<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 15, 1999
REGISTRATION NO. 333-73059
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
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............................................................................ $73,312,500 $20,381
</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 $9,370 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 MARCH 15, 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, (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% $ 15,468,167 21.5% $ 0.68
New investors..................................... 4,425,000 16.3 56,418,750 78.5 12.75
------------ --------- ------------- ---------
Total......................................... 27,124,278 100.0% $ 71,886,917 100.0%
------------ --------- ------------- ---------
------------ --------- ------------- ---------
</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 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 $0.9 million for
the year ended December 31, 1997, and $1.2 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............ 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>
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 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
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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 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
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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 an exclusive 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 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
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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
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
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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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<PAGE>
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.
We are in the process of recruiting a Chief Financial Officer. There is no
assurance as to when we will engage a Chief Financial Officer.
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.
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
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<PAGE>
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. Each 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 each from, among other things, disseminating or using
confidential information about our business or clients in any way that would be
adverse to Mediconsult.
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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>
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
50
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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 immediately exercisable option to
purchase 358,333 shares of common stock at an exercise price of $1.20 per share
which expires on October 1, 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 of 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 -- 12,479,999 46.0
All Directors and Officers as a group (10 persons).......... 17,096,633 68.9 475,000 16,693,299 56.9
Arnhold and S. Bleichroeder, Inc. (14)...................... 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 a currently exercisable option granted to Treacy & Co. on the
same date by The Mediconsult Trust, which is now the obligation of JHC
Limited, 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) 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.
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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 July 28, 2003, 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 intent 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 86,000 shares which were converted to
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 over 2 million 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
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 July
28, 2003 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 INCIID.ORG that
granted the Company the sole right to place advertisements on the Web site, to
link
F-15
<PAGE>
MEDICONSULT.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
13. SUBSEQUENT EVENTS (CONTINUED)
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.......................................................... $ 20,381
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................................................................. 6,787
--------------
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**
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**
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)
27.1 Financial Data Schedule**
</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.1 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 March 15, 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 March 15, 1999
Robert A. Jennings Officer)
/s/ IAN SUTCLIFFE Director, President
- ------------------------------ (Principal Financial March 15, 1999
Ian Sutcliffe Officer)
/s/ MICHAEL TREACY Director
- ------------------------------ March 15, 1999
Michael Treacy
Director
- ------------------------------ March 15, 1999
Barry Guld
/s/ JOHN BUCHANAN Director
- ------------------------------ March 15, 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**
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**
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>
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)
27.1 Financial Data Schedule**
</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>
CERTIFICATE OF DESIGNATION
OF
CERTIFICATE OF INCORPORATION
OF
MEDICONSULT.COM, INC.
MEDICONSULT.COM, INC., a Delaware corporation (the "Corporation"),
acting pursuant to Section 141 of the Delaware General Corporation Law, does
hereby submit the following Certificate of Designation of Series and
Determination of Rights and Preferences of its Senior Preferred Stock.
FIRST: The name of the Corporation is Mediconsult.com, Inc.
SECOND: By unanimous consent of the Board of Directors of the
Corporation dated February 25, 1999, the following resolutions were duly
adopted:
WHEREAS the Certificate of Incorporation of the Corporation
authorizes Preferred Stock consisting of 5,000,000 shares, par value $.001 per
share, issuable from time to time in one or more series; and
WHEREAS the Board of Directors of the Corporation is authorized,
subject to limitations prescribed by law and by the provisions of Section 5.04
of the Corporation's Certificate of Incorporation to establish and fix the
number of shares to be included in any series of Preferred Stock and the
designation, rights, preferences and limitations of the shares of such series;
and
WHEREAS it is the desire of the Board of Directors to establish and
fix the number of shares to be included in a new series of Preferred Stock and
the designation, rights, preferences and limitations of the shares of such new
series.
NOW, THEREFORE, BE IT RESOLVED that pursuant to Section 5.04 of the
Corporation's Certificate of Incorporation, there is hereby established a new
series of 1,000,000 shares of Preferred Stock of the Corporation (the "Senior
Preferred Stock") to have the designation, rights, preferences, powers,
restrictions and limitations set forth in a supplement of Section 5.04 as
follows:
1. DIVIDENDS.
(a) The holder of each share of Senior Preferred Stock shall be
entitled to receive out of funds legally available therefor, when and as
declared by the Board of Directors of the Corporation, dividends at the rate of
eight percent (8%) of the Original Issuance Price per annum (the "Senior
Preferred Dividends"), which shall be payable semi-annually on the 30th day of
June and the 31st day of December in each calendar year, and which shall be
declared and set apart or paid before dividends of any kind may be declared upon
the shares of Common Stock,
<PAGE>
$.001 par value of the Corporation (the "Common Stock") or shares of Preferred
Stock, $.001 par value of the Corporation (the "Junior Preferred Stock") and
before distributions of any kind may be made upon the issued and outstanding
shares of Common Stock or shares of Junior Preferred Stock (other than the
payment of Junior PIK Dividends (as defined below) in the event of a Qualified
Offering). The right to Senior Preferred Dividends shall be cumulative and shall
be deemed to accrue, whether dividends are earned or whether there be funds
legally available therefor, or whether said Senior Preferred Dividends shall
have been declared by the Board of Directors of the Corporation; PROVIDED,
HOWEVER, the right to Senior Preferred Dividends shall not begin to accrue
unless (i) a Qualified Offering does not occur on or prior to June 30, 1999 or
(ii) a Corporate Transaction occurs, in which case the right to Senior Preferred
Dividends shall have been deemed to accrue as of the Original Issuance Date.
Except with respect to the Junior PIK Dividends, the declaration and accrual of
which may occur prior to a payment, declaration or reservation of Senior
Preferred Dividends, whenever the full amount of Senior Preferred Dividends for
all past and current semi-annual dividend periods shall have been paid, without
interest, declared or a sum sufficient for the payment thereof set aside in
full, without interest (as the case may be), the Board of Directors may declare,
set aside or pay additional cash dividends, and/or may make share distributions
of the authorized but unissued shares of the Corporation and/or of its treasury
shares of Common Stock, if any. All Senior Preferred Dividends shall be payable
in shares of Senior Preferred Stock of the Corporation. On or prior to the date
of a conversion of the Senior Preferred Stock into Common Stock pursuant to
Section 4, the Corporation shall issue and deliver or, failing such actual
issuance and delivery, shall be deemed to have issued and delivered, to each
holder of record of Senior Preferred Stock that number of fully paid and
non-assessable shares of Senior Preferred Stock as shall be equal to the
aggregate amount payable in respect of each semi-annual Senior Preferred
Dividend payment not previously paid, divided by the Original Issuance Price. In
addition, the holder of each share of Senior Preferred Stock shall be entitled
to share in any dividends declared or paid upon or set aside for the Common
Stock or Junior Preferred Stock (other than the payment in the form of shares of
Junior Preferred Stock ("Junior PIK Dividends") of cumulative dividends to the
Junior Preferred Stock as set forth in the Certificate of Designations,
Preferences and Rights of Junior Preferred Stock, as amended and in effect on
the Original Issuance Date), pro rata in accordance with the number of shares of
Common Stock into which such shares of Senior Preferred Stock are then
convertible pursuant to Section 4. No dividend shall be paid on the shares of
the Common Stock or Junior Preferred Stock (other than the payment of Junior PIK
Dividends) unless dividends are paid PRO RATA to the holders of outstanding
shares of Senior Preferred Stock in accordance with the number of shares of
Common Stock into which such shares of Senior Preferred Stock are then
convertible pursuant to Section 4.
2. LIQUIDATION.
(a) Upon a Liquidation (as defined below), after payment or
provision for payment of the debts and other liabilities of the Corporation:
(i) the holders of Senior Preferred Stock shall be entitled to
receive, prior and in preference to the holders of Common Stock and Junior
Preferred Stock, out of the remaining assets of the Corporation available for
distribution to its stockholders with respect to each share of Senior Preferred
Stock, an amount (the "Senior Preference Amount") per share of Senior Preferred
equal to the sum of (A) $6.32 (the "Original Issuance Price" of the Senior
2
<PAGE>
Preferred Stock) and (B) all unpaid Senior Preferred Dividends and other
dividends payable with respect to such share under Section 1. If upon any
Liquidation the assets of the Corporation available for distribution to its
stockholders shall be insufficient to pay the holders of Senior Preferred Stock
the full respective Senior Preference Amounts to which they shall be entitled,
the holders of Senior Preferred Stock shall share ratably in any distribution of
assets based on the amounts which would be payable to them on or with respect to
the shares of Senior Preferred Stock held by them upon such distribution
pursuant to this Section 2 as if all amounts payable on or with respect to such
shares were paid in full.
(ii) After distribution to the holders of Senior Preferred
Stock of the full Senior Preference Amount set forth in Section 2(a)(i), the
holders of Junior Preferred Stock shall be entitled to receive, prior and in
preference to the holders of Common Stock, out of the remaining assets of the
Corporation available for distribution to its Stockholders with respect to each
share of Junior Preferred Stock an amount per share of Junior Preferred Stock
equal to $10.00 plus accrued and unpaid Junior PIK Dividends (the "Junior
Preference Amount" and the Senior Preference Amount and the Junior Preferred
Amount collectively the "Preferred Amount"). If upon any Liquidation the assets
of the Corporation available for distribution to its stockholders shall be
insufficient to pay the holders of Junior Preferred Stock the full respective
Junior Preference Amounts to which they shall be entitled, the holders of Junior
Preferred Stock shall share ratably in any distribution of assets based on the
amounts which would be payable to them on or with respect to the shares of
Junior Preferred Stock held by them upon such distribution pursuant to this
Section 2 as if all amounts payable on or with respect to such shares were paid
in full.
(iii) After distribution to the holders of Senior Preferred
Stock of the full Senior Preference Amount set forth in Section 2(a)(i) and
distribution to the holders of Junior Preferred Stock of the full Junior
Preference Amount set forth in Section 2(a)(ii), the holders of Common Stock
shall be entitled to receive, on a PRO RATA basis, the remaining assets of the
Corporation available for distribution to its stockholders.
(b) For purposes of this Section 2, a Corporate Transaction (as
defined below) shall be treated as a Liquidation and shall entitle the holders
of Preferred Stock to receive, upon the consummation of such Corporate
Transaction, consideration in the same form as is to be provided in such
Corporate Transaction (whether cash, securities, other property or any
combination thereof), having a fair market value (determined in good faith by
the board of directors of the Corporation) equivalent to the amounts to which
such holders of Junior Preferred Stock and Senior Preferred Stock would
otherwise have been entitled pursuant to Section 2(a) assuming such Corporate
Transaction had constituted a Liquidation within the meaning of said Section
2(a).
(c) As used herein, the following terms shall have the following
respective meanings:
(i) "Corporate Transaction" means (A) any consolidation or
merger of the Corporation, other than any merger or consolidation resulting in
the holders of the capital stock of the Corporation entitled to vote for the
election of directors holding a majority of the capital stock of the surviving
or resulting entity entitled to vote for the election of directors, (B)
3
<PAGE>
any person or entity (including any affiliates thereof) becoming the holder of a
majority of the capital stock of the Corporation entitled to vote for the
election of directors, or (C) any sale or other disposition by the Corporation
of all or substantially all of its assets.
(ii) "Liquidation" means any voluntary or involuntary
liquidation, dissolution or winding up of the affairs of the Corporation, other
than any dissolution, liquidation or winding up in connection with any
reincorporation of the Corporation in another jurisdiction.
(iii) "Original Issuance Date" means the date of original
issuance of the first share of Senior Preferred Stock.
3. VOTING RIGHTS.
(a) In addition to the rights provided by law or in the
Corporation's By-laws, each share of Senior Preferred Stock shall entitle the
holder thereof to such number of votes as shall equal the nearest whole number
of shares of Common Stock into which such share of Senior Preferred Stock is
then convertible pursuant to Section 4. Except as provided in paragraph (b)
below or as otherwise provided by law, the holders of Senior Preferred Stock,
shall be entitled to vote on all matters as to which holders of Common Stock
shall be entitled to vote, in the same manner and with the same effect as such
holders of Common Stock, voting together with the holders of Common Stock as one
class.
(b) The Corporation shall not, without the affirmative consent
or approval of the holders of at least a majority of the shares of Senior
Preferred Stock then outstanding, voting as a separate class:
(1) authorize, create, designate or establish any class or
series of capital stock or other security or other instrument convertible into
or exercisable exchangeable for any security having any right, preference or
privilege ranking senior to or PARI PASSU with the Senior Preferred Stock or
reclassify any shares of Common Stock into shares having any right, preference
or privilege ranking superior to any such right, preference or privilege of the
Senior Preferred Stock;
(2) in any other manner amend or modify the powers,
privileges, preferences, or rights, or qualifications, limitations or
restrictions of the Senior Preferred Stock as to adversely affect the holders
thereof;
(3) amend the Certificate of Incorporation of the Corporation
so as to materially adversely affect the powers, preferences or rights, or
qualification, limitations or restrictions, of the shares of Senior Preferred
Stock;
(4) amend the By-laws of the Corporation in any manner that
would materially adversely affect the powers, preferences or rights, or
qualifications, limitations or restrictions of the Senior Preferred Stock;
(5) consummate any Corporate Transaction;
(6) effect a Liquidation; or
4
<PAGE>
(7) directly or indirectly pay or declare any dividend (other
than payment of a Junior PIK Dividend or the Senior Preferred Dividends) or make
any distribution upon, or redeem, retire or repurchase or otherwise acquire, any
shares of capital stock or other securities of the Corporation (other than the
repurchase of Common Stock at cost or fair market value from employees upon
termination of employment which is approved of the board of directors of the
Corporation).
4. OPTIONAL CONVERSION.
(a) Upon the terms set forth in this Section 4, the holder of
shares of Senior Preferred Stock shall have the right, at the holder's option,
at any time and from time to time, to convert any of such shares into the number
of fully paid and nonassessable shares of Common Stock equal to the quotient
obtained by dividing (i) the Original Issuance Price of the Senior Preferred
Stock by (ii) the Conversion Price (as defined below) therefor, as last adjusted
and then in effect, by surrender of the certificates representing the shares of
Senior Preferred Stock to be converted. The conversion price per share at which
shares of Common Stock shall be issuable upon conversion of shares of Senior
Preferred Stock shall initially be the Original Issuance Price for the Senior
Preferred Stock (the "Conversion Price"), subject to adjustment as set forth in
paragraph (d) below.
(b) The holder of the shares of Senior Preferred Stock may
exercise the conversion right pursuant to paragraph (a) above by delivering to
the Corporation the certificate or certificates for the shares to be converted,
duly endorsed or assigned in blank or to the Corporation (if required by it),
accompanied by written notice stating that the holder elects to convert such
shares and stating the name or names (with address) in which the certificate or
certificates for the shares of Common Stock are to be issued. Conversion shall
be deemed to have been effected on the date when such delivery is made (the
"Conversion Date"). As promptly as practicable thereafter, the Corporation shall
issue and deliver to at such holder's address appearing on the Corporation's
records or upon the written order of such holder, to the place designated by
such holder, a certificate or certificates for the number of full shares of
Common Stock to which such holder is entitled, and a cash amount in respect of
any fractional interest in a share of Common Stock as provided in paragraph (c)
below. The person in whose name the certificate or certificates for Common Stock
are to be issued shall be deemed to have become a stockholder of record on the
applicable Conversion Date unless the transfer books of the Corporation are
closed on that date, in which event such person shall be deemed to have become a
stockholder of record on the next succeeding date on which the transfer books
are open, but the Conversion Price shall be that in effect on the Conversion
Date. Upon conversion of only a portion of the number of shares covered by a
certificate representing shares of Senior Preferred Stock surrendered for
conversion, the Corporation shall issue and deliver to or upon the written order
of the holder of the certificate so surrendered for conversion, at the expense
of the Corporation, a new certificate covering the number of shares of Senior
Preferred Stock representing the unconverted portion of the certificate so
surrendered.
(c) No fractional shares of Common Stock or scrip shall be
issued upon conversion of shares of Senior Preferred Stock. The number of full
shares of Common Stock issuable upon conversion of Senior Preferred Stock shall
be computed on the basis of the aggregate number of shares of Senior Preferred
Stock to be converted. Instead of any fractional
5
<PAGE>
shares of Common Stock which would otherwise be issuable upon conversion of any
shares of Senior Preferred Stock, the Corporation shall pay a cash adjustment in
respect of such fractional interest in an amount equal to the product of (i) the
price of one share of Common Stock as determined in good faith by the Board of
Directors and (ii) such fractional interest. The holders of fractional interests
shall not be entitled to any rights as stockholders of the Corporation in
respect of such fractional interests.
(d) The Conversion Price shall be subject to adjustment from
time to time as follows:
(i) Subject to clause (iv) below, if the Corporation shall at
any time or from time to time after the Original Issuance Date issue any shares
of Common Stock (including shares of Common Stock deemed to be issued pursuant
to subdivision (3) of clause (ii) below) other than Excluded Stock (as defined
in clause (iii) below) without consideration or for a consideration per share
less than the Conversion Price in effect immediately prior to the issuance of
such Common Stock, then the Conversion Price in effect immediately prior to each
such issuance shall forthwith be lowered to a price equal to the quotient
obtained by dividing:
(1) an amount equal to the sum of (x) the total number
of shares of Common Stock outstanding (including any shares of Common Stock
deemed to have been issued pursuant to subdivision (3) of clause (ii) below)
immediately prior to such issuance, multiplied by the applicable Conversion
Price in effect immediately prior to such issuance, and (y) the consideration
received by the Corporation upon such issuance; by
(2) the total number of shares of Common Stock
outstanding (including any shares of Common Stock deemed to have been issued
pursuant to subdivision (3) of clause (ii) below) immediately after the issuance
of such Common Stock.
(ii) For the purposes of any adjustment of the Conversion
Price pursuant to clause (i) above, the following provisions shall be
applicable:
(1) In the case of the issuance of Common Stock for
cash, the consideration shall be deemed to be the amount of cash paid therefor
after deducting therefrom any discounts, commissions or placement fees payable
by the Corporation to any underwriter or placement agent in connection with the
issuance and sale thereof.
(2) In the case of the issuance of Common Stock for a
consideration in whole or in part other than cash, the consideration other than
cash shall be deemed to be the fair market value thereof as determined in good
faith by the board of directors of the Corporation, irrespective of any
accounting treatment.
(3) The issuance after the Original Issuance Date of
options to purchase or rights to subscribe for Common Stock, securities by their
terms convertible into or exchangeable for Common Stock, or options to purchase
or rights to subscribe for such convertible or exchangeable securities, in each
case the right to exercise which are not subject to forfeiture and that have an
exercise price less than the Conversion Price last adjusted and then in effect,
shall be deemed to be an issuance of Common Stock for purposes of clause (i)
above. In the case of any such issuance of such options to purchase or rights to
subscribe for Common
6
<PAGE>
Stock, securities by their terms convertible into or exchangeable for Common
Stock, or options to purchase or rights to subscribe for such convertible or
exchangeable securities:
a. the aggregate maximum number of shares of
Common Stock deliverable upon exercise of such options to purchase or rights to
subscribe for Common Stock shall be deemed to have been issued at the time such
options or rights were issued and for a consideration equal to the consideration
(determined in the manner provided in subdivisions (1) and (2) above), if any,
received by the Corporation upon the issuance of such options or rights plus the
minimum purchase price provided in such options or rights for the Common Stock
covered thereby;
b. the aggregate maximum number of shares of
Common Stock deliverable upon conversion of or in exchange for any such
convertible or exchangeable securities or upon the exercise of options to
purchase or rights to subscribe for such convertible or exchangeable securities
and subsequent conversion or exchange thereof shall be deemed to have been
issued at the time such securities, options, or rights were issued and for a
consideration equal to the consideration received by the Corporation for any
such securities and related options or rights (excluding any cash received on
account of accrued interest or accrued dividends), plus the additional
consideration, if any, to be received by the Corporation upon the conversion or
exchange of such securities or the exercise of any related options or rights
(the consideration in each case to be determined in the manner provided in
subdivisions (1) and (2) above);
c. on any change in the number of shares or
exercise price of Common Stock deliverable upon exercise of any such options or
rights or conversions of or exchange for such securities, other than a change
resulting from the antidilution provisions thereof, the applicable Conversion
Price shall forthwith be readjusted to such Conversion Price as would have been
obtained had the adjustment made upon the issuance of such options, rights or
securities not converted prior to such change or options or rights related to
such securities not converted prior to such change been made upon the basis of
such change; and
d. on the expiration of any such options or
rights, the termination of any such rights to convert or exchange or the
expiration of any options or rights related to such convertible or exchangeable
securities, the applicable Conversion Price shall forthwith be readjusted to
such Conversion Price as would have been obtained had the adjustment made upon
the issuance of such options, rights, securities or options or rights related to
such securities been made upon the basis of the issuance of only the number of
shares of Common Stock actually issued upon the exercise of such options or
rights, upon the conversion or exchange of such securities, or upon the exercise
of the options or rights related to such securities and subsequent conversion or
exchange thereof.
