property of the Corporation and the
Executive shall execute and deliver any and all documents necessary or
appropriate to implement the foregoing.
(viii) BUSINESS OPPORTUNITIES. The Executive agrees, while he
is employed by the Corporation, to offer or otherwise make known or available to
it, as directed by the Board of Directors of the Corporation and without
additional compensation or consideration, any business prospects, contracts or
other business opportunities that he may discover, find, develop or otherwise
have available to him in the Corporation's Field of Interest, and further agrees
that any such prospects, contacts or other business opportunities shall be the
property of the Corporation.
(ix) DOCUMENTS, RECORDS, ETC. All documents, records, data,
apparatus, equipment and other physical property, whether or not pertaining to
Confidential Information, which are furnished to the Executive by the
Corporation or are produced by the Executive in connection with the Executive's
employment will be and remain the sole property of the Corporation. The
Executive will return to the Corporation all such materials and property as and
when requested by the Corporation. In any event, the Executive will return all
such materials and property immediately upon termination of the Executive's
employment for any
9
<PAGE>
reason. The Executive will not retain with the Executive any such material
property or any copies thereof after such termination.
(x) THIRD-PARTY AGREEMENTS AND RIGHTS. The Executive hereby
confirms that the Executive is not bound by the terms of any agreement with any
previous employer or other party which restricts in any way the Executive's use
or disclosure of information reasonably likely to be useful or necessary to the
performance by the Executive of his services hereunder, or the Executive's
engagement in any business. The Executive represents to the Corporation that the
Executive's execution of this Agreement, the Executive's employment with the
Corporation and the performance of the Executive's proposed duties for the
Corporation will not violate any obligations the Executive may have to any such
previous employer or other party. In the Executive's work for the Corporation,
the Executive will not disclose or make use of any information in violation of
any agreements with or right of any such previous employer or other party, and
the Executive will not bring to the premises of the Corporation any copies or
other tangible embodiments of non-public information belonging to or obtained
from any such previous employment or other party.
(xi) LITIGATION AND REGULATORY COOPERATION. During and after
the Executive's employment, the Executive shall cooperate fully with the
Corporation in the defense or prosecution of any claims or actions now in
existence or which may be brought in the future against or on behalf of the
Corporation which relate to events or occurrences that transpired while the
Executive was employed by the Corporation. The Executive's full cooperation in
connection with such claims or actions shall include, but not be limited to,
being available to meet with counsel to prepare for discovery or trial and to
act as a witness on behalf of the Corporation at mutually convenient times.
During and after the Executive's employment, the Executive also shall cooperate
fully with the Corporation in connection with any such investigation or review
of any federal, state or local regulatory authority as any such investigation or
review relates to events or occurrences that transpired while the Executive was
employed by the Corporation. The Corporation shall reimburse the Executive for
any reasonable out-of-pocket expenses incurred in connection with the
Executive's performance of obligations pursuant to this subsection (xi). The
performance by the Executive under this subsection (xi) after the termination of
the Executive's employment with the Corporation shall be subject to his other
employment obligations..
(b) The provisions of this Section 8 shall survive the
termination or expiration of this Agreement, irrespective of the reason
therefor, including under circumstances in which the Executive continues
thereafter in the employ of the Corporation.
9. INSURANCE. The Executive agrees that the Corporation may from
time to time and for the Corporation's own benefit apply for and take out life
insurance covering the Executive, either independently or together with others,
in any amount and form which the Corporation may deem to be in its best
interests. The Corporation shall own all rights in such insurance and in the
cash values and proceeds thereof and the Executive shall not have any right,
title or interest therein. The Executive agrees to assist the Corporation, at
the Corporation's
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<PAGE>
expense, in obtaining any such insurance by, among things, submitting to
customary examinations and correctly preparing, signing and delivering such
applications and other documents as reasonably may be required. Nothing
contained in this Section 10 shall be construed as a limitation on the
Executive's right to procure any life insurance for his own personal needs.
10. NOTICES. All notices shall be in writing and shall be deemed to
have been duly given to a party hereto on the date of such delivery, if
delivered personally, or on the third day after being deposited in the mail if
mailed via registered or certified mail, return receipt requested, postage
prepaid, or on the next business day after being sent by recognized national
overnight courier service, in the case of the Executive at his current address
as set forth in the Corporation's records, and in the case of the Corporation,
at it address set forth above.
11. ASSIGNABILITY AND BINDING EFFECT. This Agreement shall inure to
the benefit of and shall be binding upon the heirs, executors, administrators,
successors and legal representatives of the Executive, and shall inure to the
benefit of and be binding upon the Corporation and its successors and assigns.
The Executive may not assign, transfer, pledge, encumber, hypothecate or
otherwise dispose of this Agreement, or any of his rights or obligations
hereunder, and any such attempted delegation or disposition shall be null and
void and without effect.
12. SEVERABILITY. In the event that any provisions of this Agreement
would be held to be invalid, prohibited or unenforceable in any jurisdiction for
any reason (including, but not limited to, any provisions which would be held to
be unenforceable because of the scope, duration or area of its applicability),
unless narrowed by construction, this Agreement shall, as to such jurisdiction
only, be construed as if such invalid, prohibited or unenforceable provision had
been more narrowly drawn so as not to be invalid, prohibited or unenforceable
(or if such language cannot be drawn narrowly enough, the court making any such
determination shall have the power to modify such scope, duration or area or all
of them, but only to the extent necessary to make such provision or provisions
enforceable in such jurisdiction, and such provision shall then be applicable in
such modified form). If, notwithstanding the foregoing, any provision of this
Agreement would be held to be invalid, prohibited or unenforceable in any
jurisdiction, such provision shall be ineffective to the extent of such
invalidity, prohibition or unenforceability, without invalidating the remaining
provisions of this Agreement or affecting the validity or enforceability of such
provision in any other jurisdiction.
13. GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the internal laws of the State of New Jersey, without regard
to principles of conflict of laws and regardless of where actually executed,
delivered or performed.
14. COMPLETE UNDERSTANDING; COUNTERPARTS. This Agreement constitutes
the complete understanding and supersedes any and all prior agreements and
understandings between the parties with respect to its subject matter, and no
statement, representation, warranty or covenant has been made by either party
with respect thereto except as expressly set forth herein.
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This Agreement shall not be altered, modified, amended or terminated except by
written instrument signed by each of the parties hereto. The Section and
paragraph headings contained herein are for convenience only, and are not part
of and are not intended to define or limit the contents of said Sections and
paragraphs. This Agreement may be executed in counterparts, each of which shall
be deemed an original and all of which, when taken together, shall constitute
one and the same agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
Mediconsult.com, Inc.
By: /s/ Robert A. Jennings
----------------------
/s/ E. Michael Ingram
-------------------------------
Executive: E. Michael Ingram
<PAGE>
Exhibit 10.21
AGREEMENT
between
Novartis Pharma AG, Lichtstrasse 35, 4002, Basel, Switzerland
(hereinafter "Novartis")
and
Mediconsult.com, Inc. Jardine House, 4th Floor, 33 Reid Street, Hamilton Bermuda
HM LX (hereinafter "Mediconsult")
1. Subject-Matter of the Agreement
1.1 Mediconsult undertakes to provide Novartis with work and services
regarding the development of Novartis' Internet presence, as described in
more detail in the Scope of Work delivered simultaneously with this
Agreement. The Scope of Work shall include the following Schedules
thereto:
o Branding @ Pharma Project (Schedule 1) (hereinafter "Project");
o Description of Services (Schedule 2);
o Promotional Program (Schedule 3);
o Project Timelines (Schedule 4); and
o Project Team (Schedule 5);
Such services to be performed by Mediconsult and such other related
services as Novartis may reasonably request and approved by Mediconsult
are hereinafter jointly referred to as the "Services". The Services will
include the development and implementation of a global Internet presence
that supports the branding needs of Novartis' four substances and products
Lescol(R), Diovan(R), & Co-Diovan(R), Starlix and E25 (hereinafter
"Products"). Any installation of Novartis' Internet sites requires the
prior written approval of Novartis. The Project will outline in detail the
Services and the agreed upon services/needs for each of the Products. The
branding needs include consistent promotional and scientific messages and
visual identity of Novartis and the Products.