(iii) "Excluded Stock" means (A) up to 2,500,000 shares of
Common Stock, and options therefor, issued or granted from time to time to
employees, directors and officers of and consultants to the Corporation pursuant
to agreements, plans or arrangements approved by the Board of Directors; (B)
shares of Common Stock issued by the Corporation as a stock dividend or upon any
subdivision, split-up or combination of shares of Common Stock; (C) shares
offered in the Qualified Offering or (D) shares of Common Stock issued or
issuable to
7
<PAGE>
satisfy conversion, option or other rights granted by the Corporation as of the
Original Issuance Date.
(iv) Notwithstanding clause (i) above, (A) if Common Stock is
issued by the Corporation in the Qualified Offering for a consideration per
share (determined in accordance with the provisions of clause (ii) above, except
that the price per share shall be determined before deducting any underwriter
commissions) (the "Qualified Offering Price") less than the Conversion Price in
effect immediately prior to the issuance of such Common Stock, then the
Conversion Price in effect immediately prior to such issuance shall forthwith be
lowered to a price equal to eighty five percent (85%) of the Qualified Offering
Price; and (B) if a Qualified Offering does not occur on or prior to June 30,
1999 or is earlier withdrawn unless refiled (no more than one time) within 30
days thereafter or terminated (the "Outside Date"), then the Conversion Price
then in effect shall, immediately following the Determination Date (as
hereinafter defined), be lowered (but in no event increased) to a price equal to
the greater of (A) the average bid and ask price per share of the Common Stock
as reported on the OTC Bulletin Board for the twenty (20) trading days period
following the earlier of (x) the Outside Date or (y) such time as the Qualified
Offering shall have been withdrawn unless refiled (no more than one time) within
30 days thereafter abandoned (the "Determination Date") and (B) fifty percent
(50%) of the Original Issuance Price
(and in each case such adjusted Conversion Price shall thereafter be subject to
subsequent adjustment pursuant to clause (ii) above (in addition to any other
applicable provision of this Section 4)).
(v) If, at any time after the Original Issuance Date, the
number of shares of Common Stock outstanding is increased by a stock dividend
payable in shares of Common Stock or by a subdivision or split-up of shares of
Common Stock, then, following the record date for the determination of holder of
Common Stock entitled to receive such stock dividend, subdivision or split-up,
the Conversion Price shall be appropriately decreased so that the number of
shares of Common Stock issuable on conversion of each share of Preferred Stock
shall be increased in proportion to such increase in outstanding shares.
(vi) If, at any time after the Original Issuance Date, the
number of shares of Common Stock outstanding is decreased by a combination of
the outstanding shares of Common Stock, then, following the record date for such
combination, the Conversion Price shall be appropriately increased so that the
number of shares of Common Stock issuable on conversion of each share of
Preferred Stock shall be decreased in proportion to such decrease in outstanding
shares.
(vii) In the event of any capital reorganization of the
Corporation, 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 any consolidation or merger of the 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), each
share of Senior Preferred Stock shall after such reorganization,
reclassification, consolidation or merger (unless, in the case of a
consolidation or merger, payment shall have been made to the holders of Senior
8
<PAGE>
Preferred Stock of the full amount to which they shall have been entitled
pursuant to Section 2 hereof) be convertible into 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 to which
the holder of the number of shares of Common Stock deliverable (immediately
prior to the time of such reorganization, reclassification, consolidation or
merger) upon conversion of such share of Senior Preferred Stock would have been
entitled upon such reorganization, reclassification, consolidation or merger.
The provisions of this clause shall similarly apply to successive
reorganizations, reclassifications, consolidations or mergers.
(viii) All calculations under this paragraph shall be made to
the nearest one hundredth (1/100) of a cent or the nearest one tenth (1/10) of a
share, as the case may be.
(ix) In any case in which the provisions of this paragraph
(d) shall require that an adjustment shall become effective immediately after a
record date of an event, the Corporation may defer until the occurrence of such
event (A) issuing to the holder of any share of Preferred Stock converted after
such record date and before the occurrence of such event the shares of capital
stock issuable upon such conversion by reason of the adjustment required by such
event in addition to the shares of capital stock issuable upon such conversion
before giving effect to such adjustments, and (B) paying to such holder any
amount in cash in lieu of a fractional share of capital stock pursuant to
paragraph (c) above; PROVIDED, HOWEVER, that the Corporation shall deliver to
such holder a due bill or other appropriate instrument evidencing such holder's
right to receive such additional shares and such cash.
(e) Whenever the Conversion Price shall be adjusted as provided in
paragraph (d), the Corporation shall make available for inspection during
regular business hours, at its principal executive offices or at such other
place as may be designated by the Corporation, a statement, signed by its chief
executive officer, showing in detail the facts requiring such adjustment and the
Conversion Price that shall be in effect after such adjustment. The Corporation
shall also cause a copy of such statement to be sent by first class certified
mail, return receipt requested and postage prepaid, to each holder of Senior
Preferred Stock as to which the Conversion Price shall be so adjusted at such
holder's address appearing on the Corporation's records. Where appropriate, such
copy may be given in advance and may be included as part of any notice required
to be mailed under the provisions of paragraph (f) below.
(f) If the Corporation shall propose to take any action of the
types described in clauses (v), (vi) or (vii) of paragraph (d) above, the
Corporation shall give notice to each holder of shares of Senior Preferred
Stock, in the manner set forth in paragraph (e) above, which notice shall
specify the record date, if any, with respect to any such action and the date on
which such action is to take place. Such notice shall also set forth such facts
with respect thereto as shall be reasonably necessary to indicate the effect of
such action (to the extent such effect may be known at the date of such notice)
on the Conversion Price and the number, kind or class of shares or other
securities or property which shall be deliverable or purchasable upon the
occurrence of such action or deliverable upon conversion of shares of Senior
Preferred Stock. In the case of any action which would require the fixing of a
record date, such notice shall be given at least 20 days prior to the date so
fixed, and in case of all other action, such notice shall be given at least 30
days prior to the taking of such proposed action. Failure to give such notice,
or any defect therein, shall not affect the legality or validity of any such
action.
9
<PAGE>
(g) The Corporation shall reserve, and at all times from and after
the date of Original Issuance Date keep reserved, free from preemptive rights,
out of its authorized but unissued shares of Common Stock, solely for the
purpose of effecting the conversion of the shares of Senior Preferred Stock,
sufficient shares of Common Stock to provide for the conversion of all
outstanding shares of Senior Preferred Stock.
(h) At any time the Corporation makes or fixes a record date for
the determination of holders of Common Stock entitled to receive a dividend or
other distribution payable in securities of the Corporation other than shares of
Common Stock, provision shall be made so that each holder of shares of Senior
Preferred Stock shall receive upon conversion thereof, in addition to the shares
of Common Stock receivable thereupon, the number of securities of the
Corporation which it would have received had its shares of Senior Preferred
Stock been converted into shares of Common Stock on the date of such event and
had such holder thereafter, during the period from the date of such event to and
including the date of conversion, retained such securities receivable by it
pursuant to this paragraph during such period, subject to the sum of all other
adjustments called for during such period under this Section 4 with respect to
the rights of such holder of shares of Senior Preferred Stock.
5. MANDATORY CONVERSION.
(a) (i) Upon the consummation of an underwritten public offering
for the account of the Corporation of its Common Stock first occurring after the
Original Issuance Date pursuant to a registration statement filed under the
Securities Act of 1933, as amended, with aggregate cash proceeds to the
Corporation of not less than $20,000,000 (a "Qualified Offering"), and so long
as all shares of Junior Preferred Stock have been converted into shares of
Common Stock upon the consummation such of the Qualified Offering, each share of
Senior Preferred Stock then outstanding shall, by virtue of and simultaneously
with such Qualified Public Offering, be deemed automatically converted into the
number of fully paid and nonassessable shares of Common Stock equal to the
quotient obtained by dividing (i) the Original Issuance Price of the Senior
Preferred Stock by (ii) the Conversion Price, as last adjusted and then in
effect.
(b) As promptly as practicable after the date of consummation of any
Qualified Offering and the delivery to the Corporation of the certificate or
certificates for the shares of Senior Preferred Stock which have been converted,
duly endorsed or assigned in blank to the Corporation (if required by it), the
Corporation shall issue and deliver to or upon the written order of each holder
of Senior Preferred Stock, to the place designated by such holder, a certificate
or certificates for the number of full shares of Common Stock to which such
holder is entitled, and a cash amount in respect of any fractional interest in a
share of Common Stock as provided in paragraph (c) below. The person in whose
name the certificate or certificates for Common Stock are to be issued shall be
deemed to have become a stockholder of record on the date of such Qualified
Public Offering and on such date the shares of Senior Preferred Stock shall
cease to be outstanding, whether or not the certificates representing such
shares have been received by the Corporation.
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<PAGE>
(c) The provisions set forth in Sections 5(a) and (b) shall apply
to the conversion of Senior Preferred Stock pursuant to this Section in the same
manner as they apply to the conversion of Senior Preferred Stock pursuant to
Section 4.
6. OPTIONAL REDEMPTION.
(a) Subject to Section 6(c), each holder of Senior Preferred Stock
shall have the option, exercisable on or after the fourth anniversary of the
Original Issuance Date upon request by the holders of 51% of the outstanding
shares of Senior Preferred Stock at any time after the Original Issuance Date to
cause the Corporation to redeem any or all, and the Corporation shall (unless
prohibited by law), within thirty (30) days of receipt of a Notice of Exercise
(as defined in Section 6(b)) (the "Optional Redemption Period") so redeem any or
all (the "Optional Redemption"), of the number of shares of Senior Preferred
Stock requested by such holder to be redeemed, at a redemption price per share
(the "Optional Redemption Price") equal to the Original Issuance Price (subject
to equitable adjustment to reflect stock splits, stock dividends, stock
combinations, recapitalizations and like occurrences), plus declared and unpaid
dividends, if any, through the date of Optional Redemption.
(b) Notice of the exercise of the redemption option (the "Notice
of Exercise") pursuant to Section 6(a) shall be sent by first-class certified
mail, postage prepaid and return receipt requested, or by overnight courier to
the Corporation. At all times from an after the commencement of the Optional
Redemption Period, the holders of record of shares of Senior Preferred Stock
shall, as to the shares of Senior Preferred Stock to be redeemed, be entitled to
receive payment in cash in full of the Optional Redemption Price with respect to
such Senior Preferred Stock. If the Corporation is prohibited by law from
effecting any such redemption, then such redemption shall be effected as soon as
such prohibition is eliminated or removed (and the Corporation shall use its
best efforts to eliminate or remove such prohibition).
(c) Anything contained herein to the contrary notwithstanding, the
holders of shares of Senior Preferred Stock exercising their Optional Redemption
right under this Section 6 shall have the right, exercisable at any time until
payment in full of the Optional Redemption Price is made with respect to such
shares, to convert all or any part of such shares into shares of Common Stock
pursuant to Section 5 hereof.
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<PAGE>
IN WITNESS WHEREOF, this Certificate of Designation has been signed
by the Chief Executive Officer of the Corporation this 25th day of February,
1999.
MEDICONSULT, INC.
By: /s/ Robert A. Jennings
--------------------------------
Robert A. Jennings
Chief Executive Officer
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<PAGE>
Exhibit 4.1
Number [Certificate Number] Common Stock SHARES
*[Number of Shares]*
MEDICONSULT.COM, INC.
INCORPORATED UNDER THE LAWS
OF THE STATE OF DELAWARE
CUSIP 58469J 10 0
THIS CERTIFIES THAT
[Shareholder Name]
IS THE OWNER OF
[Shares Spelled] ([Number of Shares])
FULLY PAID AND NON-ASSESSABLE SHARES OF COMMON STOCK. NO PAR VALUE
MEDICONSULT.COM, INC.
Transferable on the books of the Corporation by the holder hereof, in person or
by duly authorized attorney, upon surrender of this Certificate properly
endorsed or accompanies by a proper assignment. This certificate and the shares
represented hereby are issued and shall be held subject to all of the provisions
of the Articles of Incorporation and the Bylaws of the Corporation, and all
amendments thereto, copies of which are on file at the principal office of the
Corporation, to all of which the holder of this Certificate by acceptance hereof
assents. This Certificate is not valid unless countersigned by the Transfer
Agent.
WITNESS the facsimile seal of the Corporation and the facsimile signatures
of its duly authorized officers.
<TABLE>
<S> <C> <C>
DATED: [date]
_____________________________ [SEAL] COUNTERSIGNED:
Robert Jennings, President STANDARD REGISTRAR & TRANSFER AGENCY
P.O. Box 14411, Sta. "G"
Albuquerque, New Mexico 87111
_____________________________ By_________________________________________________
Robert Jennings, Secretary Transfer Agent and Registrar Authorized Signature
</TABLE>
<PAGE>
Exhibit 4.2
[FORM OF INVESTOR SENIOR PREFERRED 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 SUBSCRIPTION WARRANT
February 26, 1999
1. GENERAL.
(a) THIS CERTIFIES that, for value received, [NAME OF INVESTOR], 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 the fifth anniversary of the date hereof, on the terms and subject to
the provisions hereinafter set forth, [___] of shares (subject to adjustment as
provided herein) of fully paid and non-assessable shares of Senior Convertible
Preferred Stock, $.001 par value, of the Corporation (the "Preferred Stock"), at
a price per share (the "Warrant Price") of $[___] or in the event the Preferred
Stock shall prior to exercise or exchange of this Warrant have been manditorily
converted into Common Stock, $.001 par value (the "Common Stock") of the
Corporation (as set forth in the Certificate of Incorporation of the
Corporation, as amended), that number of shares of Common Stock into which such
number of shares of Preferred Stock would be converted ("Mandatory Conversion
Event") at any time or from time to time during the Exercise Period.
(b) This Warrant is being issued pursuant to a Senior Convertible
Preferred Stock Purchase Agreement dated as of the date hereof (the
"Agreement"), among the Corporation and the Investors set forth on Schedule 1
thereto. All terms used but not defined herein shall have the meanings set forth
in the Agreement. 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 Preferred Stock until the occurrence of a Mandatory
Conversion Event, and upon and at all times after, the occurrence of a Mandatory
Conversion Event, shall mean Common Stock.
<PAGE>
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 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.
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<PAGE>
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:
(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.
3
<PAGE>
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.
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 of Common Stock shall be issued as a
result of any such adjustment, and any fractional shares resulting from the
computations pursuant to this paragraph shall be eliminated without
consideration.
5. COVENANTS AS TO PREFERRED STOCK.
(a) The Corporation covenants and agrees that all shares of
Preferred Stock which may be issued upon the exercise of the rights represented
by this Warrant, and all shares of Common Stock which may be issued upon the
conversion of the Preferred Stock 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 Preferred Stock and the
Common Stock is at all times equal to or less than the then effective Warrant
Price per share of Preferred 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 Preferred Stock to provide for the exercise of the rights
represented by this Warrant and (b) shares of Common Stock to provide for the
conversion of the Preferred Stock issuable upon exercise of 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 Preferred 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
4
<PAGE>
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 Preferred Stock issuable upon the exercise of this Warrant or the
Common Stock issuable upon conversion of the Preferred Stock 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.
(b) The Corporation further covenants and agrees that the holder
hereof will be entitled to the benefits of any adjustment prior to the exercise
hereof pursuant to any anti-dilution protection and any notice of adjustment of
the conversion price provided to the holders of Preferred Stock in accordance
with the Corporation's Certificate of Incorporation.
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.
8. RIGHTS OF THE HOLDER.
Anything contained herein to the contrary notwithstanding, the
shares of Preferred Stock issuable upon exercise of this Warrant and the Common
Stock issuable upon conversion of such shares of Preferred Stock shall be
entitled to all rights and benefits accorded thereto in the Registration Rights
Agreement 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
5
<PAGE>
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 Preferred
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.
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.
6
<PAGE>
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 Offfice
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 Schedule I to the Stock
Purchase Agreement:
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 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 Investor.
15. CONSENT TO JURISDICTION; VENUE.
7
<PAGE>
(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 Investor, 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.
17. FRACTIONAL SHARES. 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.
* * *
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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:
[INVESTOR]
By: ______________________________
Name:
Title:
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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
________________________________________.
Dated:_____________
_________________________________
(Signature)
_________________________________
(Address)
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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:__________________________
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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:
______________________________
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Exhibit 10.8
MEMORANDUM OF AGREEMENT
THIS MEMORANDUM OF AGREEMENT ("Memorandum") is entered into this 25th day
of February, 1999, by and among MEDICONSULT.COM, INC., a Delaware corporation
("Mediconsult"), and Timi Gustafson, Mark Gustafson and Cynthia Fink (each a
"Shareholder" and collectively the "Shareholders").
RECITALS
Shareholders have been discussing with Mediconsult the sale to Mediconsult of
all of the outstanding shares (the "Company Shares") of CybertDiet, Inc. (the
"Company"). Set forth below are the principle understandings of the parties.
PUT AND CALL. The Shareholders shall grant to Mediconsult the right (the
"Call Right") to purchase all but not less than all of the Company Shares.
Mediconsult shall grant to the Shareholders the right (the "Put Right") to
require Mediconsult to purchase all of the Company Shares. The Put Right may be
exercised by the Shareholders only (i) after the delivery by the Shareholders of
audited financial statements of the Company in accordance with SEC requirements
for the period from the inception of the Company through December 31, 1998,
which audited financial statements may not be materially different from the
unaudited financial statements of the Company for such period previously
delivered to Mediconsult and (ii) upon confirmation, in a form reasonable
satisfactory to Mediconsult, that Company web site traffic at the time of the
exercise of the Put Right has not materially decreased from the date of this
Memorandum. The accounting firm will be selected and paid by Mediconsult. The
Put Right may not be exercised prior to the earlier of (i) the date ten days
after the effective date of the S-1 registration statement or (ii) the date the
S-1 is abandoned or withdrawn from the registration process.
Mediconsult acknowledges the existence of the loan to the Company by Timi
Gustafson in the original principal amount of $53,500 and agrees that after the
exercise of the Put Right or the Call Right, the obligation shall remain an
obligation of the Company and shall be paid pursuant to its terms and
conditions.
Each of the Put Right and the Call Right may be exercised only one time
and must be exercised, if at all, prior to the date six months after the date of
this Memorandum.
PURCHASE PRICE. The purchase price ("Purchase Price") for all of the Company
Shares shall be 400,000 shares of common stock of Mediconsult (the "Mediconsult
Shares"). The Purchase Price shall be allocated pro-rata among each of the
Shareholders based on each Shareholder's respective ownership interest in the
Company. If any change is made in the shares of Mediconsult through stock
splits, stock dividends or
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combination of shares or the like after the date hereof, appropriate adjustment
shall be made in the number of Mediconsult Shares so as to avoid any enlargement
or dilution of the Purchase Price.
EMPLOYMENT AGREEMENTS. Upon the exercise of the Put Right or the Call Right,
Mediconsult and each of Timi Gustafson and Cynthia Fink shall enter into
employment agreements with Mediconsult in form and substance mutually agreeable
to each of the parties.
MANAGEMENT AGREEMENTS. The Shareholders shall cause the Company to enter into
an agreement (the "Management Agreement") with Mediconsult pursuant to which the
Company and Mediconsult will jointly manage the Company's Web site prior to the
exercise or expiration of the Put Right or the Call Right. In conjunction
therewith, Mediconsult shall enter into consulting agreements (the "Consulting
Agreements") with Timi Gustafson and Cynthia Fink. The terms of the Management
Agreement and the Consulting Agreements shall be mutually agreed upon by the
respective parties thereto; provided that the management by Mediconsult shall be
exclusive, and Mediconsult shall have the sole right to place advertisements on
the Web site of the Company, to link traffic, and manage the content of the Web
site. Such rights of Mediconsult shall be subject to such approvals, guidelines
and compensation as the parties may determine. The Management Agreement and the
Consulting Agreements shall terminate upon the first to occur of (i) the mutual
agreement of the Company and Mediconsult, (ii) the date the Put Right or the
Call Right is exercised, or (iii) the date of the expiration of the Put Right
and the Call Right, if neither is exercised.
NON-COMPETITION. Neither Timi Gustafson nor Cynthia Fink for a period of two
years from the date of the exercise of the Put Right or the Call Right shall
directly or indirectly own, participate in the ownership, management or
operation of any business which is competitive with the business of Mediconsult
or the Company as of the date of this Memorandum.