1.2 Novartis shall provide to Mediconsult on an ongoing basis during the term
of this Agreement such information and data as Novartis determines to be
required by Mediconsult for the performance of the Services.
<PAGE>
1.3 Mediconsult shall provide the Services in a timely and professional manner
and in accordance wit the terms of this Agreement. Any subcontracting of
Services is subject to prior written approval of the Services.
1.4 Mediconsult shall attend such meetings at Novartis' and its affiliates'
offices in Basel, East Hanover, etc., as reasonably requested by Novartis,
at no additional cost to Novartis.
1.5 Mediconsult shall promptly inform Novartis in writing in the case of
special events, problems, etc. in connection with the Services.
2. Collaborators
2.1 Mediconsult shall be responsible for the appropriate staffing of the
team to perform its tasks under this Agreement and shall bear all the
related costs and expenditures.
2.2 If the performance of the Services should require the recruitment of
any additional collaborators, employees, agents, etc. (collectively,
"Collaborators"), Mediconsult shall be responsible for such recruitment
and shall have all responsibility, financial or otherwise, with respect to
such Collaborators.
2.3 Mediconsult warrants that such Collaborators will comply with the
obligations set forth in this Agreement.
3. Consideration
3.1 In consideration of the Services, Novartis will make the payments,
subject to evaluation by Novartis and satisfactory performance by
Mediconsult, set forth in the Scope of Work. The total amount of such fee
excluding VAT compensates all Services provided by Mediconsult under this
Agreement, such as initial design, development, and deployment, promotion
and maintenance of the Internet presence for each of the Products, etc.
Except as specified in the Scope of Work, Mediconsult will receive no
further payments or reimbursements from Novartis for or in connection with
the Services.
3.2 Mediconsult shall send its invoices to Novartis Pharma AG, Zentraler
Fakturencingang, WSJ-210.1333, Postfach, 4002 Basel, Switzerland, marked
to the attention of Ms. Monica Ryser-Cseri or to such other person as may
be designated by Novartis from time to time. The invoices shall contain
the following information: full address of dispatcher, VAT number of
dispatcher [if applicable], addressee (Novartis Pharma AG, Zentraler
Fakturencingang, WSJ-2120.1333, Attention Ms. Monica Ryser-Cseri), clear
statement that it is an invoice, job number/SAP order number, date,
detailed items invoiced, VAT (to be
<PAGE>
shown separately)[if applicable], total amount invoiced including
currency, credit terms, bank details. Novartis shall make its payments
within 20 (twenty) working days after receipt of a respective invoice.
4. Term and Termination
4.1 This Agreement shall retroactively enter into effect on 16 October
1998 and shall expire on 31 December 1999, unless extended by the parties.
4.2 Novartis shall be entitled to terminate this Agreement at any time by
written notice to Mediconsult if in its reasonable opinion Mediconsult
should have failed to perform the Services in a professional and timely
manner and/or in accordance wit the terms of this Agreement.
4.3 This Agreement may be terminated by either party at any time by
ewritten notice to the other party in either of the following
circumstances: (i) if the other party should be in breach of any of its
obligations hereunder and should fail or be unable to remedy such beach
within 30 (thirty) days of receipt of notice in writing specifying the
breach; (ii) if the other party should go into liquidation otherwise than
for the purpose of amalgamation reconstruction; or should have a receiver
or manage appointed of any of its assets; or should enter into any
composition with its creditors.
4.4 Upon any termination or expiration of this Agreement, all outstanding
rights and obligations between the parties arising from or in connection
with this Agreement shall immediately terminate, except: (i) any
obligation that matured prior to the effective date of the termination or
expiration; (ii) the secrecy obligations set forth in Section 5 and (iii)
any other provision which, by its terms, is understood to survive the
termination or expiration of this Agreement. Termination of this Agreement
shall be without prejudice to any claim or right of action of either party
against the other party for any prior breach of this Agreement.
4.5 In the event of early termination, Mediconsult will execute an orderly
transition of any sites and applications to Novartis' internal Internet
operations. This orderly transition will take place within 45 (forty-five)
days of written notification from Novartis. Within such period of 45
(forty-five) days, all work in progress will be completed and an
appropriate handover of content and applications will occur.
4.6 In addition, a transition of sites and applications developed for
Novartis and the Products may take place in any case, if Novartis deems
that it should like these sites and applications to be managed on a daily
basis for a local server/contractor. In this case, an orderly transition
of sites and applications should follow the same procedure outline in
Section 4.5. This transition would not necessarily affect the Services
provided by Mediconsult. Mediconsult would agree to work with Novartis'
local supplier.
<PAGE>
5. Confidentiality
5.1 Mediconsult undertakes to treat all technical, commercial, scientific
and/or other information obtained from Novartis or otherwise acquired in
connection with this Agreement (hereinafter "Information") confidential,
except for any information which Mediconsult is able to demonstrate:
(1) was already in the public domain at the time of receipt from
Novartis;
(2) was in its possession prior to receipt from Novartis, and was
not acquired, directly or indirectly, from Novartis;
(3) becomes part of the public domain through no fault of
Mediconsult;
(4) is lawfully received by Mediconsult from a third party, having
a right to disclose it to Mediconsult;
(5) was developed by Mediconsult, independently from the
Information disclosed.
5.2 Nothing in this Section 5 shall prevent the disclosure of those parts
of the Information which are required to be disclosed by law or court
order; provided, however, that if Mediconsult is so required to disclose
any such Information, it shall provide Novartis prompt written notice of
such requirement so that Novartis may seek a protective order or other
appropriate remedy to prevent or limit such disclosure.
5.3 Mediconsult undertakes that the Information will be used exclusively
for the purposes of this Agreement.
5.4 The provisions of this Section 5 shall survive the duration of this
Agreement for a term of 15 (fifteen) years.
5.5 After completion of this Agreement, Mediconsult will return to
Novartis or, at Novartis' option, will destroy any documents (in whatever
form) supplied by Novartis as well as all copies thereof and documents
containing extracts therefrom provided, however, that Mediconsult may
retain one copy for the sole purpose of verifying compliance with
Mediconsult's obligations under this Agreement.
6. Intellectual Property Rights
6.1 Novartis is entitled to use and exploit, free of charge, any
information generated in the course of the Services to be provided
hereunder. Any copyrights, as well as
<PAGE>
any rights to patentable or non-patentable inventions which Mediconsult
develops in the course of performing the work contemplated by this
Agreement (such inventions, collectively "Inventions") will, promptly
following Novartis' request, be assigned to Novartis free of charge.
Mediconsult will assist Novartis in the preparation of patent applications
on any such Inventions. Novartis will reimburse Mediconsult for its
out-of-pocket expenses required to be incurred in connection therewith,
which Mediconsult agrees will constitute adequate consideration for such
assignment.
6.2 In creating an Internet presence for the Products, Mediconsult will
bring content and applications to bear both from its existing sources as
well as from development and third party sources. In general, however,
Mediconsult would grant ownership of the developed Internet content,
applications and web site(s) to Novartis based on the following
parameters:
6.3 Content
- General content (e.g., on disease) provided by Mediconsult to
populate the site(s) are non-exclusively owned by Novartis. Novartis
has a fee fully paid non-exclusive right to use this content or
applications without permission from Novartis.
- Product-specific content and applications created by Mediconsult for
the Novartis web site(s) are exclusively owned by Novartis.
Mediconsult does not have the right to use this content or
applications without permission from Novartis.
- Content re-purposed from Novartis for the site(s) are exclusively
owned by Novartis. Mediconsult does not have the right to use this
content or applications without the prior written consent of
Novartis.