REGISTRATION RIGHTS. The Shareholders will be entitled to customary piggyback
and S-3 registration rights with respect to the Mediconsult Shares, the specific
terms of which shall be mutually agreed upon by Mediconsult and the
Shareholders.
RESTRICTIONS ON TRANSFER. If the Put Right or the Call Right is exercised
prior to the effective date of the Mediconsult S-1, ten percent of the
Mediconsult Shares shall be registered by Mediconsult in such offering. The
balance of the Mediconsult Shares shall not be transferred except pursuant to an
effective registration statement satisfying the requirements of the Securities
Act of 1933, as amended (the "Securities Act"), a valid exemption therefrom or
Rule 144 of the Securities Act. The Shareholders shall execute a customary
lockup agreement for a period not to exceed 180 days with respect to any
Mediconsult Shares not registered under the S-1 on the same terms as the
Mediconsult directors and executive officers.
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The parties intend to enter into one or more formal agreements
incorporating the terms hereof, which documents will include customary
deliveries, closing conditions (including the absence of adverse change other
than due to the actions of Mediconsult under the Management Agreement not
concurred with or approved by a Shareholder) and representations and warranties.
However, until such formal agreement or agreements are signed this memorandum of
agreement will be deemed a binding agreement of the parties, governed and
construed in accordance with the laws of the State of California. This
Memorandum may be executed in any number of counterparts, each of which shall be
deemed an original and all of which shall constitute one and the same agreement.
IN WITNESS WHEREOF, the parties have executed this Memorandum as of the date
first above written.
MEDICONSULT.COM, INC., /s/Timi Gustafson
a Delaware corporation _______________________
Timi Gustafson
By, /s/Robert A. Jennings /s/Cynthia Fink
_______________________ _______________________
Cynthia Fink
Its: CEO
_______________________
/s/Mark Gustafson
_______________________
Mark Gustafson
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<PAGE>
Exhibit 10.9
INCIID EXCLUSIVE SPONSORSHIP AGREEMENT
This agreement, made this 15th day of January 1999, is made by and between
INCIID (the International Council on Infertility Information Dissemination), a
Virginia nonprofit corporation exempt from federal income tax under section 501
(c)(3) of the Internal Revenue Code, with its principle place of business
located at 5008 South 24th Street, Arlington, Virginia 22206, and principle
place of business located at 50008 South 24th Street, Arlington Virginia 222206,
and Mediconsult.com Limited, hereinafter referred to a s "Mediconsult", a
Bermuda corporation, with it principal place of business located at
- ------------ -----------------------------------------------------.
WHEREAS INCIID, as a nonprofit, tax-exempt corporation relies of the
support of its sponsors and contributors to make its activities and programs
possible; and
WHEREAS, Mediconsult desires to support the mission and activities of
INCIID by becoming the exclusive sponsor of INCIID's Internet site; and
WHEREAS, Mediconsult seeks to drive visitors from WWW.INCIID.ORG (the
"Site") to its World Wide Web sites, including WWW.MEDICONSULT.COM (the
"Mediconsult Web site"), to acquire new and repeat visitors, to increase traffic
for healthcare content, and to reinforce the Mediconsult brand; and
WHEREAS, INCIID and Mediconsult now desire to enter into this Agreement
whereby Mediconsult shall be the exclusive sponsor of INCIID Web sites, subject
to the terms and conditions stated herein;
THEREFORE, INCIID and Mediconsult agree as follows:
1. EXCLUSIVE SPONSOR. Mediconsult agrees to become the exclusive sponsor of
INCIID's Internet web site located at WWW.INCIID.ORG. As exclusive sponsor,
Mediconsult will have the sole right to place sponsor messages on the web site
and that no advertising links, promotional information or marketing materials
from third parties shall be placed or displayed on the Site without the prior
written approval of Mediconsult. However, INCIID staff will introduce
Mediconsult to its existing and potential sponsors and encourage these sponsors
to continue and expand their sponsorship messages on the web site. In addition,
INCIID will not (a) sell, or permit any other person or entity to sell, any
advertising or products or services or make any links on or to the Site; (b)
use, or permit any other person or entity to use, all or any part of INCIID's
user information database; (c) license, link or otherwise make its content
available on the World Wide Web to any other person or entity; or (d) own or
operate any other Web site for which Mediconsult is not the exclusive sponsor as
herein provided.
<PAGE>
2. SPONSORSHIP FEE. As the exclusive sponsor of INCIID's Internet web site,
Mediconsult agrees to donated Five-Hundred-Thousand Dollars (500,000.00) in cash
or common stock of Mediconsult.com per year for each and every year of the terms
of this agreement. It is agreed and understood by INCIID that the donation is to
be used to directly support INCIID's activities with respect to it web site and
that at least 80% of the donation will be so used. It is further agreed and
understood that a majority of INCIID staff time, including the time of its
current President and Executive Director, will be spent on the INCIID web site.
In addition, INCIID will not (a) sell, or permit any other person or entity to
sell, any advertising or products or services or make any links on or to the
Site; (b) use, or permit any other person or entity to use, all or any part of
INCIID's user information database; (c) license, link or otherwise make its
content available on the World Wide Web to any other person or entity; or (d)
own or operate any other Web site for which Mediconsult is not the exclusive
sponsor as herein provided.
INCIID Agrees to the extent possible, to transfer any and all current sponsor
agreements to Mediconsult as of the beginning date of this Agreement. The manner
of execution of the transfer will be agreed between all parties. Revenue from
existing INCIID sponsorship agreements will be apportioned based on the full
length of the agreement and the period of that agreement that overlaps with this
exclusive sponsorship agreement.
The donation shall be payable in equal, quarterly funding of One Hundred
Twenty-Five Thousand Dollars ($125,00.00) each, payable on or before January 15,
1April 15, July 15, and October 15 of each calendar year throughout the term of
this Agreement. In addition, Mediconsult shall pay a royalty equal to ten
percent (10%) of any revenues that exceed $500,000.00 per year that Mediconsult
generated that are directly related to sponsorship of the INCIID Internet site.
[Any sponsor recognition or message that appears, in any form, on the INCIID web
site will be considered a sponsorship directly related to the INCIID site for
purposes of this Agreement.] Products or services on or purchased through a
Mediconsult web site will not be directly related to the INCIID site. Royalty
payments shall be paid quarterly, during the quarter in which Mediconsult
received sub-sponsorship fees, according to the sponsorship fee payment schedule
detailed within this paragraph.
Mediconsult agrees to maintain and preserve full, complete and accurate books,
records, and accounts in accordance with generally accepted accounting
principles of any and all sponsorship and other fees received directly related
to the INCIID web site and this Agreement. Mediconsult shall provide quarterly
reports of these earning to INCIID, along with its quarterly sponsorship and
royalty payments to INCIID. INCIID or an independent certified public accountant
designated by it an reasonably acceptable to Mediconsult shall have the right at
all reasonable times during normal business hours upon reasonable prior notice,
at its expense, to review the books, records, [including sub-sponsor contracts],
in addition, INCIID will not (a) sell, or permit any other person or entity to
sell, any advertising or products or services or make any links on or to the
Site; (b) use, or permit any other person or entity to use, all or any part of
INCIID's user information database; (c) license, link or otherwise make its
content available on the World Wide Web to any other person or entity; or (d)
own or operate any other Web site
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for which Mediconsult is not the exclusive sponsor as herein provided in
addition to interest form the date such amount was due until paid, at one and
one-half percent (1.5) per month or the maximum rate permitted by law, whichever
is less. If an inspection discloses an understatement in any report of five
percent (5%) or more, Mediconsult shall, in addition reimburse INCIID for any
and all out-of-pocket costs and expenses of such accountant connected with the
inspection
3. RECOGNITION. To recognize and acknowledge Mediconsult's donation, INCIID
agrees to:
o Include Mediconsult's name and logo on INCIIDS's Internet site,
identifying Mediconsult as the exclusive sponsor of the website.
o Incorporate navigation bars, links and other navigational devices
reasonably requested by Mediconsult to enable visitors to navigate
both INCIID's site and Mediconsult's site more easily;
o Provide other recognition of Mediconsult's sponsorship as mutually
agreed between the parties and as permitted by the rules and
regulations of the Internal Revenue Service with respect to
nonprofit organizations exempt form tax under section 501(C)(3) of
the Internal Revenue Code.
o Allow such sponsorship as agreed upon by Mediconsult and INCIID to
appear on the web site.
o Share linking between the INCIID and Mediconsult websites.
o Enable visitors to the Site or purchase products or services through
Mediconsult's sites. INCIID acknowledges that Users who purchase
goods or services will be deemed to be visitors of Mediconsult and
subject to all rules, policies and operating procedures concerning
visitors, orders, customer service and sales. Mediconsult may change
its policies and operating procedures at any time.
Mediconsult agrees to be solely responsible for any and all costs related to
special programming or coding necessary to include sponsor messages on the
INCIID web site.
4. REPORTING. INCIID shall report to Mediconsult regarding the programs and
activities of the INCIID website at least quarterly, In addition, INCIID agrees
to make its web site log files available to Mediconsult for Mediconsult's own
analysis, including allowing Mediconsult to send such files off INCIID's server
for such analysis by Mediconsult. INCIDD further agrees to allow programming
changes to take place on its web site, and to add additional software as
requested to do so by Mediconsult, to support Mediconsult's reporting and
analysis activities. Mediconsult agrees to be responsible for the cost of any
software and any requested programming, which software and changes INCIID agrees
to implement on its web site. Quarterly reports shall include:
o Budget reports;
o Website content information including reports on prior, new and
future content plans; and
o Other information as mutually agreed between Mediconsult and INCIID.
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5. OWNERSHIP. The parties understand and agree that all information residing
on their respective websites is and shall remain the sole and exclusive
property of website owner, including but not limited to copyright to the
information. The parties understand and agree that materials and
information jointly developed by INCIID and Mediconsult, such as but not
limited to transcripts of auditoriums sponsored jointly by INCIID and
Mediconsult, regardless of the equipment used to conduct, or the "place"
of such auditoriums, shall be and remain the joint property of INCIID and
Mediconsult, It is further agreed and understood that INCIID shall not
develop any web site content for use on any website other than the Site,
or jointly with any other sponsor during the term of this Agreement,
unless such joint content development is mutually agreed to in advance by
Mediconsult. INCIID hereby grants to Mediconsult, during the term of this
Agreement and any extensions or renewals thereof, an exclusive,
royalty-free license to establish hyperlinks between the parties' Web
Sites and to use INCIID's trade names, logos, trademarks and service marks
(the "INCIID Marks") as is reasonably necessary to establish and promote
such hyperlinks and to otherwise perform its obligations under this
Agreement; provided, however, that any promotional materials or usages
containing any of the INCIID Marks will be subject to INCIID's prior
written approval.
INCIID and Mediconsult warrant that they have the right to use all
materials and information included on their respective websites, including
owning and/or holding copyright and trademark rights to sue any and all
such materials an information, and that all content and other similar
information and materials used on their respective websites is lawful and
does not violate any federal, state or local laws and regulations and is
not legally threatening or obscene.
6. TERM. The term of this agreement shall be for three (3) years, beginning
January 1, 1999 and ending December 31, 2001. This agreement may be
renewed for subsequent three (3) year terms upon the mutual written
consent of both parties. - The parties agree to discuss, in good faith,
prior to the end of the initial term, the status of the relationship of
the parties and the terms of this Agreement. Notwithstanding the
foregoing, if the parties agree to renew this Agreement, the terms of the
Agreement, including without limitation the compensation terms stated in
Section 2 below, shall remain in full force and effect without amendment.
However, if before the expiration of the initial term INCIID receives a
bona fide offer from a third party to become the exclusive sponsor of or
have another exclusive relationship with the Site on financial terms more
advantageous to INCIID than those stated in Section 2 herein and provides
Mediconsult with written notice and a copy of such offer, Mediconsult will
have the right, by notice to INCIID in writing within thirty (30) days of
receiving such notice, to match the financial terms offered by such third
party for the renewal term. If Mediconsult notifies INCIID that it is
willing to renew this Agreement upon the amended
5
<PAGE>
financial terms, then those terms shall be applied to the renewal term,
notwithstanding anything in this Agreement to the contrary. If Mediconsult
does not notify INCIID that it is willing to amend the financial terms of
this Agreement for the renewal term within thirty (30) days of receiving
such notice, then INCIID shall have fifteen (15) days thereafter to give
Mediconsult written notice to terminate this Agreement at the end of the
initial term and may then enter into an agreement with such third party on
the amended terms last offered to Mediconsult.
7. TERMINATION. This agreement may only be terminated by the non-breaching
parties upon the material breach of any of its terms, including but not
limited to the failure of INCIID to acknowledge Mediconsult's sponsorship
of INCIID's website pursuant to the terms of this Agreement or
Mediconsult's failure to timely pay sponsorship and/or royalty fees
pursuant to the terms of this Agreement,. As follows: Upon a material
breach of the contract, non-breaching party shall give the thirty (30)
days to cure the breach. If the breach is not cured within the 30-day
period. The contract will terminate immediately at the end of the 30-day
cure period. This agreement may also be terminated upon mutual written
agreement of the parties. Notwithstanding the foregoing, if such breach
involves the payment of money and is not cured or otherwise resolved by
the parties in writing within fifteen (15) days after receipt by
Mediconsult of such notice, INCIID shall be entitled to initiate an audit
under Section 2. In the event of such an audit, if the Auditor shall
render an award of monetary damages payable to INCIID, and such amount
shall remain unpaid for ten (10) days after Mediconsult receives a copy of
such judgment from INCIID, INCIID shall be entitled to terminate this
Agreement.
Upon termination of this agreement for any reason, Mediconsult shall pay,
in full, all sponsorship and royalty fees due through and including the
termination date within 30 days of the termination date, and shall have no
further responsibilities for any quarterly payments. Royalty fees are
payable when earned and after receipt by Mediconsult. Following
termination, the parties agree to contin8e to honor any sub-sponsorship
agreements undertaken by Mediconsult prior to the termination date in
accordance with the terms of the Agreement, including INCIID's continued
recognition of such sub-sponsorships on its web site provided that
Mediconsult or such Sub-sponsor continues to make payment to INCIID for
any and all royalties arising from such sponsorships.
8. CONTINUOUS SERVICE. Both INCIID and Mediconsult will use reasonable
efforts to provide continuous availability of their respective websites on
the Internet. It is understood and agreed between the parties to this
Agreement that availability of the websites will be subject to periodic
interruption files, and downtime related to equipment or services outside
the control of the parties, including public and private
telecommunications services or Internet nodes or facilities. The parties
agree that they and their respective officers, employees and agents shall
not be liable for any direct, indirect, incidental, special or
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consequential damages that result form such periodic interruptions in
service. On a [quarterly] basis, INCIID will use its best efforts to
provide Mediconsult with mutually agreed data concerning search and
browsing behavior on the Site, to the extent such behavior reasonably
could relate to online promotions or sales of goods or services.
Mediconsult shall treat such data as Confidential Information and will not
use it except in accordance with reasonable guidelines to be agreed by the
parties. Notwithstanding anything contained in this Section, INCIID will
not be required to deliver to Mediconsult any user data in violation of
its then-existing policies regarding the protection of user information.
9. FORCE MAJEURE . The parties' performance of this Agreement is subject to
acts of God, war, government regulation, terrorism, disaster, strikes,
civil disorder, or any other emergency beyond the control of the parties
making it inadvisable, illegal, or impossible to perform their obligations
under this Agreement. Either party may suspend their performances under
this Agreement as necessitated by the particular act of God, for any one
or more of such reasons upon written notice to the other without
liability, penalty, or cancellation fees.
10. INDEMNIFICATION. INCIID agrees to indemnify, defend and hold harmless
Mediconsult, its officers, employees and agents, from any and all demands,
liabilities, losses, costs and claims, including reasonable attorney's
fees and costs of litigation, that may arise or result directly or
indirectly from INCIID's entering into this Agreement, including INCIID's
activities with respect to its Internet web site, any breach of this
Agreement or the violation of third-party property rights by any materials
provided by it for display on the Site, except for any claim that arises
form the gross negligence of INCIID, its officers, employees and agents.
11. CONFIDENTIALITY. The terms and conditions of this Agreement, as well as
any information, records or proprietary information exchanges between the
parties with respect to this Agreement, will remain confidential to the
parties, unless otherwise mutually agreed in writing to be disclosed by
the parties or where required by law to disclose the information. It is
agreed and understood, however, that the parties may disclose such
information to their accountants, legal financial and marketing advisors,
and employees as necessary for the performance of this Agreement, provided
that such person s agree to treat the information as confidential.
12. MISCELLANEOUS. This Agreement, and INCIID Sponsorship Addendum attached
hereto, contains the entire agreements and understanding between the
parties with respect to the subject matter discussed in this Agreement and
supersedes any prior oral or written agreement, commitments,
understandings or communications between the parties. This Agreement shall
be governed by and construed in accordance with the laws of the State of
New York. If any part of this Agreement shall be found or held invalid or
unenforceable by any court or
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governmental agency of competent jurisdiction, such invalidity, or
unenforceability shall not affect the remainder of this Agreement which
shall survive and be construed as if such invalid or unenforceable part
had not been contained, Herein. In the vent that a dispute arises between
the parties, both parties agree that it should be arbitrated pursuant to
the rules of the American Arbitration Association (AAA) at the office of
the AAA maintained in New York City. If any party to this Agreement
breaches any of the terms of this Agreement, then that party shall pay to
the non-defaulting party all of the non-defaulting part's costs and
expenses, including but not limited to reasonable attorney's fees and
costs of litigation and arbitration, incurred by the non-defaulting party
in enforcing the terms of this Agreement. This Agreement shall be binding
upon the parties hereto, their assigns, successors, heirs, executors and
administrators.
13. COUNTERPARTS. This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original. But all of which together shall
constitute one and the same instrument.
By our signatures we agree on behalf of our respective organizations to
the terms and conditions of this sponsorship agreement as of the first
date specified above.
<TABLE>
<S> <C>
FOR MEDICONSULT.COM, LIMITED FOR THE INTERNATIONAL COUNCIL ON
INFERTILITY INFORMATION DISSEMINATION, INC.
/s/ Robert A. Jennings /s/ Theresa Venet Grant
----------------------- --------------------------
Robert Jennings, CEO Theresa Venet Grant, President
</TABLE>
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Exhibit 10.15
SOURCE CODE LICENSE AGREEMENT
This Source Code License Agreement is dated February 26, 1999, by and
between TVisions, Inc., a Massachusetts corporation with an address of 21 Erie
Street, Cambridge, Massachusetts 02139 ("TVI") and Mediconsult.com, Limited, a
corporation organized under the laws of Bermuda, with an address of 33 Reid
Street, 4th Floor Hamilton, HM 12, Bermuda ("Licensee").
WHEREAS, TVI and Licensee previously executed a World Wide Web Server
Agreement dated November 6, 1996, as amended ("WWW Server Agreement"); and
WHEREAS, the WWW Server Agreement has been terminated in accordance with
its terms; and
WHEREAS, Licensee and TVI wish to enter into an agreement for Licensee's
continued use of the software and software tools, either proprietary to, or
licensed by, TVI and used by Licensee under, and during the thirty-day period
prior to the termination of, the WWW Server Agreement (including the source code
to certain portions thereto), which are identified on Section I of Exhibit A
attached hereto and made a part hereof ("Licensed Software").
NOW THEREFORE, in consideration of the mutual promises contained herein,
the parties agree as follows:
1. License.
(a) Subject to the terms and conditions contained in this License
Agreement, TVI hereby grants to Licensee and Licensee, by its continued use of
Licensed Software, hereby accepts a worldwide, perpetual, fully-paid,
sublicensable (except as provided hereunder) and nonexclusive right and license
to use, copy for use in compliance herewith, produce Derivative Works from,
translate, perform, display, maintain, support, modify and enhance the Licensed
Software, including the source code to the portions of the Licensed Software for
which the source code is provided as set forth on Exhibit A ("Source Code"),
during the term hereof, in all languages and in any and all media now or
hereafter known, including electronic transmission, for the purposes of or in
connection with (i) world wide web ("Web") sites owned, managed, sponsored or
hosted by Licensee or any subsidiary or affiliate thereof, or (ii) incorporating
Licensed Software into Web software of or developed by or for Licensee for use
by Licensee, its subsidiaries or affiliates, either internally or solely in
connection with Web sites described under clause (i) above; and for no other
purpose. The Web sites in clauses (i) and (ii) above are sometimes referred to
herein as "Qualified Web Sites." Licensee shall not pursuant to the licenses
granted herein be entitled to sublicense, use, sell, assign or otherwise
transfer the Licensed Software on a standalone or bundled basis, on or for a Web
site that is not a Qualified Web Site. For purposes hereof, "Derivative Work(s)"
means a work that is based upon Licensed Software or Documentation, such as a
revision, enhancement, modification, translation, abridgement, condensation or
expansion of Licensed Software or Documentation or, subject to the provisions of
the preceding sentence, any other transformation or adaption of Licensed
Software or Documentation.
(b) The Licensed Software may not be licensed, sold, leased or otherwise
transferred by Licensee, except as expressly permitted by this Section 1 or as
set forth in Section 10. The parties acknowledge that, in the course of
development by TVI of the Licensed Software, Licensee has delivered or furnished
to TVI certain materials and information, including without limitation, logos
and trademarks and other graphic material of Licensee and its clients, content
(including without limitation, healthcare, product and client information) and
interface and programming information (collectively, "Licensable Materials"),
some of which may be bundled with or embedded in Licensed Software.
Notwithstanding anything in this Agreement to the contrary, all Licensable
Materials are and shall continue to be the sole property of Licensee and its
clients, as the case may be, and may be used, licensed, sold, leased or
otherwise transferred by Licensee and its clients, subject to the provisions
hereof to the extent Licensable Materials are not first removed from Licensed
Software, as they in their sole and absolute discretion shall determine, without
restriction hereunder. TVI shall not have any rights with respect to any
Licensable Materials. Subject to the foregoing, TVI, its successors and assigns,
retains all right, title and interest in and to Licensed Software and related
documentation. The Licensed Software contains copyrighted material, trade
secrets, and other proprietary material of TVI. Licensee may disclose the
Licensed Software and related Documentation to Subcontractors (as defined below)
and affiliates, including such Subcontractors' and affiliates' respective
employees, in connection with the pursuit of the
<PAGE>
licensed activities, so long as Licensee (i) obtains from each such receiving
party his or her agreement to keep the Source Code and related Documentation
confidential, (ii) restricts the discloser from using the Source Code and
related Documentation other than as set forth in Sections 1(a) and 1(b), and
(iii) establishes and enforces strict guidelines for accessing, handling and
storage of the Source Code . "Subcontractors" shall mean any subcontractor(s) of
Licensee or an affiliate that acts on behalf of Licensee or an affiliate, as
applicable, in modifying, supporting or enhancing the Source Code , subject to
the provisions of this Agreement. In the event of the termination of a
sublicense due to the breach by a sublicense of Licensee of a provision of this
Agreement, such termination shall be with prejudice to the rights of Licensee to
enter into another sublicense with such sublicensee. The rights of any other
sublicensee or Licensee shall not be affected by, and neither any other such
sublicensee or Licensee shall be in default due to the acts of the breaching
sublicensee so long as the breaching sublicensee is not an affiliate of such
sublicensee or Licensee; provided, however, that Licensee shall be responsible
to Licensor for any damages incurred by Licensor resulting from such breach by
sublicensee, excluding any indirect, special or consequential damages or lost
profits for which Licensee shall have no liability.
(c) Subject to the terms and conditions of this Agreement, TVI hereby
grants and Licensee hereby accepts a worldwide perpetual, sublicensable (to the
extent expressly provided hereunder) nonexclusive right and license to use, copy
for use in compliance herewith, produce Derivative Works from, translate,
display, and modify the Documentation in all languages and in any and all media
now or hereafter known, including electronic transmission, for purposes of uses
permitted by the license grant in Section 1(a) , and to publish and distribute
in any manner consistent with Licensee's rights hereunder the Documentation to
clients, directly or indirectly. For purposes hereof, "Documentation," means
those software user manuals, reference manuals and installation guides, or
portions thereof, which are used in conjunction with the Licensed Software, as
well as all programmer's notes, patches, fixes and binary code as exist on the
date hereof.
(d ) Licensee shall have the right to produce Derivative Works from
Licensed Software with functionality different than Licensed Software or to
produce future Derivative Works from Licensed Software, within Licensee or an
affiliate, or with a Subcontractor, for purposes of uses permitted by the
license grant in Section 1(a) . All such Derivative Works produced by or through
Licensee shall be jointly owned by Licensee and TVI; provided, however, that (i)
TVI shall continue to be the sole owner of any part of the Derivative Works that
was owned exclusively by TVI prior to the development of the foregoing
Derivative Works, (ii) TVI shall not have any right to any such Derivative Work
that contains any jointly owned property, and (iii) TVI shall not sell, license
or transfer the source code developed exclusively for any jointly owned
Derivative Work to any party and shall keep it confidential as herein provided.
(f) Upon receipt of the amount set forth in Section 2(a) below, TVI shall
provide Licensee with a copy of the Licensed Software, including the
deliverables indicated in Exhibit B ("Deliverables") in electronic form.
Licensee acknowledges that the Deliverables will be delivered to Licensee
hereunder in their respective "AS IS" condition under the WWW Server Agreement,
and Licensee agrees to accept Deliverables in such condition.. Upon receipt of
the amount set forth in Section 2(a) below, TVI shall deliver (to the extent not
previously delivered) to Licensee certain Third Party Products (as defined in
Section 3(b) below) used by Licensee under the WWW Server Agreement which were
acquired by TVI for, and are the property of, Licensee, and Licensee accepts
such Third Party Products in their respective "AS IS" condition under the WWW
Server Agreement.
By continued use of Licensed Software, Licensee agrees that it shall not remove
any proprietary notices or labels from, the Licensed Software, nor use the
Licensed Software in any manner except as expressly permitted herein.
2. LICENSE FEES.
(a) In consideration of the license granted herein, Licensee agrees to pay
TVI simultaneous with the execution of this License Agreement by wire
transfer of immediately available United States funds the license fees
in the amount set forth in Section II of EXHIBIT A.
2
<PAGE>
(b) Until August 31, 1999, TVI will provide Licensee with maintenance,
support and assistance for the Licensed Software at Licensee's request
from 8:30 a.m. to 5:00 p.m. Eastern Standard Time, Monday through
Friday, at the hourly rates set forth in Section III of EXHIBIT A.
Such fees shall be due and payable by Licensee within thirty (30) days
of the invoice date. Such support will include bug fixes of Licensed
Software and, if required, on-site visits to Exodus Communications,
Inc., in Waltham, Massachusetts, and TVI will work with Licensee's
other vendors in providing such maintenance, support and assistance.
3. DISCLAIMER OF WARRANTIES.
(a) EXCEPT AS EXPRESSLY SET FORTH IN SECTION 7 HEREIN, TVI DISCLAIMS
ALL EXPRESS OR IMPLIED WARRANTIES INCLUDING SPECIFICALLY THE IMPLIED WARRANTY OF
MERCHANTABILITY AND THE WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE.
SPECIFICALLY, TVI MAKES NO EXPRESS OR IMPLIED WARRANTIES THAT THE FUNCTIONS
CONTAINED IN THE LICENSED SOFTWARE WILL CONTINUE TO MEET THE LICENSEE'S
REQUIREMENTS OR THAT THE LICENSED SOFTWARE WILL CONTINUE TO BE FREE FROM ERROR.
LICENSED ASSUMES ALL RISKS AND ASSOCIATED COSTS FOR ANY NECESSARY REPAIRS OR
CORRECTIONS RESULTING FROM SUCH ERRORS. TVI MAKES NO WARRANTY THAT THE LICENSED
SOFTWARE WILL OPERATE FREE OF ERRORS OR FAILURES OR THAT ANY ERRORS OR FAILURES
WILL BE CORRECTED.
(b) Licensee understands and agrees that Licensee and\or TVI
used products neither owned, licensed or developed by TVI under the WWW Server
Agreement, including, without limitation, (i) non-TVI software products, and
(ii) non-TVI computer hardware products, including, without limitation, any
computer hardware owned by Licensee and provided to TVI in connection with
hosting services (collectively, all such products or components under the
foregoing clauses (i) or (ii) are referred to as the "Third Party Products"), in
connection with TVI providing services to Licensee under the WWW Server
Agreement. WITH RESPECT TO THIRD PARTY PRODUCTS, TVI DISCLAIMS ALL EXPRESS OR
IMPLIED WARRANTIES INCLUDING SPECIFICALLY THE IMPLIED WARRANTY OF
MERCHANTABILITY AND THE WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE.
SPECIFICALLY, TVI MAKES NO EXPRESS OR IMPLIED WARRANTIES THAT THE THIRD PARTY
PRODUCTS WILL CONTINUE TO MEET THE LICENSEE'S REQUIREMENTS OR THAT THE THIRD
PARTY PRODUCTS WILL BE FREE FROM ERRORS OR FAILURE. TVI SHALL NOT BE LIABLE
UNDER ANY THEORY OF LIABILITY UNDER THIS LICENSE AGREEMENT OR OTHERWISE FOR ANY
LOSS, COST, CLAIM, EXPENSE OR DAMAGES ARISING FROM OR IN CONNECTION WITH FAILURE
OF ANY LICENSED SOFTWARE OR LICENSEE SYSTEMS UTILIZING LICENSED SOFTWARE CAUSED
BY MALFUNCTIONING OR DEFECTIVE THIRD PARTY PRODUCTS.
4. COPYRIGHT OWNERSHIP.
(a) Except as to Derivative Works only , Licensee and its employees will
not alter or remove and will maintain the legal copyright notices which may
appear on the Licensed Software including, but not limited to those on diskette
labels, software screens and printed documentation.
(b) Except as expressly provided in this Agreement, and unless otherwise
provided by written agreement, neither party shall have a duty to seek the
consent or approval of the other, nor account to the other for use of Derivative
Works , and each party waives any rights it may now or hereafter have with
respect to partition. TVI's rights with respect to Derivative Works made by or
through Licensee shall be subject to the limitations set forth in Section 1(d)
above.
5. TERM.
This License Agreement shall be effective until terminated. If Licensee
materially breaches or defaults in any of its obligations under this Agreement,
this License Agreement shall terminate thirty (30) calendar days after written
notice of such default, if Licensee fails to remedy such default by such
thirtieth (30th) day. Except in accordance with
3
<PAGE>
the foregoing, this License Agreement shall not be terminated by TVI. Licensee
may terminate the License Agreement at any time with or without cause.
6. OBLIGATIONS ON TERMINATION, SURVIVAL.
Upon any such termination, Licensee shall (i) deliver to TVI all copies of
the Licensed Software then in Licensee's possession or control together with all
copies thereof, (ii) erase or destroy any of the Licensed Software contained in
computer memory or data storage apparatus under the control of Licensee, (iii)
remove the Licensed Software from the WWW Server and any other software,
hardware, or other computer product in Licensee's possession or control that
incorporates or uses the Licensed Software in whole or in part (whether such use
is permitted hereunder or not), and (iv) certify in writing to TVI within
fourteen (14) days after termination that all actions (i) through (iii) have
been taken by Licensee. Licensee shall be entitled to remove from the Licensed
Software and retain Licensable Materials and Derivative Works .
7. WARRANTIES.
Limited Warranty. (a) Subject to the limitations set forth in
this Agreement, TVI warrants that the Licensed Software is as of the date hereof
all the software proprietary to TVI used by Licensee under the WWW Server
Agreement, and that all deliverables have been delivered to Licensee "AS IS"
under the WWW Server Agreement. TVI MAKES NO WARRANTY THAT ALL ERRORS OR
FAILURES WILL BE CORRECTED. TVI represents and warrants that, upon payment of
the amount set forth in Section 2(a) above, it shall deliver (to the extent not
previously delivered) to Licensee all Third Party Products used by TVI in
Licensee's Web site Mediconsult.com, the Habitrol Site, and the feature known as
the Experts System for visitors to the Mediconsult.com Web site or otherwise in
performing services for Licensee under the WWW Server Agreement, and TVI makes
no other representation or warranty whatsoever with respect to Third Party
Products.
(b) No Virus, Time-Bombs, etc. TVI warrants that the deliverables
containing the Licensed Software have been delivered to Licensee free of any
back door, time bomb, drop dead device, or other software routine designed to
disable a computer program automatically with the passage of time or
automatically by the actions of a person other than the Licensee, or
unauthorized code (such as any virus, Trojan horse, worm, or other software
routine or hardware component designed to permit unauthorized access, or to
disable, erase or otherwise harm software, hardware or data).
(c) Performance of Services. TVI warrants that the services provided by it
under Section 2(b) of this License Agreement will be performed in a workmanlike
and professional manner, consistent with services delivered under the WWW Server
Agreement.
(d) Title. TVI warrants that (i) it has all right, title and interest to
the Licensed Software and can license as herein provided the Licensed Software
and all intellectual property rights therein, including all copyrights and
trademarks and other rights that are necessary for Licensee to pursue the
licensed activities in accordance herewith, and (ii) the Licensed Software is
provided to Licensee free and clear of any and all liens, claims and
encumbrances of any third party. The consents of all persons, firms and other
entities that are required for the execution, delivery and performance by TVI of
this Agreement, including the licenses to Licensee, have been obtained by TVI
and are in full force and effect.
(e) No Burdensome Agreements. TVI is not a party to or bound by or aware of
any oral or written contract or understanding which restricts TVI's right to
enter into this Agreement or to grant the rights and licenses hereunder, or
interferes with the rights granted to Licensee under this Agreement.
(f) Infringement. The Licensed Software, as delivered to Licensee, will not
infringe upon any property rights of any third party, including without
limitation any patent, trademark or copyright or other intellectual property
right of
4
<PAGE>
any person or entity. TVI has no knowledge of any violation or infringement by
any third party (including without limitation, employees of or consultants to
TVI) of any intellectual property rights contained in any Licensed Software.
There are no claims, actions, suits, proceedings, arbitrations or investigations
pending or threatened against TVI or any affiliate thereof, which could
adversely affect the Licensed Software, or TVI's right to use or license the
Licensed Software or Licensee's rights to use the Licensed Software as herein
provided.
8. INDEMNIFICATION.
(a) Licensee agrees to indemnify and hold TVI, its directors, officers,
employees, agents and affiliates, harmless from and against any loss, cost and
expense (including reasonable attorneys fees), damages and liability arising
directly or indirectly from any claim or threatened claim related in any manner
to the use by Licensee, its employees, agents, or sublicensees of the Licensed
Software, except where Licensee is entitled to indemnification from TVI under
Section 8(b) below. In the event of any such claim or threatened claim, Licensee
agrees to pay resulting costs, damages and legal fees incurred by TVI which are
attributable to such claims and agrees to defend TVI against such claim or
threatened claim, at Licensee's sole cost and expense, using counsel selected by
Licensee, subject to Licensor's reasonable approval Licensee shall not be
entitled to settle any such action to the extent relating to other than monetary
damages or affecting any property owned or rightfully used by TVI.
(b) TVI agrees to indemnify and hold Licensee, its directors, officers,
employees, agents and affiliates, harmless from and against any loss, cost and
expense (including reasonable attorneys fees), damages and liability arising
from any breach of any representation or warranty by TVI. In the event of any
such claim or threatened claim, TVI agrees to pay resulting costs, damages and
legal fees incurred by Licensee which are attributable to such claims and agrees
to defend Licensee against such claim or threatened claim at TVI's sole cost and
expense, using counsel selected by TVI, subject to Licensee's reasonable
approval, TVI shall not be entitled to settle any such action to the extent
relating to other than monetary damages or affecting any property owned by
Licensee or licensed to it. Notwithstanding the foregoing, TVI shall have no
liability to Licensee based upon a breach of the representations in Section 7 to
the extent that any infringement or claim thereof relating to the Licensed
Software provided by TVI to Licensee is based upon (i) use of any Licensed
Software in combination with equipment, software or other material not supplied
by TVI where the Licensed Software supplied by Licensor would not itself be
infringing, (ii) use of any Licensed Software supplied by Licensor in an
application or environment for which such Licensed Software, or portion thereof,
was not designed or not contemplated under this License Agreement, (iii)
modification of Licensed Software, or any portion thereof, by anyone (including
without limitation Licensee or any Licensee consultant or contractor if
infringement would have been avoided but for such modification), or (iv) any
claims of infringement of any patent, copyright or trade secret in which
Licensee or any Licensee affiliate has an interest or license. NOTWITHSTANDING
ANY OTHER PROVISION OF THIS LICENSE AGREEMENT, INCLUDING BUT NOT LIMITED TO THIS
SECTION 8(b), THE LIABILITY OF TVI UNDER THIS LICENSE AGREEMENT, WHETHER UNDER
THIS SECTION 8(b) OR OTHERWISE, SHALL BE LIMITED TO THE AMOUNT RECEIVED BY TVI
UNDER SECTION 2(a), EXCEPT FOR LIABILITY FOR BREACH OF THE REPRESENTATION UNDER
SECTION 7(f). TVI shall have no liability for any claim under this Section 8(b)
or otherwise initiated after that date one year after the date hereof.
9. WWW SERVER AGREEMENT.
Notwithstanding the termination of the WWW Server Agreement, certain
provisions of Section 3(b) of the WWW Server Agreement survive termination of
the WWW Server Agreement and accordingly in order to clarify the rights of
Client thereunder (Licensee) surviving such termination, the first sentence of
Section 3(b) of the WWW Server Agreement are hereby deleted in its entirety and
the following is substituted therefor:
Subject to the terms and conditions of this Agreement, TVI
hereby grants to the Client, and Client accepts, a
nontransferable site license for TVI Software including,
without limitation, all tools developed under this Agreement,
for internal use by the Client, during the term hereof and,
for the TVI Software as used by the Client on February 28,
1999, after the term hereof.
5
<PAGE>
10 MISCELLANEOUS.
This Agreement contains the entire Agreement between the parties, and no
other agreement (verbal or written) concerning the subject matter hereof exists
between the parties. This Agreement may be amended only by means of a writing
signed by both parties. This Agreement is governed by the internal laws of the
Commonwealth of Massachusetts without referenced to choice of law principles. If
any provision of this Agreement is held by a court of competent jurisdiction to
be illegal or invalid, the remaining provisions will not be affected, and the
rights and obligations of the parties will be construed and enforced as if this
Agreement did not contain the invalid or illegal provision. In the event that
Licensee is in default or fails to comply with the terms, conditions or
provisions herein (either actual or threatened), Licensee agrees that Licensor's
remedies at law shall be inadequate. Accordingly, Licensee agrees that in such
event, the Licensor shall have the right to specific performance and/or
injunctive relief in addition to any and all other remedies and rights of law or
in equity, and such rights and remedies shall be cumulative. This Agreement may
be assigned by either party without the consent of the other party upon the sale
of all or substantially all of the capital stock or assets of the assigning
party, effective upon notice to the nonassigning party.
IN WITNESS WHEREOF, the parties hereto have executed this License Agreement in
duplicate the day and year written above.
TVisions, Inc. Mediconsult.com, Limited
By: /s/ Ralph J. Folz By: /s/ Robert Jennings
---------------------------- -----------------------
Ralph J. Folz, President Robert Jennings
Title: CEO
---------------------
Address: Address:
21 Erie Street 33 Reid Street, 4th Floor
Cambridge, Massachusetts 02139 Hamilton, HM 12, Bermuda
Tel: (617) 441-8330 Tel: 441.292.0474
Fax: (617) 441-8530 Fax: 441.295.0560
6
<PAGE>
Exhibit A
I. Licensed Software.
The TVI Software utilized as of the date hereof with the Licensee's world
wide web site "Mediconsult.com" (the "Site"), in binary form as of the date
hereof, including, without limitation, all such software known as (i) the
Habitrol Site, (ii) the feature known as the Experts System for visitors to the
Site, and (iii) the source code to the software described under clauses (i) and
(ii).