6.4 Applications
- Applications provided by Mediconsult to populate the site(s) are
non-exclusively owned by Novartis. Novartis has a free fully paid
non-exclusive right to use these applications, subject to costs of
transfer of technology to Novartis sites, in perpetuity. Mediconsult
continues to own these applications and may use them on their public
web site and for other client sites.
- Applications developed by Mediconsult exclusively for the site(s)
are owned by Novartis.
<PAGE>
- Mediconsult owns the source code for all applications as the
developer of ht applications. Novartis is provided with a license to
use the applications in perpetuity. However, Novartis does not have
the tight to resell these applications to third parties.
6.5 Other
- Content and applications owned or developed in conjunction with a
third party (such as a patient association or a medical database
company), will be subject to the terms of any agreement negotiated
at that time. Novartis will be made aware (and be allowed a
reasonable period for comments) of any terms and conditions prior to
arrangements being finalized.
- In case of an early termination of this contract, Novartis owns all
pre-releases of applications developed by Mediconsult (for the
site(s) up to the date of termination.
7. Publications
No publication or other disclosure to any third party may be made by
Mediconsult, either during the term of this Agreement or after its
termination or expiry, without the prior written approval of Novartis.
8. Obligations Contrary to this Agreement
The parties hereby covenant and represent that each of them has full right
and authority to enter into this Agreement and to accept all the
obligations thereunder, that they have no obligations with any third party
which might be in conflict with their obligations under this Agreement,
and that they will during the term of this Agreement not enter into such
obligations without the prior written consent of the other party.
9. Assignment
This Agreement shall not be assignable without the prior written consent
of the other party, except that Novartis shall be entitled to assign this
Agreement or any rights and obligations thereof to any of its affiliates
or to a company taking over all or substantially all of its pharmaceutical
business.
10. Entire Agreement
This Agreement sets forth the entire understanding between the parties
with respect to the transactions and arrangements contemplated hereby and
supersedes all prior oral or written arrangements. No amendments or
modification to this Agreement shall be valid or binding upon the parties
unless made in writing and
<PAGE>
signed by the representatives of such parties. All enclosures to this
Agreement shall form an integral part thereto.
11. Notices
Any notices which either Party may be required or shall desire to give
under this Agreement shall be deemed to be duly given when in writing and
delivered personally, mailed by registered mail, courier service or sent
by telex (provided that such telex shall be confirmed by registered mail
or courier service) to the Party to whom notice is to be given, at the
address first given above or such other address or addresses of which such
Party shall have given written notice not less than 7 (seven) days before
the notice is dispatches.
12. Jurisdiction
This Agreement will be governed by, and construed in accordance with, the
substantive laws of Switzerland, except as they relate to the conflict of
laws. Any dispute will be resolved by the ordinary courts of Basel-City,
Switzerland, without restricting any right of appeal.
Novartis Pharma AG
Signatures:
---------------------------- ----------------------------
Dates:
---------------------------- ----------------------------
Names/Titles: Jan S. C. Talmage Monica Ryser-Cseri
Head of Strategic Marketing Pharma Communications
Mediconsult.com, Inc.
Signatures:
---------------------------- ----------------------------
Dates: _
---------------------------- ----------------------------
Names/Titles:
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this Registration
Statement on Form S-1 of Mediconsult.com, Inc. of our report dated
February 26, 1999 on our audits of the consolidated financial statements of
Mediconsult.com, Inc. as of December 31, 1997 and 1998 and for each of the
three years in the period ended December 31, 1998. We also consent to the
reference to our firm under the caption "Experts."
Hamilton, Bermuda
April 2, 1999 PricewaterhouseCoopers
<PAGE>
Exhibit 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this Registration Statement
on Form S-1 of Mediconsult.com, Inc. of our report dated March 14, 1999 on
our audits of the financial statements of CyberDiet, LLC as of
December 31, 1996, 1997 and 1998. We also consent to the reference to our firm
under the caption "Experts".
Hamilton, Bermuda
April 2, 1999 PricewaterhouseCoopers