II. License Fees:
<TABLE>
<S> <C>
Habitrol Site 156,000.00
Experts System $104,000.00
Total $260,000.00
</TABLE>
III. Maintenance and Support Fees.
<TABLE>
<S> <C>
Project Management $288/hour
Technical Support $288/hour
Graphic Design $200/hour
Advanced Content Development $200/hour
Basic Content Development $200/hour
</TABLE>
7
<PAGE>
Exhibit B
Certain Deliverables
BINARIES:
AdMgr
Anniversary
ClickMe
ClickThru
DrNed
Expert
Include
Live
MakeInclude
MediXpert-nsapi
Medilinks
OLDmake_topics
Preprocess
ProCon
Rsync
Snr
TVI_cgi_lib
TVI_convert_lib
TVI_util_lib
URL
URLph
URLs
Urology
VitalWorks
automation
autopoll
bengay
breast
bulkmail
cgi_lib
dater
drug_filter
fix_news
indexer
make_topics
medizine
nasapi.tar
news
newsletter
redirect
restart
rotate
save_email
search
search.save
srg
suggest
survey
survey.old
tell
topics.h
url_frames
util_lib
8
<PAGE>
vol_survey
9
<PAGE>
EXPERTS:
./LOGGING_VERSION/00README
./LOGGING_VERSION/Makefile
./LOGGING_VERSION/Makefile.in
./LOGGING_VERSION/address_form.hts
./LOGGING_VERSION/address_form.hts-in
./LOGGING_VERSION/address_form.hts.orig
./LOGGING_VERSION/address_form.hts~
./LOGGING_VERSION/approve-detail.hts
./LOGGING_VERSION/approve.hts
./LOGGING_VERSION/brockq.hts
./LOGGING_VERSION/confirm_form.pl
./LOGGING_VERSION/confirm_form.pl-in
./LOGGING_VERSION/confirm_form.pl.orig
./LOGGING_VERSION/confirm_form.pl~
./LOGGING_VERSION/domail.pl
./LOGGING_VERSION/domail.sh
./LOGGING_VERSION/expert-access.hts
./LOGGING_VERSION/expert-access.pl
./LOGGING_VERSION/mc_approve.pl
./LOGGING_VERSION/mc_misc.pl
./LOGGING_VERSION/opinion.pl
./LOGGING_VERSION/questionnaire.hts
./LOGGING_VERSION/submit_data.pl
./LOGGING_VERSION/submit_data.pl-in
./LOGGING_VERSION/submit_data.pl.orig
./LOGGING_VERSION/submit_data.pl~
./LOGGING_VERSION/user-access.hts
./LOGGING_VERSION/user-access.pl
./RCS/Makefile,v
./RCS/Makefile.in,v
./RCS/address_form.hts,v
./RCS/approve-detail.hts,v
./RCS/approve.hts,v
./RCS/confirm_form.pl,v
./RCS/domail.pl,v
./RCS/domail.sh,v
./RCS/expert-access.hts,v
./RCS/expert-access.pl,v
./RCS/getrec.pl,v
./RCS/makefile,v
./RCS/mc_admin.pl,v
./RCS/mc_admin.sh,v
./RCS/mc_approve.pl,v
./RCS/mc_misc.pl,v
./RCS/opinion.pl,v
./RCS/questionnaire.hts,v
./RCS/submit_data.pl,v
./RCS/user-access.hts,v
./RCS/user-access.pl,v
./install/WWW/lib/mc_misc.pl
./install/WWW/secure/admin/approve-detail.hts
./install/WWW/secure/admin/approve.hts
./install/WWW/secure/admin/getrec.pl
./install/WWW/secure/admin/mc_approve.pl
./install/WWW/secure/forms/address_form.hts
10
<PAGE>
./install/WWW/secure/forms/confirm_form.pl
./install/WWW/secure/forms/opinion.pl
./install/WWW/secure/forms/submit_data.pl
./install/WWW/secure/forms/user-access.pl
./install/WWW/secure/reports/getrec.pl
./install/WWW/secure/expert-access.hts
./install/WWW/secure/expert-access.pl
./install/WWW/secure/user-access.hts
./install/usr/local/sybase/bin/domail
./install/usr/local/sybase/bin/domail.sh
./install/usr/local/sybase/bin/mc_admin
./install/usr/local/sybase/bin/mc_admin.sh
./install/user-access.hts-in
./install/address_form.hts
./install/address_form.hts-in
./install/approve-detail.hts
./install/approve-detail.hts-in
./install/approve.hts
./install/approve.hts-in
./install/confirm_form.pl
./install/confirm_form.pl-in
./install/domail.pl
./install/domail.pl-in
./install/domail.sh
./install/domail.sh-in
./install/expert-access.hts
./install/expert-access.hts-in
./install/expert-access.pl
./install/expert-access.pl-in
./install/getrec.pl
./install/getrec.pl-in
./install/makefile
./install/mc_admin.pl
./install/mc_admin.sh
./install/mc_admin.pl-in
./install/mc_admin.sh-in
./install/mc_approve.pl
./install/mc_approve.pl-in
./install/mc_misc.pl
./install/mc_misc.pl-in
./install/opinion.pl
./install/opinion.pl-in
./install/questionnaire.hts
./install/submit_data.pl
./install/submit_data.pl-in
./install/user-access.hts
./install/user-access.pl
./install/user-access.pl-in
./schema/RCS/01create_database.sql,v
./schema/RCS/02create_base_tbls.sql,v
./schema/RCS/03create_nextkey_tbls.sql,v
./schema/RCS/04insert_status.sql,v
./schema/RCS/05mc_new_expert.proc,v
./schema/RCS/06mc_new_user.proc,v
./schema/RCS/07mc_new_message.proc,v
./schema/RCS/08mc_new_consult.proc,v
./schema/RCS/create_procs.sql,v
./schema/01create_database.sql
11
<PAGE>
./schema/01dev_create_database.sql
./schema/02create_base_tbls.sql
./schema/03create_nextkey_tbls.sql
./schema/04insert_status.sql
./schema/04insert_topics.sh
./schema/04insert_topics.sql
./schema/05mc_new_expert.proc
./schema/06mc_new_user.proc
./schema/07mc_new_message.proc
./schema/08mc_new_consult.proc
./schema/create_procs.sql
./schema/topics.text
./expert-access.hts-in
./Makefile
./Makefile.in
./Q.hts
./development/WWW/secure/admin/approve-detail.hts
./development/WWW/secure/admin/approve.hts
./development/WWW/secure/admin/mc_approve.pl
./development/WWW/secure/forms/user-access.pl
./development/WWW/secure/forms/opinion.pl
./development/WWW/secure/forms/address_form.hts
./development/WWW/secure/forms/confirm_form.pl
./development/WWW/secure/forms/questionnaire.hts
./development/WWW/secure/forms/submit_data.pl
./development/WWW/secure/reports/getrec.pl
./development/WWW/secure/expert-access.hts
./development/WWW/secure/expert-access.pl
./development/WWW/secure/user-access.hts
./development/WWW/lib/mc_misc.pl
./development/usr/local/sybase/bin/domail
./development/usr/local/sybase/bin/domail.sh
./development/usr/local/sybase/bin/mc_admin
./development/usr/local/sybase/bin/mc_admin.sh
./address_form.hts-in ./admin.sql
./approve-detail.hts
./approve-detail.hts-in
./approve.hts
./approve.hts-in
./backtest.hts
./brockq.hts
./ccodes.txt
./confirm_form.pl-in
./domail.pl
./domail.pl-in
./domail.sh
./domail.sh-in
./example.pl
./expert-access.hts
./confirm_form.pl
./user-access.hts
./expert-access.pl
./expert-access.pl-in
./experts.txt
./feedback2.txt
./getrec.pl
./getrec.pl-in
12
<PAGE>
./mc_admin.pl
./mc_admin.pl-in
./mc_admin.sh
./mc_admin.sh-in
./mc_approve.pl
./mc_approve.pl-in
./mc_dump.proc
./mc_misc.pl
./mc_misc.pl-in
./new-pass.pl
./opinion.pl
./opinion.pl-in
./pientaq.hts
./questionnaire.hts
./questionnaire.hts-in
./reset.sql
./submit_data.pl-in
./testit.pl
./address_form.hts
./user-access-test.hts
./user-access-test.pl
./user-access.hts-in
./user-access.pl
./user-access.pl-in
./submit_data.pl
secure/admin/approve-detail.hts
secure/admin/approve.hts
secure/admin/index.html
secure/admin/mc_approve.pl
secure/aids/service/forms/gottliebq.hts
secure/aids/service/forms/krasinskiq.hts
secure/aids/service/forms/richmanq.hts
secure/allergies/service/forms/casaleq.hts
secure/allergies/service/forms/weinbergerq.hts
secure/alzheimers/service/forms/bienenfeldq.hts
secure/alzheimers/service/forms/schneiderq.hts
secure/arthritis/service/forms/tindallq.hts
secure/arthritis/service/forms/wallaceq.hts
secure/asthma/service/forms/casaleq.hts
secure/asthma/service/forms/weinbergerq.hts
secure/bph/service/forms/naslundq.hts
secure/brain/service/forms/hallq.hts
secure/breast/service/forms/reintgenq1.hts
secure/breast/service/forms/reintgenq2.hts
secure/cervical/service/forms/C.hts
secure/cervical/service/forms/copeland_endoq.hts
secure/cervical/service/forms/copeland_ovarq.hts
secure/cervical/service/forms/copelandq.hts
secure/cervical/service/forms/gallionq.hts
secure/cervical/service/forms/thigpenq.hts
secure/chronic/service/forms/rauckq.hts
secure/chronic/service/forms/youngq.hts
secure/colon/service/forms/caushajq.hts
secure/colon/service/forms/fieldingq.hts
secure/depression/service/forms/bienenfeldq.hts
secure/depression/service/forms/goodnickq.hts
secure/diabetes/service/forms/morrisonq.hts
secure/diabetes/service/forms/qdata.txt
13
<PAGE>
secure/diabetes/service/forms/tsalikianq.hts
secure/diabetes/service/forms/tsalikianq.hts~
secure/emphysema/service/forms/crawfordq.hts
secure/epilepsy/service/forms/gumnitq.hts
secure/epilepsy/service/forms/potolicchioq.hts
secure/forms/address_form-test.hts
secure/forms/address_form.hts
secure/forms/confirm_form-test.pl
secure/forms/confirm_form.pl
secure/forms/index.html
secure/forms/opinion.pl
secure/forms/questionnaire.hts
secure/forms/submit_data-test.pl
secure/forms/submit_data.pl
secure/forms/test.hts
secure/forms/test.pl
secure/forms/user-access-test.pl
secure/forms/user-access.pl
secure/headache/service/forms/mooreq.hts
secure/heart/forms/martinq.hts
secure/heart/service/forms/franklinq.hts
secure/heart/service/forms/franklinq.hts~
secure/heart/service/forms/richq.hts
secure/heart/service/forms/richq.hts~
secure/heart/service/forms/rosenthal_fetusq.hts
secure/heart/service/forms/rosenthalq.hts
secure/heart/service/forms/rosenthalq.hts~
secure/heart/service/forms/sinatraq.hts
secure/hypertension/service/forms/franklinq.hts
secure/hypertension/service/forms/sinatraq.hts
secure/ibd/service/forms/waltersq.hts
secure/images/ads/acgted.gif
secure/images/ads/cfc.gif
secure/images/ads/faq.gif
secure/images/ads/hon.gif
secure/images/ads/laha.gif
secure/images/ads/medi_books.gif
secure/images/ads/medi_home.gif
secure/images/ads/medi_news.gif
secure/images/ads/medi_store.gif
secure/images/ads/medi_support.gif
secure/images/ads/over50.gif
secure/images/ads/pciils.gif
secure/images/ads/pcwii.gif
secure/images/ads/pgtra.gif
secure/images/ads/uaf.gif
secure/images/ads/ucc.gif
secure/images/ads/uchf.gif
secure/images/ads/uhyp.gif
secure/images/ads/zostrix.gif
secure/images/autopoll/bar_indigo.gif
secure/images/autopoll/current.gif
secure/images/autopoll/results.gif
secure/images/autopoll/vote.gif
secure/images/center_watch/ctrials.gif
secure/images/center_watch/dtherapy.gif
secure/images/center_watch/homebt.gif
secure/images/center_watch/logobig.gif
14
<PAGE>
secure/images/center_watch/medibt.gif
secure/images/center_watch/notifbt.gif
secure/images/center_watch/patnotify.gif
secure/images/content/logo.gif
secure/images/content/margin.gif
secure/images/content/tagline.gif
secure/images/content/title.gif
secure/images/content/toolbar.gif
secure/images/home/background.jpg
secure/images/home/health.gif
secure/images/home/logo.gif
secure/images/home/medixperts.gif
secure/images/home/quick_search.gif
secure/images/home/search.gif
secure/images/home/sections.gif
secure/images/home/title.gif
secure/images/home/toolbar.gif
secure/images/people/bazinet.jpg
secure/images/people/brock.gif
secure/images/people/casale.gif
secure/images/people/cheney.gif
secure/images/people/hallowell.gif
secure/images/people/moore.gif
secure/images/procon/bullet.gif
secure/images/procon/code.gif
secure/images/procon/con_header.gif
secure/images/procon/con_statement.gif
secure/images/procon/help.gif
secure/images/procon/horizontal_rule.gif
secure/images/procon/join.gif
secure/images/procon/pro_con_header.gif
secure/images/procon/pro_header.gif
secure/images/procon/pro_statement.gif
secure/images/procon/suggest.gif
secure/images/procon/view.gif
secure/images/service/one.gif
secure/images/service/simple_process.gif
secure/images/service/three.gif
secure/images/service/two.gif
secure/images/shared/bullets/square.gif
secure/images/shared/headers/background.gif
secure/images/shared/headers/return_associations.jpg
secure/images/shared/headers/return_blank.jpg
secure/images/shared/headers/return_home.jpg
secure/images/shared/headers/return_store.jpg
secure/images/shared/headers/return_topic.jpg
secure/images/shared/news/hospice.gif
secure/images/shared/news/mediexperts.gif
secure/images/shared/news/redribon.gif
secure/images/shared/news/xmas.gif
secure/images/shared/partners/free_samples.gif
secure/images/shared/partners/medizine.gif
secure/images/shared/partners/medizine_small.gif
secure/images/shared/partners/pharminfo.gif
secure/images/shared/partners/ucc.gif
secure/images/shared/site_news/nosmoking.gif
secure/images/shared/toc/associations.gif
secure/images/shared/toc/back_issues.gif
15
<PAGE>
secure/images/shared/toc/community.gif
secure/images/shared/toc/current_issue.gif
secure/images/shared/toc/disease_specific_info.gif
secure/images/shared/toc/fee_services.gif
secure/images/shared/toc/for_more_information.gif
secure/images/shared/toc/help_services.gif
secure/images/shared/toc/medical_information.gif
secure/images/shared/toc/mediconsult.gif
secure/images/shared/toc/our_partners.gif
secure/images/shared/toc/related_men_topics.gif
secure/images/shared/toc/related_topics.gif
secure/images/shared/toc/related_women_topics.gif
secure/images/shared/toc/toc.gif
secure/images/shared/topics/go.gif
secure/images/shared/topics/topics1.gif
secure/images/shared/topics/topics2.gif
secure/images/shared/welcome/breast_cancer.gif
secure/images/shared/welcome/support.gif
secure/images/shared/welcome/vital.gif
secure/images/shared/arrow.gif
secure/images/shared/ask_barb.gif
secure/images/shared/awards.gif
secure/images/shared/background.jpg
secure/images/shared/birthday.gif
secure/images/shared/border.gif
secure/images/shared/first_time.gif
secure/images/shared/hon.gif
secure/images/shared/lightbulb.gif
secure/images/shared/logo.gif
secure/images/shared/new.gif
secure/images/shared/quick_search.gif
secure/images/shared/realbubble.gif
secure/images/shared/search.gif
secure/images/shared/tagline.gif
secure/images/shared/toolbar.gif
secure/images/store/search_association.gif
secure/images/store/search_product.gif
secure/images/store/search_topic.gif
secure/images/store/toolbar.gif
secure/images/support/home.gif
secure/images/support/next.gif
secure/images/support/post.gif
secure/images/support/previous.gif
secure/images/support/reload.gif
secure/impotence/service/forms/brockq.hts
secure/incontinence/service/forms/corcosq.hts
secure/infertility/service/forms/crowley_fq.hts
secure/infertility/service/forms/crowley_mq.hts
secure/infertility/service/forms/sanfilippoqf.hts
secure/infertility/service/forms/sanfilippoqm.hts
secure/kidney/service/forms/banderq.hts
secure/kidney/service/forms/oldhamq.hts
secure/lung/service/forms/sauseq.hts
secure/ms/service/forms/coyleq.hts
secure/online_store/header.hts
secure/parkinsons/service/forms/kellyq.hts
secure/pregnancy/service/forms/perkinsq.hts
secure/pregnancy/service/forms/robichauxq.hts
16
<PAGE>
secure/prostate/service/forms/brockq.hts
secure/prostate/service/forms/scardinoq.hts
secure/renal/service/forms/vassalottiq.hts
secure/renal/service/forms/vassalottiq.hts~
secure/reports/envtest.hts
secure/reports/envtest.pl
secure/reports/getrec.pl
secure/reports/index.html
secure/reports/mc_frame.html
secure/reports/mc_rep.html
secure/reports/mc_toc.html
secure/skin/service/forms/hebertq.hts
secure/skincancer/service/forms/oldhamq.hts
secure/skincancer/service/forms/reintgenq.hts
secure/sleep/service/forms/potolicchioq.hts
secure/sleep/service/forms/westbrook_insomq.hts
secure/sleep/service/forms/westbrookq.hts
secure/std/service/forms/#martinq.hts#
secure/std/service/forms/martinq.hts
secure/strokes/service/forms/steinq.hts
secure/strokes/service/forms/youngq.hts
secure/urinary/service/forms/denstedtq.hts
secure/urinary/service/forms/premingerq.hts
secure/MC_new_passwords2.xls
secure/expert-access.hts
secure/expert-access.pl
secure/index.html
secure/mediforms
secure/new-pass.pl
secure/pass.txt
secure/user-access-test.hts
secure/user-access.hts
17
<PAGE>
HABITROL:
./SNR
./bin/mailit
./bin/feedback
./bin/noweb
./lib/habitrol.pl
./lib/compare.pl
./sql/access_denied.hts
./sql/envtest.hts
./sql/sendto.pl
./sql/wsh-page3.hts
./sql/wsh-page2.hts
./sql/.nsconfig
./sql/wsh-page1.hts
./sql/index.hts
./src/RCS/common.h,v
./src/ping/CR
./src/ping/CR~
./src/ping/RCS/do_ping.pl,v
./src/ping/RCS/Makefile,v
./src/ping/Makefile
./src/ping/do_ping.pl
./src/ping/do_ping.o
./src/ping/do_ping
./src/HabitrolLib/RCS/habitrol.pl-in,v
./src/HabitrolLib/RCS/Makefile,v
./src/HabitrolLib/habitrol.pl
./src/HabitrolLib/habitrol.pl-in
./src/HabitrolLib/Makefile
./src/Makefile.in
./src/schema/RCS/data-tables.sql,v
./src/schema/RCS/user-tables.sql,v
./src/schema/RCS/01create_database.sql,v
./src/schema/RCS/hab_dump.proc,v
./src/schema/set_quitdate.sql
./src/schema/hab_dump.proc
./src/schema/add_diet.proc
./src/schema/new_user_test
./src/schema/add_diet.sql
./src/schema/new_user.proc
./src/schema/del_user.proc
./src/schema/set_nicotine.sql
./src/schema/add_rewards.proc
./src/schema/add_therapy.proc
./src/schema/steps
./src/schema/cleardb.sql
./src/schema/load-sql
./src/schema/CLEARDB
./src/schema/data-tables.out
./src/schema/data-tables.sql
./src/schema/debug.in
./src/schema/check_user_level.proc
./src/schema/update-statistics.sql
./src/schema/add_hardships.proc
./src/schema/set_quitdate.proc
./src/schema/pg.txt
./src/schema/NEW.sql
18
<PAGE>
./src/schema/add_benefits.sql
./src/schema/del_user.sql
./src/schema/data-tables-leo.sql
./src/schema/remove_profile.proc
./src/schema/add_temptations.sql
./src/schema/email.sql
./src/schema/schema.pl
./src/schema/check_user_level.sql
./src/schema/remove_profile.sql
./src/schema/add_hardships.sql
./src/schema/add_stress.proc
./src/schema/sketch
./src/schema/sysusages.txt
./src/schema/user-tables.out
./src/schema/user-tables.sql
./src/schema/add_stress.sql
./src/schema/add_therapy.sql
./src/schema/user-tables-leo.sql
./src/schema/add_activity.sql
./src/schema/add_temptations.proc
./src/schema/create_database.sql
./src/schema/01create_database.sql
./src/schema/add_progress.proc
./src/schema/set_nicotine.proc
./src/schema/add_rewards.sql
./src/schema/add_activity.proc
./src/schema/set_user_level.proc
./src/schema/schema.txt
./src/schema/add_benefits.proc
./src/schema/add_progress.sql
./src/schema/new_user.sql
./src/schema/dataitems
./src/sqsh-1.6.tar.gz
./src/sybperl-2.10.tar.gz
./src/dbscripts/Makefile
./src/dbscripts/signup/RCS/Makefile,v
./src/dbscripts/signup/RCS/signup.pl-in,v
./src/dbscripts/signup/signup.pl
./src/dbscripts/signup/testdata
./src/dbscripts/signup/Makefile
./src/dbscripts/signup/Jim-Mozilla-3.04C-SGI
./src/dbscripts/signup/Marijke-IE4
./src/dbscripts/signup/Cedric-IE4
./src/dbscripts/signup/signup.pl-in
./src/dbscripts/profile/RCS/profile.pl-in,v
./src/dbscripts/profile/Makefile
./src/dbscripts/profile/email/Makefile
./src/dbscripts/profile/email/index.hts
./src/dbscripts/profile/profile.pl-in
./src/dbscripts/profile/profile.pl
./src/feedback/RCS/feedback.c,v
./src/feedback/RCS/feedback.h,v
./src/feedback/RCS/Makefile,v
./src/feedback/feedback
./src/feedback/Makefile
./src/feedback/feedback.c
./src/feedback/feedback.o
./src/feedback/feedback.h
19
<PAGE>
./src/email/RCS/email.pl-in,v
./src/email/RCS/Makefile,v
./src/email/Makefile
./src/email/email.pl
./src/email/email.pl-in
./src/SendTo/sendto.pl
./src/SendTo/Makefile
./src/SendTo/sendto.pl-in
./src/sybperl-2.10/eg/bcp.dat
./src/sybperl-2.10/eg/GenRepDefs.pl
./src/sybperl-2.10/eg/sql.pl
./src/sybperl-2.10/eg/ct_cursor.pl
./src/sybperl-2.10/eg/SybWWW.pm
./src/sybperl-2.10/eg/ct_sql2.pl
./src/sybperl-2.10/eg/dbcc.pl
./src/sybperl-2.10/eg/buffer.pl
./src/sybperl-2.10/eg/bcp.pl
./src/sybperl-2.10/eg/dbschema.disk.pl
./src/sybperl-2.10/eg/ct_param.pl
./src/sybperl-2.10/eg/README
./src/sybperl-2.10/eg/Show.cgi
./src/sybperl-2.10/eg/ct_sql.pl
./src/sybperl-2.10/eg/who.pl
./src/sybperl-2.10/eg/ctlib.pl
./src/sybperl-2.10/eg/Login.pm
./src/sybperl-2.10/eg/proc.isql
./src/sybperl-2.10/eg/rpc-example.pl
./src/sybperl-2.10/eg/dbschema.pl
./src/sybperl-2.10/eg/TABLEop.pm
./src/sybperl-2.10/eg/README.dbschema
./src/sybperl-2.10/eg/SecureSql.pm
./src/sybperl-2.10/eg/dbtext.pl
./src/sybperl-2.10/eg/dbschema.old
./src/sybperl-2.10/BCP/t/bcp.dat
./src/sybperl-2.10/BCP/t/bcp.t
./src/sybperl-2.10/BCP/Makefile.PL
./src/sybperl-2.10/BCP/BCP.pm
./src/sybperl-2.10/BCP/README
./src/sybperl-2.10/BCP/MANIFEST
./src/sybperl-2.10/BCP/Makefile.old
./src/sybperl-2.10/FAQ
./src/sybperl-2.10/PWD
./src/sybperl-2.10/SPR
./src/sybperl-2.10/lib/sql.pl
./src/sybperl-2.10/lib/sybutil.pl
./src/sybperl-2.10/lib/sybperl.pl
./src/sybperl-2.10/lib/ctutil.pl
./src/sybperl-2.10/pod/sybperl.pod
./src/sybperl-2.10/pod/README
./src/sybperl-2.10/pod/Makefile
./src/sybperl-2.10/pod/sybperl-1.0xx.man
./src/sybperl-2.10/patchlevel.h
./src/sybperl-2.10/CHANGES
./src/sybperl-2.10/Makefile.PL
./src/sybperl-2.10/Sybperl/t/sybperl.t
./src/sybperl-2.10/Sybperl/t/dbmoney.t
./src/sybperl-2.10/Sybperl/Makefile.PL
./src/sybperl-2.10/Sybperl/README
20
<PAGE>
./src/sybperl-2.10/Sybperl/Makefile.old
./src/sybperl-2.10/Sybperl/Sybperl.pm
./src/sybperl-2.10/Version
./src/sybperl-2.10/CTlib/t/cursor.t
./src/sybperl-2.10/CTlib/t/ctlib.t
./src/sybperl-2.10/CTlib/Makefile.PL
./src/sybperl-2.10/CTlib/README
./src/sybperl-2.10/CTlib/CTlib.pm
./src/sybperl-2.10/CTlib/CTlib.xs
./src/sybperl-2.10/CTlib/Makefile.old
./src/sybperl-2.10/DBlib/t/dblib.t
./src/sybperl-2.10/DBlib/t/money.t
./src/sybperl-2.10/DBlib/Makefile.PL
./src/sybperl-2.10/DBlib/README
./src/sybperl-2.10/DBlib/DBlib.pm
./src/sybperl-2.10/DBlib/DBlib.xs
./src/sybperl-2.10/DBlib/Makefile.old
./src/sybperl-2.10/README
./src/sybperl-2.10/UPGRADE
./src/sybperl-2.10/MANIFEST
./src/sybperl-2.10/Makefile.old
./src/sybperl-2.10/README.win32
./src/sybperl-2.10/README.thread
./src/sybperl-2.10/CONFIG
./src/sybperl-2.10/config.pl
./src/CompareLib/RCS/compare.pl-in,v
./src/CompareLib/Makefile
./src/CompareLib/compare.pl-in
./src/CompareLib/compare.pl
./src/statistics/RCS/do_dbstats.pl,v
./src/statistics/RCS/Makefile,v
./src/statistics/RCS/dbstats.pl-in,v
./src/statistics/dbstats.pl.old
./src/statistics/do_dbstats.pl
./src/statistics/dbstats.pl
./src/statistics/do_dbstats
./src/statistics/Makefile
./src/statistics/dbstats.pl-in
./src/statistics/jim.pl
./src/statistics/do_dbstats.o
./src/util_lib/RCS/header.c,v
./src/util_lib/RCS/footer.c,v
./src/util_lib/RCS/Makefile,v
./src/util_lib/RCS/get_string.c,v
./src/util_lib/RCS/util_lib.h,v
./src/util_lib/RCS/flock.c,v
./src/util_lib/RCS/flock.h,v
./src/util_lib/RCS/new_lines.c,v
./src/util_lib/TAGS
./src/util_lib/new_lines.o
./src/util_lib/new_lines.c
./src/util_lib/product.c
./src/util_lib/util_lib.a
./src/util_lib/util_lib.h
./src/util_lib/header.o
./src/util_lib/header.c
./src/util_lib/Makefile
./src/util_lib/get_string.o
21
<PAGE>
./src/util_lib/get_string.c
./src/util_lib/flock.c
./src/util_lib/flock.o
./src/util_lib/flock.h
./src/maillist/six_months/RCS/Makefile,v
./src/maillist/six_months/RCS/do_six_months.pl,v
./src/maillist/six_months/RCS/six_months.pl-in,v
./src/maillist/six_months/do_six_months
./src/maillist/six_months/Makefile
./src/maillist/six_months/six_months.pl
./src/maillist/six_months/do_six_months.o
./src/maillist/six_months/do_six_months.pl
./src/maillist/six_months/six_months.pl-in
./src/maillist/mailit/mailit
./src/maillist/mailit/Makefile
./src/maillist/mailit/mailit.o
./src/maillist/mailit/mailit.pl
./src/maillist/unregistered/RCS/do_ureg.pl,v
./src/maillist/unregistered/RCS/ureg.pl-in,v
./src/maillist/unregistered/do_ureg.pl
./src/maillist/unregistered/do_ureg.o
./src/maillist/unregistered/Makefile
./src/maillist/unregistered/ureg.pl
./src/maillist/unregistered/do_ureg
./src/maillist/unregistered/ureg.pl-in
./src/maillist/diary/RCS/email_diary.pl-in,v
./src/maillist/diary/RCS/Makefile,v
./src/maillist/diary/RCS/do_diary.pl,v
./src/maillist/diary/do_diary
./src/maillist/diary/Makefile
./src/maillist/diary/email_diary.pl
./src/maillist/diary/do_diary.o
./src/maillist/diary/email_diary.pl-in
./src/maillist/diary/do_diary.pl
./src/maillist/Makefile
./src/maillist/quitday/RCS/do_quitday.pl,v
./src/maillist/quitday/RCS/Makefile,v
./src/maillist/quitday/RCS/quitday.pl-in,v
./src/maillist/quitday/Makefile
./src/maillist/quitday/quitday.pl-in
./src/maillist/quitday/do_quitday.o
./src/maillist/quitday/quitday.pl
./src/maillist/quitday/do_quitday.pl
./src/maillist/quitday/do_quitday
./src/maillist/ive_quit_2/RCS/Makefile,v
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<PAGE>
Exhibit 10.16
- ------------------------------------------------------------------------------
MEDICONSULT.COM, INC.
-------------------------------------------
STOCK PURCHASE AGREEMENT
-------------------------------------------
FEBRUARY 26, 1999
- ------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
1. Certificates of Designation.............................................................................1
2. Issuance and Sale of Senior Preferred Shares and Warrants and Reservation of Reserved Common
Shares; Closings........................................................................................1
2.1 Issuance of Senior Preferred Shares and Warrants and Reservation of Reserved Common
Shares.........................................................................................1
2.2 Agreement to Sell and Purchase the Senior Preferred Shares.....................................1
2.3 Delivery of Senior Preferred Shares and Warrants...............................................2
2.4 The Closing....................................................................................2
3. Representations and Warranties of the Corporation.......................................................2
3.1 Organization; Power and Authority; Qualifications..............................................2
3.2 Authorization of the Documents; No Conflicts...................................................3
3.3 Authorization of Senior Preferred Shares, Warrants, Warrant Shares and Reserved Common
Shares.........................................................................................3
3.4 No Consent or Approval Required................................................................3
3.5 Capitalization.................................................................................4
3.6 Equity Investments.............................................................................5
3.7 SEC Documents..................................................................................5
3.8 No Defaults....................................................................................6
3.9 Financial Information..........................................................................6
3.10 Absence of Undisclosed Liabilities.............................................................6
3.11 Absence of Changes.............................................................................7
3.12 Title to Assets, Properties and Rights.........................................................7
3.13 Burdensome Restrictions........................................................................7
3.14 Intellectual Property Rights...................................................................8
3.15 Employment of Officers, Employees and Consultants..............................................9
3.16 ERISA Plans and Contracts......................................................................9
3.17 Agreements....................................................................................11
3.18 Compliance; Licenses and Permits..............................................................12
3.19 Labor Relations; Employees....................................................................12
3.20 Litigation....................................................................................12
3.21 Tax Matters...................................................................................13
</TABLE>
-I-
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
Page
<S> <C>
3.22 Related Party Transactions....................................................................13
3.23 Offering Exemption............................................................................14
3.24 Brokers.......................................................................................14
3.25 Registration Rights...........................................................................14
3.26 Other Securities..............................................................................14
3.27 Use of Proceeds...............................................................................14
3.28 Insurance.....................................................................................14
3.29 Disclosure....................................................................................14
3.30 Underwriting Agreement........................................................................15
3.31 Qualified Small Business......................................................................15
3.32 Definition of "Best Knowledge"................................................................16
4. Representations and Warranties of the Investors........................................................16
5. Conditions Precedent to the Closing....................................................................17
5.1 Conditions Precedent to the Closing...........................................................17
6. Information Rights.....................................................................................18
6.2 Affirmative Covenants.........................................................................18
7. Additional Agreements of the Corporation...............................................................19
7.1 Restrictions on Certain Actions...............................................................19
7.2 Compliance....................................................................................20
7.3 Insurance.....................................................................................20
7.4 Corporate Existence, Properties, Etc..........................................................21
7.5 Payment of Taxes..............................................................................21
7.6 Nondisclosure and Invention Assignment Agreement..............................................21
7.7 Review of Registration Statement..............................................................21
7.8 Key-Man Life Insurance........................................................................21
8. Restriction on Transfer................................................................................21
9. Fees...................................................................................................23
10. Exchanges; Lost, Stolen or Mutilated Certificates......................................................23
11. Survival of Representations, Warranties and Agreements, Etc............................................24
12. Indemnification........................................................................................24
13. Remedies...............................................................................................24
</TABLE>
-II-
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C>
14. Successors and Assigns.................................................................................24
15. Entire Agreement.......................................................................................24
16. Notices................................................................................................24
17. Changes................................................................................................25
18. Counterparts...........................................................................................25
19. Headings...............................................................................................26
20. Nouns and Pronouns.....................................................................................26
21. Governing Law..........................................................................................26
22. Consent to Jurisdiction; Venue.........................................................................26
</TABLE>
-III-
<PAGE>
ATTACHMENTS
EXHIBITS
Exhibit A - Certificate of Designation
Exhibit B Form of Stock Subscription Warrant
Exhibit C - Opinions of Counsel to the Corporation
Exhibit D Form of Registration Rights Agreement
Exhibit E Form of Stockholders Agreement
<PAGE>
MEDICONSULT.COM, INC.
STOCK PURCHASE AGREEMENT
As of February 26, 1999
TO THE INVESTORS
(as hereinafter defined)
Dear Sirs:
The undersigned, MEDICONSULT.COM, INC., a Delaware corporation (the
"Corporation") hereby agrees with each of the parties listed on Schedule I
hereto (the "Investors") as follows:
1. CERTIFICATES OF DESIGNATION. Prior to the execution and delivery of this
Agreement, the Corporation filed with the Secretary of State of the State of
Delaware a Certificate of Designation of Series and Determination of Rights and
Preferences of its Senior Preferred Stock (the "Certificate of Designation") to
its Certificate of Incorporation (the "Certificate of Incorporation"), a copy of
which is attached hereto as EXHIBIT A. The Certificate of Designation, among
other things, (i) designates 1,000,000 shares as Senior Convertible Preferred
Stock (the "Senior Preferred Stock") and (ii) sets forth the terms,
designations, powers, preferences and relative, participating, optional and
other special rights, and the qualifications, limitations and restrictions, of
the Senior Preferred Stock.
2. ISSUANCE AND SALE OF SENIOR PREFERRED SHARES AND WARRANTS AND RESERVATION OF
RESERVED COMMON SHARES; CLOSINGS.
2.1 ISSUANCE OF SENIOR PREFERRED SHARES AND WARRANTS AND RESERVATION OF
RESERVED COMMON SHARES. On the terms and subject to the conditions hereof,
the Corporation has authorized the issuance on the Closing Date (as defined
in Section 2.4 hereof) of (i) an aggregate of 506,329 shares of Senior
Preferred Stock (such shares of Senior Preferred Stock being sometimes
hereinafter collectively referred to as the "Senior Preferred Shares"), and
the reservation of a requisite number of shares of Common Stock, $.001 par
value (the "Common Stock"), of the Corporation for issuance upon conversion
of the Senior Preferred Shares and Warrant Shares (such reserved Common Stock
being sometimes hereinafter referred to as the "Reserved Common Shares") and
(ii) stock subscription warrants (the "Warrants") to purchase 224,000 shares
of Senior Preferred Stock (the "Warrant Shares") in the form of EXHIBIT B
attached hereto.
2.2 AGREEMENT TO SELL AND PURCHASE THE SENIOR PREFERRED SHARES. On the
terms and subject to the conditions hereof, the Corporation is selling to
each Investor and such Investor is purchasing from the Corporation at the
Closing, that number of shares of Senior Preferred Stock set forth opposite
such Investor's name on Schedule I and (ii) Warrants to purchase that number
of Warrant Shares set forth opposite such Investor's name on Schedule I, for
the aggregate purchase price set forth opposite such Investor's name on
Schedule I (representing an
<PAGE>
aggregate purchase price for all Investors of $3,200,000 for the Senior
Preferred Shares and Warrants purchased by the Investors).
2.3 DELIVERY OF SENIOR PREFERRED SHARES AND WARRANTS. At the Closing, the
Corporation shall deliver to each Investor a certificate or certificates and
Warrants, registered in the name of the Investors, representing that number of
Senior Preferred Shares and the Warrants being purchased by such Investor at the
Closing. In each case, delivery of certificates representing Senior Preferred
Shares and the Warrants shall be made against receipt by the Corporation of a
check payable to the Corporation or a wire transfer to an account designated by
the Corporation in the full amount of the purchase price for the Senior
Preferred Shares and Warrants being purchased by the Investor at the Closing.
2.4 THE CLOSING. The Closing hereunder with respect to the transactions
contemplated by Section 2.1 hereof is taking place on the date hereof at the
offices of Orrick, Herrington & Sutcliffe LLP, 30 Rockefeller Plaza, New York,
New York 10112 (the date hereof sometimes being referred to herein as the
"Closing Date").
3. REPRESENTATIONS AND WARRANTIES OF THE CORPORATION. The Corporation hereby
represents and warrants, except as disclosed in the disclosure schedule dated
the date hereof, certified on behalf of the Corporation by the Chief Executive
Officer of the Corporation and delivered by the Corporation simultaneously
herewith (the "Disclosure Schedule") to the Investors as follows:
3.1 ORGANIZATION; POWER AND AUTHORITY; QUALIFICATIONS. The Corporation is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and each Subsidiary is a corporation duly organized,
validly existing and in good standing under the laws of its jurisdiction. Each
of the Corporation and the Subsidiaries has all requisite corporate power and
corporate authority to own, lease and operate its properties, to carry on its
business as presently conducted and as presently proposed to be conducted and to
carry out the transactions contemplated by this Agreement, the Certificate of
Designation, the Stockholders Agreement (as defined in Section 5.1(h)) and the
Registration Rights Agreement (as defined in Section 5.1(g) hereof) (each, a
"Document" and collectively, the "Documents"). Each of the Corporation and the
Subsidiaries is qualified to transact business as a foreign corporation in those
jurisdictions identified on Schedule 3.1 of the Disclosure Schedule and in all
other jurisdictions in which the character of the property owned or leased or
the nature of the activities conducted by the Corporation and the Subsidiaries
(as the case may be) makes such qualification necessary or the failure to so
qualify would have a material adverse effect on the business, properties,
affairs, condition (financial or otherwise), results of operations, assets or
liabilities of the Corporation or the Subsidiaries taken as a whole (a "Material
Adverse Effect"). The Corporation has provided the Investors, with true, correct
and complete copies of its and each Subsidiaries, organizational documents
(including, if applicable, certificates of incorporation and by-laws), in each
case, as amended to, and as in effect on, the date hereof. The term
"Subsidiaries" shall mean Mediconsult.com Limited, iHealth, Pharminfonet,
Mediconsult.com (UK) Ltd. and any corporation, partnership, joint venture,
limited liability company or other legal entity of which the Corporation (either
alone or through or together with any other Subsidiary) owns, directly or
indirectly, more than 50% of the stock or other equity
2
<PAGE>
interests the holders of which are generally entitled to vote for the election
of the board of directors or other governing body of such corporation or other
legal entity.
3.2 AUTHORIZATION OF THE DOCUMENTS; NO CONFLICTS. The execution, delivery
and performance by the Corporation of the Documents have been duly authorized by
all requisite corporate action by the Corporation and each such Document
constitutes a valid and binding obligation of the Corporation, enforceable
against the Corporation in accordance with its terms. The execution, delivery
and performance of the Documents and the consummation of the transactions
contemplated thereby and compliance with the provisions thereof by the
Corporation and the issuance, sale and delivery of the Senior Preferred Shares,
the Warrants, and the Warrant Shares and the Reserved Common Shares by the
Corporation, does not (a) violate any provision of law, statute, rule or
regulation, or any ruling, writ, injunction, order, judgment or decree of any
United States or foreign court, administrative agency or other governmental body
applicable to the Corporation or any of its properties or assets or (b) conflict
with or result in any breach of any of the terms, conditions or provisions of,
or constitute (with due notice or lapse of time, or both) a default (or give
rise to any right of termination, cancellation or acceleration) under, or result
in the creation of any Encumbrance (as defined in Section 3.11 hereof) upon any
of the properties or assets of the Corporation or the Subsidiaries under their
respective certificates of incorporations or by-laws, or any note, indenture,
mortgage, lease agreement or other contract, agreement or instrument to which
the Corporation or the Subsidiaries (as the case may be) is a party or by which
any of them or any of their respective properties is bound or affected.
3.3 AUTHORIZATION OF SENIOR PREFERRED SHARES, WARRANTS, WARRANT SHARES AND
RESERVED COMMON SHARES. The authorization, reservation (if applicable),
issuance, sale and delivery of the Senior Preferred Shares, Warrants, Warrant
Shares and Reserved Common Shares have been duly authorized by all requisite
corporate action of the Corporation, and when issued, sold and delivered on the
date hereof in the case of the Senior Preferred Stock and the Warrants, or upon
conversion, exercise or exchange of the Senior Preferred Stock or Warrants in
the case of the Reserved Common Shares and the Warrant Shares, will be validly
issued and outstanding, fully paid and nonassessable with no personal liability
attaching to the ownership thereof, and not subject to preemptive or any other
similar rights of the stockholders of the Corporation or others. The terms,
designations, powers, preferences and relative, participating, optional and
other special rights, and the qualifications, limitations and restrictions, of
the Senior Preferred Shares are as stated in the Certificate of Designation.
3.4 NO CONSENT OR APPROVAL REQUIRED. No consent of any person and no
consent, approval or authorization of, or declaration to or filing with, any
United States or foreign governmental or regulatory authority is required for
the valid authorization, execution and delivery by the Corporation of any
Document or for the consummation of the transactions contemplated thereby or for
the valid authorization, issuance and delivery of the Senior Preferred Shares or
the Warrants, or for the valid authorization, reservation, issuance and delivery
of the Reserved Common Shares or the Warrant Shares, other than those consents,
approvals, authorizations, declarations or filings (including those filings
required to be made under applicable Federal securities and/or state securities
and "blue sky" laws) which have been or will timely be obtained or made, as the
case may be, and which are identified on Schedule 3.4 hereto.
3
<PAGE>
3.5 CAPITALIZATION.
(a) The authorized capital stock of the Corporation immediately upon the
consummation of the Closing of the transactions contemplated hereby shall
consist of:
(i) 50,000,000 shares of Common Stock, no par value, of which (i)
18,537,950 shares shall have been validly issued and be outstanding, fully
paid and nonassessable, with no personal liability attaching to the ownership
thereof, (ii) 430,000 shares shall have been duly reserved for issuance upon
conversion of the Preferred Stock, $.001 par value, of the Corporation (the
"Junior Preferred Stock") and a sufficient number of shares to provide for
the payment of any Junior PIK Dividend (as such term is defined in the
Certificate of Designation), accruing thereon, (iii) 1,000,000 shares have
been duly reserved for issuance upon conversion of the Senior Preferred
Shares, (iv) 2,500,000 shares shall have been duly reserved for issuance to
officers, employees or directors of, or consultants to, the Corporation
pursuant to the Corporation's 1996 Stock Option Plan (the "Plan") (v) 400,000
shares of Common Stock have been reserved for issuance to Arnold and S.
Bleichroeder, Inc., pursuant to the letter agreement dated July 28, 1998
between Arnold S. Bleichroeder, Inc. and the Corporation upon exercise of the
Warrant granted thereunder; and (vi) 2,000,000 shares of Common Stock have
been reserved for issuance upon the exercise of an option granted to Treacy &
Co., LLC pursuant to the letter agreement dated November 16, 1998 between
Treacy & Co., LLC and the Corporation.
(ii) 5,000,000 shares of Preferred Stock, $.001 par value, of which
(i) 1,000,000 shares shall have been duly designated as Junior Preferred
Stock, of which 430,000 shares are validly issued and outstanding, fully paid
and nonassessable with no personal liability attaching to the ownership
thereof, (ii) 1,000,000 shares shall have been duly designated as Senior
Convertible Preferred Stock, of which (A) 506,329 shares shall have been
validly issued and be outstanding, fully paid, nonassessable, with no
personal liability attaching to the ownership thereof, (B) 224,000 shares
have been duly reserved for issuance upon exercise or exchange of the Warrant
Shares and (C) a sufficient number of shares shall have been reserved for
issuance of shares of Senior Preferred Stock as a Senior Preferred Dividend
(as such term is defined in the Certificate of Designation).
(b) Schedule 3.5 of the Disclosure Schedule sets forth a capitalization
table prior to and immediately following the consummation of the transactions
contemplated hereby (including conversion of the Junior Preferred Stock) and
which shall in each case identify all outstanding warrants, options, agreements,
convertible securities or other commitments pursuant to which the Corporation is
or may become obligated to issue any shares of the capital stock or other
securities of the Corporation, which list names all persons entitled to receive
such shares or other securities and the shares of capital stock or other
securities required to be issued thereunder. Except as set forth on Schedule 3.5
of the Disclosure Schedule or as contemplated by the Documents, there are, and
immediately upon consummation of the Closing of the transactions contemplated
hereby, there will be, no preemptive or similar rights to purchase or otherwise
acquire shares of the capital stock of the Corporation pursuant to any provision
of law, the Certificate of Incorporation or By-laws or any agreement to which
the Corporation is a party; and there is, and immediately upon the consummation
of the Closing of the transactions contemplated hereby, there will be, no
agreement, restriction or encumbrance (such as a right of
4
<PAGE>
first refusal, right of first offer, proxy, voting trust, voting agreement,
etc.) with respect to the sale or voting of any shares of capital stock of the
Corporation (whether outstanding or issuable upon conversion or exercise of
outstanding securities), to which the Corporation is a party on by which it is
bound, or, to the Best Knowledge of the Corporation, among or between any
persons other than the Corporation, except as contemplated by the Documents. All
shares of the capital stock and other securities issued by the Corporation at or
prior to the Closing have either been registered under the Securities Act of
1933, as amended (the "Securities Act") or any comparable foreign securities
laws or been or are being issued in transactions exempt from registration under
the Securities Act and all applicable state securities or "blue sky" laws. The
Corporation has not violated the Securities Act or any comparable foreign
securities laws or any applicable state securities or "blue sky" laws in
connection with the issuance of any shares of capital stock or other securities
at or prior to the Closing that could reasonably be expected to have a Material
Adverse Effect.
3.6 EQUITY INVESTMENTS. Except for the Subsidiaries identified on Schedule
3.6 of the Disclosure Schedule the Corporation does not presently have any
Subsidiaries, nor has it owned, nor does it presently own, any capital stock or
other proprietary interest, directly or indirectly, in any corporation,
association, trust, partnership, joint venture or other entity. The Corporation
owns 100% of the issued and outstanding capital stock of each Subsidiary, free
and clear of all Encumbrances. There are no options, warrants, rights, calls,
commitments or agreements of any character to which the Subsidiaries are a party
or by which it is bound calling for the issuance of shares of capital stock of
the Subsidiaries or any securities convertible into or exercisable or
exchangeable for, or representing the right to purchase or otherwise receive,
any such capital stock, or other arrangement to acquire, at any time or under
any circumstance, capital stock of the Subsidiaries or any such other
securities. Other than pursuant to statutory laws in certain foreign
jurisdictions in which the Subsidiaries are organized, there are no preemptive
or similar rights to purchase or otherwise acquire shares of the capital stock
of any Subsidiary pursuant to any provision of law, or organization document or
any agreement to which such Subsidiary is a party; and there is, and immediately
upon the consummation of the Closing of the transactions contemplated hereby,
there will be, no agreement, restriction or encumbrance (such as a right of
first refusal, right of first offer, proxy, voting trust, voting agreement,
etc.) with respect to the sale or voting of any shares of capital stock of any
Subsidiary (whether outstanding or issuable upon conversion or exercise of
outstanding securities)
3.7 SEC DOCUMENTS. The Corporation has delivered to the Investors true,
correct and complete copies of all regular and periodic reports, schedules,
registration statements, proxy statements and other documents filed with the
Securities and Exchange Commission (the "SEC") for the period commencing
December 12, 1996, through the date hereof (the "SEC Documents'), which are all
of the documents (other than preliminary material) that the Corporation was
required to file with the SEC since December 12, 1996. As of their respective
dates, none of the SEC Documents contained any untrue statement of material fact
or omitted to state a material fact required to be stated therein or necessary
in order to make the statements made therein, in light of the circumstances
under which they were made, not misleading, and the SEC Documents complied, when
filed, in all material respects with the then applicable requirements of the
Securities Act, the Exchange Act, and the rules and regulations promulgated
thereunder. The financial statements of the Corporation included in the SEC
Documents complied, when filed, as to form in all respects with the then
applicable accounting requirements and the published rules
5
<PAGE>
and regulations of the SEC with respect thereto, were prepared in accordance
with generally accepted accounting principles ("GAAP") applied on a consistent
basis during the periods involved (except as may have been indicated in the
notes thereto or, in the case of unaudited statements, as permitted by Form 10-Q
promulgated by the SEC) and fairly presented (subject, in the case of unaudited
statements, to normal, recurring audit adjustments) the consolidated results of
their operations and cash flows for the periods then ended. The Corporation has
filed all documents and agreements which were required to be filed as exhibits
to the SEC Documents and all such documents and agreements when filed were
correct and complete; and, to the extent that any such documents and agreements
remain in effect as of the date hereof, the Corporation had delivered correct
and complete copies thereof to the Investors, including all modifications and
amendments thereto to the date hereof. In addition, the Corporation has
delivered to the Investors correct and complete copies of all documents or
agreements which would be included as exhibits to an Annual Report on Form 10-K
if the Corporation were required to file Form 10-K for the period ended on the
date immediately preceding the date hereof.
3.8 NO DEFAULTS. Neither the Corporation nor the Subsidiaries are in
default, which default could reasonably be expected to have a Material Adverse
Effect, (a) under their respective certificates of incorporation or by-laws, or
any Contract (as hereinafter defined) or (b) of any order, writ, injunction or
decree of any court or any Federal, state, municipal or other domestic or
foreign governmental department, commission, board, bureau, agency or
instrumentality. There exists no condition, event or act which constitutes, or
which after notice, lapse of time or both, would constitute, a default under any
of the foregoing that could reasonably be expected to have a Material Adverse
Effect.
3.9 FINANCIAL INFORMATION.
(a) Schedule 3.9(a) of the Disclosure Schedule contains the audited balance
sheet of the Corporation (the "Interim Balance Sheet") as of December 31, 1998
(the "Interim Balance Sheet Date"), and the related audited statements of
operations and cash flows for the year then ended (collectively, the "Financial
Statements"), certified by the Corporation's independent public accountants (the
"Company Accountants").
(b) Except as set forth on Schedule 3.9(b) of the Disclosure Schedule, the
Financial Statements (i) are in accordance with the books and records of the
Corporation, (ii) present fairly the financial condition and results of
operations of the Corporation as of the date and for the periods indicated and
(iii) have been prepared in accordance with GAAP consistently applied.
3.10 ABSENCE OF UNDISCLOSED LIABILITIES. Except as set forth on Schedule
3.10 of the Disclosure Schedule, as of the Interim Balance Sheet Date, (a)
neither the Corporation nor the Subsidiaries had liability (whether matured or
unmatured, fixed or contingent) which was not provided for or disclosed in the
Interim Balance Sheet and (b) all liability reserves established by the
Corporation and the Subsidiaries and set forth in the Interim Balance Sheet are
adequate for all such liabilities at the applicable date thereof, in each case
as required to be provided for on the Interim Balance Sheet in order for the
Interim Balance Sheet to fairly represent the financial condition of the
Corporation and the Subsidiaries as of the date thereof in accordance with GAAP
consistently applied. There are no loss contingencies (as such term is used in
Statement
6
<PAGE>
of Financial Accounting Standards No. 5 issued by the Financial Accounting
Standards Board in March 1975) which are not adequately provided for in the
Interim Balance Sheet as required by said Statement No. 5.
3.11 ABSENCE OF CHANGES. Except as set forth on Schedule 3.11 of the
Disclosure Schedule or in the SEC Documents, since the date of the most recent
audited financials included in the SEC Documents, there has not been (a) any
material adverse change in the financial condition, results of operations,
assets, liabilities or business of the Corporation or the Subsidiaries, (b) any
borrowing or agreement to borrow any funds or any liability of any nature
whatsoever (contingent or otherwise) incurred by the Corporation or the
Subsidiaries, other than current liabilities incurred in the ordinary course of
business, (c) any asset or property of the Corporation or the Subsidiaries made
subject to an Encumbrance of any kind, (d) any waiver of any valuable right of
the Corporation or the Subsidiaries, or the cancellation of any debt or claim
held by the Corporation or the Subsidiaries, (e) any payment of dividends on, or
other distributions with respect to, or any direct or indirect redemption or
acquisition of, any shares of the capital stock of the Corporation or the
Subsidiaries, or any agreement or commitment therefor, (f) any issuance of any
stock, bond or other security of the Corporation or the Subsidiaries or any
agreement or commitment therefor (including, without limitation, options,
warrants or rights or agreements or commitments to purchase such securities or
grant such options, warrants or rights) except as disclosed on Schedule 3.5 of
the Disclosure Schedule, (g) any mortgage, pledge, sale, assignment or transfer
of any tangible or intangible assets of the Corporation or the Subsidiaries,
except, with respect to the sale of online advertising inventory and with
respect to tangible assets, in the ordinary course of business, (h) any loan by
the Corporation or the Subsidiaries to any officer, director, employee,
consultant or stockholder of the Corporation or the Subsidiaries, or any
agreement or commitment therefor, (i) any damage, destruction or loss (whether
or not covered by insurance) affecting the business, assets, properties,
operations or condition, financial or otherwise, or results of operations of the
Corporation or the Subsidiaries, (j) any extraordinary increase, direct or
indirect, in the compensation paid or payable to any officer, director,
employee, consultant or agent of the Corporation or the Subsidiaries, (k) any
change in the accounting methods, practices or policies followed by the
Corporation or the Subsidiaries or any change in depreciation or amortization
policies or rates theretofore adopted, or (l) or any event or transaction, or
any information that has come to the attention of the Corporation or the
Subsidiaries, that could reasonably be expected to have a material adverse
effect on the assets, liabilities, operations, results of operations, condition
(financial or otherwise), business or prospects of the Corporation and the
Subsidiaries taken as a whole.
3.12 TITLE TO ASSETS, PROPERTIES AND RIGHTS. Each of the Corporation and
each Subsidiary has good and valid title or the right to use or license all
properties, interests in properties and assets, real, personal and mixed,
tangible or intangible, used in the conduct of their respective businesses, free
and clear of all mortgages, judgments, claims, liens, security interests,
pledges, escrows, charges or other encumbrances of any kind or character
whatsoever, whether or not related to credit or the borrowing of money
("Encumbrances").
3.13 BURDENSOME RESTRICTIONS. The Corporation is not obligated under any
contract or agreement or subject to any charter or other corporate
restriction which presently materially
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adversely affects, or in the future may reasonably be expected to materially
adversely affect, its business, properties, assets, prospects or condition
(financial or otherwise).
3.14 INTELLECTUAL PROPERTY RIGHTS. Schedule 3.14 of the Disclosure Schedule
sets forth, for the Intellectual Property owned by the Corporation or its
Subsidiaries, a complete and accurate list of all United States and foreign (a)
patents and patent applications; (b) trademark registrations (including Internet
domain registrations) and applications and material unregistered trademarks; (c)
copyright registrations and applications, and material unregistered copyrights,
indicating for each, the applicable jurisdiction, registration number (or
application number), and date issued (or date filed).
Schedule 3.14 of the Disclosure Schedule sets forth a complete and accurate list
of all written and material oral license agreements granting any right to use or
practice any rights under any Intellectual Property, whether the Corporation or
any of its Subsidiaries is the licensee or licensor thereunder, and any
assignments, consents, forbearances to sue, judgments, orders, settlements or
similar obligations relating to any Intellectual Property to which the
Corporation or any of its Subsidiaries is a party or otherwise bound (other than
off-the-shelf software applications programs having an acquisition price of less
than $5,000) (collectively, the "License Agreements"), indicating for each the
title, the parties, date executed, whether or not it is exclusive and the
Intellectual Property covered thereby. The License Agreements are valid and
binding obligations of Corporation or its Subsidiaries, enforceable in
accordance with their terms, and there exists no event or condition which will
result in a, violation or breach of, or constitute (with or without due notice
or lapse of time or both) a default by the Corporation or its Subsidiaries under
any such License Agreement, the violation, breach or default of any of which
could reasonably be expected to have a Material Adverse Effect.
No royalties, honoraria or other fees are payable to any third parties for the
use of or right to use any Intellectual Property except pursuant to the License
Agreements set forth on Schedule 3.14 of the Disclosure Schedule.
Except as set forth in Schedule 3.14 of the Disclosure Schedule:
(i) the Corporation or its Subsidiaries exclusively own, free and
clear of all liens, all owned Intellectual Property, or have a valid,
enforceable right to use all of the licensed Intellectual Property;
(ii) the Corporation has taken reasonable steps to protect the
Intellectual Property;
(iii) the conduct of the Corporation's and its Subsidiaries'
businesses as currently conducted or planned to be conducted does not
infringe upon any Intellectual Property rights (other than patents) of or
controlled by any third party nor, to the Best Knowledge of the Corporation,
infringe any patent owned by or controlled by any third party;
(iv) except as set forth on Schedule 3.14 of the Disclosure
Schedule, there is no litigation pending, or to the Best Knowledge,
threatened (A) alleging that the Corporation's activities or the conduct of
its businesses or that of any of its Subsidiaries infringes upon, violates,
or constitutes the unauthorized use of the Intellectual Property rights of
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any third party or (B) challenging the ownership, use, validity or
enforceability of any Intellectual Property;
(v) to the Best Knowledge of the Corporation, no third party is
misappropriating, infringing, diluting, or violating any Intellectual
Property owned by the Corporation or any of its Subsidiaries and, except as
set forth on Schedule 3.14 of the Disclosure Schedule, no such claims have
been brought against any third party by the Corporation or any of its
Subsidiaries; and
(vi) the consummation of the transactions contemplated hereby will
not result in the loss or impairment of the Corporation's or any of its
Subsidiaries' right to own or use any of the Intellectual Property, nor will
they require the consent of any United States or foreign governmental
authority or third party in respect of any such Intellectual Property.
All trademarks material to the conduct of the business of the Corporation have
been in continuous use by the Corporation or its Subsidiaries. To the Best
Knowledge of the Corporation and its Subsidiaries, there has been no prior use
of such trademarks by any third party which would confer upon said third party
superior rights in such trademarks; and the registered trademarks have been
continuously used in the form appearing in, and in connection with the goods and
services listed in, their respective registration certificates or identified in
their respective pending applications.
The Corporation has taken reasonable steps in accordance with normal industry
practice to protect the Corporation's rights in trade secrets of the
Corporation. Without limiting the foregoing, the Corporation has and enforces a
policy of requiring each employee, consultant and contractor to execute
proprietary information, confidentiality and assignment agreements substantially
consistent with the Corporation's standard forms thereof (complete and current
copies of which have been delivered to the Parent). Except under confidentiality
obligations, there has been no disclosure of any Corporation or Subsidiary
confidential information or trade secrets the disclosure of which could
reasonably be expected to have a Material Adverse Effect.
3.15 EMPLOYMENT OF OFFICERS, EMPLOYEES AND CONSULTANTS. No third party has
asserted or may assert any valid claim against the Corporation, any Investor or
any of the Designated Persons (as hereinafter defined) with respect to (a) the
continued employment by, or association with, the Corporation, of any of the
present officers or employees of or consultants to the Corporation
(collectively, the "Designated Persons") or (b) the use, in connection with any
business presently conducted or proposed to be conducted by the Corporation or
any of the Designated Persons of any information which the Corporation or any of
the Designated Persons would be prohibited from using under any prior agreements
or arrangements or any legal considerations applicable to unfair competition,
trade secrets or proprietary information.
3.16 ERISA PLANS AND CONTRACTS.
(a) For purposes of this Agreement, the term "Employee Plan" means each
employee bonus, retirement, pension, profit sharing, stock option, stock
appreciation, stock purchase, incentive, deferred compensation, hospitalization,
medical, dental, vision, life and other health and disability (whether provided
by insurance or otherwise), severance, termination
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and other plan, program, arrangement, policy or payroll practice providing
employee benefits, including, without limitation, each "employee benefit plan"
as defined in Section 3(3) of the Employee Retirement Income Security Act of
1974, as amended to the date hereof ("ERISA"), and including plans which have
been frozen or terminated during the five-year period ending on the date of this
Agreement, in each instance maintained by the Corporation or to which the
Corporation contributes or has contributed and under which any person presently
employed by the Corporation (an "Employee") or formerly so employed by the
Corporation (a "Former Employee") participates or had accrued any rights or
under which the Corporation is liable in respect of an Employee or Former
Employee. The terms "Employee" and "Former Employee" will include, where
applicable, the beneficiaries and dependents of an Employee or Former Employee.
Schedule 3.16 of the Disclosure Schedule lists or describes all Employee Plans.
(b) Except as otherwise disclosed on Schedule 3.16 of the Disclosure
Schedule:
(i) The Corporation does not maintain or contribute to any Employee
Plan.
(ii) No Employee Plan is or has been since the enactment of ERISA a
"multiemployer plan" as defined in Section 3(37) of ERISA. No complete or
partial withdrawal from any multiemployer plan has occurred which could
subject the Corporation to "withdrawal liability" as defined in Section 4201
of ERISA.
(iii) Contributions, premiums, benefits or other payments required
to be made by the Corporation or any Subsidiary thereof to or with respect to
any Employee Plan for all periods preceding the date of this Agreement have
been made or properly accrued as liabilities on the Financial Statements, and
the Corporation will not have any liability (actual or contingent) under any
insurance policy (or ancillary agreement relating to such insurance policy)
in the nature of a retroactive rate adjustment or loss sharing or similar
arrangement.
(iv) Each Employee Plan which is intended to be qualified under
Section 401(a) of the Internal Revenue Code of 1986, as amended (the "Code"),
is so qualified and has been so qualified during the period from its adoption
to date, and each trust forming a part thereof is exempt from tax pursuant to
Section 501(a) of the Code. The Corporation has furnished to the Investor,
true, correct and complete copies of the most recent Internal Revenue Service
determination letters with respect to any such Employee Plans, which
determination letters are all favorable and relate to each such Employee Plan
as amended to comply with the Tax Equity and Fiscal Responsibility Act of
1982, the Deficit Reduction Act of 1984 and the Retirement Equity Act of
1984. Each Employee Plan has been amended to the extent required to comply
with the Tax Reform Act of 1986, and has been maintained in compliance with
its terms and with the requirements prescribed by any and all statutes,
orders, rules and regulations, including, without limitation, ERISA and the
Code (including the provisions thereof which are effective with respect to
such Employee Plans as of the date hereof but which do not require amendments
to have been made to the applicable Employee Plans as of the date hereof),
which are applicable to such Employee Plans.
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(v) No Employee Plan provides benefits, including, without
limitation, death or medical benefits (whether or not insured) with respect
to Employees or Former Employees beyond their retirement or other termination
of service other than (A) coverage mandated by applicable laws, (B) death
benefits under any "employee pension benefit plan" (as defined in Section
3(2) of ERISA), (C) retirement benefits under any employee pension benefit
plan or (D) deferred compensation benefits accrued as liabilities on the
Financial Statements.
(vi) No facts or circumstances exist, no actions have been taken or
omitted to be taken, nothing has occurred and nothing will occur as a result
of the execution, delivery and performance of this Agreement, such that the
Corporation could be subject (directly or indirectly, such as through an
indemnification, guarantee or similar agreement or obligation) to any
liability for any claims, judgments, damages, penalties, taxes (including
excise taxes), assessments or similar terms, including, without limitation,
any claim by a plan or by the Pension Benefit Guaranty Corporation under
Section 412 of the Code or under Title IV of ERISA, with respect to any of
the Employee Plans or any "employee benefit plan" (as defined in Section 3(3)
of ERISA) currently or formerly maintained by a business entity that is or
has been aggregated with, or treated as the same employer as, the Corporation
for any purpose under ERISA or the Code (other than liability for benefit
payments incurred in the normal operations of any such Employee Plan for
periods preceding the Closing Date), nor does the Corporation have any such
liability. Without limiting the scope of the previous sentence, none of the
Corporation or any Employee Plan has, since the inception of each Employee
Plan, violated the "prohibited transaction" provisions of Section 4975(c) and
(d) of the Code or Sections 406 and 408 of ERISA.
(vii) There has been no failure to comply with the continuation
health care coverage requirements of Sections 162(k) and 4980B of the Code
and Sections 601 through 608 of ERISA, with respect to each Employee or
Former Employee and any other employee or former employee of the Corporation
and any member of a "controlled group of corporations" (as defined in Section
1563(a) of the Code) that included the Corporation ("COBRA Employee") and any
"qualified beneficiary" (as defined in Sections 162(k) or 4980B of the Code)
of any COBRA Employee that could result in a material liability for the
Corporation.
3.17 AGREEMENTS. Except as set forth on Schedule 3.17 of the Disclosure
Schedule, neither the Corporation nor any Subsidiary is a party to any written
or oral contract not made in the ordinary course of business and, whether or not
made in the ordinary course of business, neither the Corporation nor any
Subsidiary is a party to any material written or oral (a) contract with any
labor union; (b) contract for the future purchase of fixed assets or for the
future purchase of materials, supplies or equipment in excess of normal
operating requirements; (c) contract for the employment of any officer,
individual employee or other person on a full-time basis or any contract with
any person on a consulting basis, in each case that provides for a severance
arrangement with such employee or consultant; (d) agreement or indenture
relating to the borrowing of money or to the mortgaging, pledging or otherwise
placing a lien on any assets of the Corporation and/or the Subsidiaries; (e)
guaranty of any obligation for borrowed money or otherwise; (f) lease or
agreement under which the Corporation and/or any Subsidiary is lessee of or
holds or operates any property, real or personal, owned by any other party; (g)
lease or agreement under which the Corporation and/or any Subsidiary is lessor
of or permits any third party to hold or operate any property, real or personal,
owned or controlled by the Corporation
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and/or the Subsidiaries; (h) agreement or other commitment for capital
expenditures in excess of $10,000; (i) contract, agreement or commitment under
which the Corporation and/or any Subsidiary is obligated to pay any broker's
fees, finder's fees or any such similar fees, to any third party; (j) any
license (whether as licensor or licensee), or sublicense, royalty, permit, or
franchise agreement, (k) the content or delivery of its content, products and
services (including the transmission or other performance (electronically or
otherwise)) (other than confidentiality and non-disclosure agreements entered
into in the ordinary course of business); (l) any agreement, instrument or other
arrangement granting or permitting any encumbrance on any of the properties,
assets or rights of the Corporation and/or the Subsidiaries; (m) agreement which
restricts the Corporation and/or any Subsidiary from engaging in any aspects of
its business or competing in any line of business in any geographic area; or (n)
any other contract, agreement, arrangement or understanding which is material to
the businesses of the Corporation and/or the Subsidiaries or which is material
to a prudent investor's understanding of the businesses of the Corporation and
the Subsidiaries (collectively, the "Contracts"). All such contracts and
agreements constitute the valid and binding obligations of the respective
parties thereto, enforceable in accordance with their terms, and neither the
Corporation or any Subsidiary nor, to the Best Knowledge of the Corporation and
the Subsidiaries, any other party thereto is in default thereunder and there
exists no condition, event or act which constitutes, or which after notice,
lapse of time or both, would constitute, a default by the Corporation or any
Subsidiary or, to the Best Knowledge of the Corporation and the Subsidiaries,
any other party thereunder.
3.18 COMPLIANCE; LICENSES AND PERMITS. Except as set forth on Schedule 3.18
of the Disclosure Schedule or in the SEC Documents, the Corporation has complied
in all material respects with all Federal, state, local or foreign laws,
ordinances, regulations or orders applicable to the business of the Corporation
as presently or previously conducted. The Corporation has all Federal, state,
local and foreign governmental licenses and permits which are required for the
conduct of the business presently conducted by the Corporation the failure to
obtain which either individually or in the aggregate could reasonably be
expected to have a Material Adverse Effect, which licenses and permits are in
full force and effect, and no violations are outstanding or uncured with respect
to any such licenses or permits and no proceeding is pending or, to the Best
Knowledge of the Corporation and the Subsidiaries, threatened to revoke or limit
any thereof. Schedule 3.18 of the Disclosure Schedule hereto lists all Federal,
state, local and foreign governmental licenses and permits of the Corporation
which are used in or relate to its business.
3.19 LABOR RELATIONS; EMPLOYEES. Neither the Corporation nor any Subsidiary
is delinquent in payments to any of its employees for any wages, salaries,
commissions, bonuses or other direct compensation for any services performed by
them to the date hereof or amounts required to be reimbursed to such employees,
(ii) there is no labor strike, dispute, slowdown or stoppage actually pending or
threatened against or involving the Corporation or any Subsidiary and (iii)
neither any grievance nor any arbitration proceeding arising out of or under
collective bargaining agreements is pending and no claim therefor has been
asserted.
3.20 LITIGATION. Except as set forth in Schedule 3.20 of the Disclosure
Schedule or in the SEC Documents, there is no action, suit, customer claim,
proceeding or investigation at law or in equity or by or before any United
States or foreign governmental instrumentality or other agency now pending
nor, to the Best Knowledge of the Corporation and the Subsidiaries,
threatened against, or affecting the assets or properties of, the Corporation
or the Subsidiaries
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(including, without limitation, any action, suit, claim, proceeding or
litigation involving the claims contemplated by Sections 3.14 and 3.15), nor
does there exist any basis for any such action, suit, customer claim, proceeding
or investigation. There are no orders, judgments or decrees of any United States
or foreign court or governmental agency that name or are expressly made
applicable to the Corporation or the Subsidiaries.
3.21 TAX MATTERS. The Corporation and each Subsidiary has (a) filed all
state, local and foreign tax returns, declarations of estimated tax, tax
reports, information returns and statements (collectively, the "Returns")
required to be filed by it prior to the Closing (other than those for which
extensions shall have been granted prior to the Closing) relating to any Taxes
(as defined below) with respect to any income, properties or operations of the
Corporation and each Subsidiary (as the case may be) prior to the Closing; (b)
as of the time of filing, the Returns were complete and correct and the
Corporation and the Subsidiaries (as the case may be) have paid all Taxes shown
on the Returns to be due; (c) neither the Corporation nor any Subsidiary is
delinquent in the payment of any Taxes, nor has the Corporation or any
Subsidiary requested any extension of time within which to file any Return,
which Return has not since been filed; (d) there are no pending tax audits of
any Returns of the Corporation or the Subsidiaries; (e) no tax liens have been
filed and no deficiency or addition to Taxes, interest or penalties for any
Taxes with respect to any income, properties or operations of the Corporation or
the Subsidiaries has been proposed, asserted or assessed in writing against the
Corporation or the Subsidiaries; (f) neither the Corporation nor any Subsidiary
has granted any extension of the statute of limitations applicable to any Return
or other Tax claim with respect to any income, properties or operations of the
Corporation or such Subsidiary (as the case may be); (g) neither the Corporation
nor any Subsidiary has, during the five-year period preceding the date hereof,
been a personal holding company within the meaning of Section 542 of the Code;
and (h) neither the Corporation nor any Subsidiary has made any election under
Section 341(f) of the Code. As used in this Agreement, the term "Tax" shall mean
any of the Taxes and the term "Taxes" shall mean, with respect to any person or
entity, (i) all income taxes (including any tax on or based upon net income, or
gross income, or income as specially defined, or earnings, or profits, or
selected items of income, earnings or profits) and all gross receipts, sales,
use, ad valorem, transfer, franchise, license, withholding, payroll, employment,
excise, severance, stamp, occupation, premium, property or windfall profits
taxes, alternative or add-on minimum taxes, customs duties or other taxes, fees,
assessments or charges of any kind whatsoever, together with any interest and
any penalties, additions to tax or additional amounts imposed by any taxing
authority (domestic or foreign) on such person or entity and (ii) any liability
for the payment of any amount of the type described in the immediately preceding
clause (i) as a result of being a "transferee" (within the meaning of Section
6901 of the Code or any other applicable law) of another person or entity or a
member of an affiliated or combined group.
3.22 RELATED PARTY TRANSACTIONS. Except as set forth on Schedule 3.22 of
the Disclosure Schedule hereto, no current or former stockholder, director,
officer or employee of the Corporation or any Subsidiary, nor any "associate"
(as defined in the rules and regulations promulgated under the Securities Act)
of any such person, is presently, or since the inception of the Corporation and
each of the Subsidiaries has been, directly or indirectly through his, her or
its affiliation with any other person or entity, a party to any transaction with
the Corporation, providing for the furnishing of services by or to, or rental of
real or personal property from or to, or otherwise requiring cash payments to or
by any such person. For the purposes of this
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Agreement, a transaction of the type described in this Section 3.22 is sometimes
herein referred to as a "Related Party Transaction."
3.23 OFFERING EXEMPTION. Subject in part to and in reliance in part upon
the accuracy of the representations and warranties of the Investors set forth in
Section 4 hereof, the offering and sale of the Senior Preferred Shares and the
Warrants and the Reserved Common Shares and the Warrant Shares upon conversion,
exercise or exchange (as the case may be) of the Senior Preferred Shares or the
Warrant (as the case may be) are or will be exempt from registration under the
Securities Act; and the aforesaid offering and sale is and will be exempt from
registration under applicable state securities and "blue sky" laws. The
Corporation has made or will make all requisite filings and has taken or will
take all action necessary to be taken to comply with such state securities or
blue sky laws.
3.24 BROKERS. Neither the Corporation, the Subsidiaries nor any of the
officers, directors, employees or stockholders of the Corporation has employed
any broker or finder in connection with the transactions contemplated by this
Agreement.
3.25 REGISTRATION RIGHTS. Except as contemplated by the Registration Rights
Agreement or set forth on Schedule 3.25 of Disclosure Schedule, hereto, no
person has any right to cause the Corporation to effect the registration under
the Securities Act of any shares of Common Stock or any other securities
(including debt securities) of the Corporation.
3.26 OTHER SECURITIES. Except as set forth on Schedule 3.26 of the
Disclosure Schedule, the Senior Preferred Stock issued and sold hereunder to the
Investor is the most senior class of security (whether debt or equity) held by
any current investor in or lender to the Corporation.
3.27 USE OF PROCEEDS. The net proceeds received by the Corporation from the
sale of the Senior Preferred Shares and Warrants shall be used by the
Corporation for working capital and general corporate purposes and as set forth
on Schedule 3.27 of the Disclosure Schedule.
3.28 INSURANCE. All policies set forth on Schedule 3.28 of the Disclosure
Schedule of insurance held by the Corporation and by the Subsidiaries are valid
and enforceable polices and are outstanding and duly in force and all premiums
due with respect thereto have been paid in full. The amounts of coverage under
such policies of insurance are of the types and amounts customarily carried by
entities conducting businesses similar to those of the Corporation and the
Subsidiaries. Neither the Corporation nor any Subsidiary has, during the last
three fiscal years, been denied or had revoked or rescinded any policy of
insurance.
3.29 DISCLOSURE. Neither this Agreement nor any other document,
certificate, instrument or statement furnished or made available to the Investor
by or on behalf of the Corporation in connection with the transactions
contemplated hereby contains any untrue statement of a material fact or omits to
state a material fact necessary in order to make the statements contained herein
and therein, viewed as a whole, not misleading.
3.30 UNDERWRITING AGREEMENT All representations and warranties to be set
forth in the underwriting agreement, expected to be entered into between the
Corporation and Underwriters (as such term is to be defined in the Underwriting
Agreement) with respect to the
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Qualified Offering (the "Underwriting Agreement") (other than those that refer
specifically to the Underwriting Agreement or arrangements with the Underwriters
that are not germane to the placement of the shares of Common Stock that are
subject thereto (other than those related generally to the offering contemplated
thereby)) will be true and complete in all respects as if made on and as of the
date thereof, and upon execution and delivery of the Underwriting Agreement will
be deemed to be hereby incorporated by reference and made a part hereof as if
set forth herein in their entirety.
3.31 QUALIFIED SMALL BUSINESS.
(a) The Corporation has conducted a reasonable investigation into the
question of whether the Senior Preferred Stock is "qualified small business
stock" ("QSBS") within the meaning of Section 1202(c) of the Code; and as of the
date hereof all of the Senior Preferred Stock is QSBS.
(b) Qualification of the Senior Preferred Stock as QSBS is based, in part,
on the value of the Corporations capital stock or other assets at certain
relevant times. For purposes of the representations made in this Section 3.31,
the Corporation has made a good faith determination of such values, taking into
account all material facts and circumstances, but cannot guarantee that the
Internal Revenue Service will not successfully assert that such determination is
incorrect.
(c) Qualification of the Senior Preferred Stock as QSBS is based, in part,
on whether the Corporation has been engaged in the active conduct of one or more
qualified trades or businesses. The term "qualified trade or business" set forth
in Section 1202(e)(3) of the Code is not clearly defined in all respects. For
purposes of the representations made in this Section 3.31, the Corporation has
made a good faith effort to apply the definition of qualified trade or business
set forth in Section 1202(e)(3) of the Code, but cannot guarantee that the
Internal Revenue Service will not successfully assert a contrary definition.
(d) Qualification of the Senior Preferred Stock as QSBS is based, in part,
on whether at least eighty percent (by value) of the Corporation's assets have
been used in the active conduct of one or more qualified trades or businesses.
For this purpose, assets held as "working capital" of a qualified trade or
business within the meaning of Section 1202(e)(6) of the Code are treated as
used in the active conduct of such trade or business. The term "working capital"
set forth in Section 1202(e)(6) of the Code is not clearly defined in all
respects. For purposes of the representations made in this Section 3.31, the
Corporation has made a good faith effort to apply the definition of working
capital set forth in Section 1202(e)(6) of the Code, but cannot guarantee that
the Internal Revenue Service will not successfully assert a contrary definition.
(e) Qualification of the Senior Preferred Stock as QSBS is based, in part,
on whether the Corporation purchased any of its capital stock from a person
related to the Investors during a relevant testing period. For purposes of the
representations made in this Section 3.31, the Corporation has made a good faith
determination that such purchases did not occur, but cannot guarantee that the
Internal Revenue Service will not successfully assert that such determination is
incorrect.
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3.32 DEFINITION OF "BEST KNOWLEDGE". As used herein, the term the "Best
Knowledge" shall mean and include (a) actual knowledge and (b) that knowledge
which a prudent business person could have obtained in the management of his or
her business affairs after making due inquiry and exercising due diligence with
respect thereto. In connection with the foregoing, the knowledge (both actual
and constructive) of any director, officer or key employee of the Corporation
and the Subsidiaries shall be imputed to be the knowledge of the Corporation and
the Subsidiaries
4. REPRESENTATIONS AND WARRANTIES OF THE INVESTORS.
(a) Each Investor has all requisite corporate power and corporate authority
to carry out the transactions contemplated by the Documents.
(b) The execution, delivery and performance by an Investor of the Documents
have been duly authorized by all requisite action by such Investor and each such
Document constitutes a valid and binding obligation of such Investor,
enforceable against such Investor in accordance with its terms.
(c) No consent of any person and no consent, approval or authorization of,
or declaration to or filing with, any governmental or regulatory authority is
required for the valid authorization, execution and delivery by an Investor of
any Document or for the consummation of the transactions contemplated thereby.
(d) Each Investor represents and warrants to the Corporation, as to itself,
that (a) the Investor is and will be acquiring the Senior Preferred Shares and
the Warrants to be purchased hereunder and, in the event that such Investor
should acquire any Reserved Common Shares or Warrant Shares, that such Investor
will be acquiring such Reserved Common Shares or Warrant Shares, for its own
account, for investment and not with a view to the distribution thereof within
the meaning of the Securities Act.
(i) Each Investor understands that (A) the Senior Preferred Shares
and the Warrants have not been and the Reserved Common Shares and Warrant
Shares will not be, registered under the Securities Act, by reason of their
issuance by the Corporation in transactions exempt from the registration
requirements of the Securities Act and (B) the Senior Preferred Shares, the
Warrants, the Warrant Shares and the Reserved Common Shares must be held by
such Investor indefinitely unless a subsequent disposition thereof is
registered under the Securities Act or is exempt from registration.
(ii) Each Investor further understands that the exemption from
registration afforded by Rule 144 (the provisions of which are known to such
Investor) promulgated under the Securities Act depends on the satisfaction of
various conditions, and that, if applicable, Rule 144 may only afford the
basis for sales only in limited amounts.
(iii) Each Investor represents and warrants that it has not employed
any broker or finder in connection with the transactions contemplated by this
Agreement.
(iv) Each Investor represents and warrants that it is an "accredited
investor" as such term is defined in Rule 501(a) promulgated under the
Securities Act.
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(v) Each Investor agrees that the Corporation may place a legend on
the certificates delivered hereunder stating that the Senior Preferred
Shares, the Warrants, the Warrant Shares and any Reserved Common Shares have
not been registered under the Securities Act, and, therefore cannot be
offered, sold or transferred unless they are registered under the Securities
Act or an exemption from such registration is available, and that the
Corporation may place stop transfer orders on the transfer books of the
Corporation.
5. CONDITIONS PRECEDENT TO THE CLOSING.
5.1 CONDITIONS PRECEDENT TO THE CLOSING. The obligations of the Investors
to purchase and pay for Senior Preferred Shares and the Warrants at the Closing
are subject to satisfaction of the following conditions precedent (in addition
to such other conditions as are hereinafter set forth in this Section 5):
(a) CORPORATE PROCEEDINGS. All corporate and other proceedings to be taken
and all waivers and consents, approvals, qualifications and/or registrations
required to be obtained or effected in connection with the execution, delivery
and performance of the Documents and the transactions contemplated thereby,
including, but not limited to, the reservation, issuance, sale and delivery of
the Senior Preferred Shares, the Warrants, the Warrant Shares and the Reserved
Common Shares, shall have been taken, obtained or effected (except for the
filing of any notice subsequent to the Closing which may be required under
applicable Federal and state securities or "blue sky" laws or any comparable
foreign securities laws which, if required, shall be filed on a timely basis as
may be so required), and all documents incident thereto shall be satisfactory in
form and substance to the Investors and to its special counsel, Orrick
Herrington & Sutcliffe LLP ("OHS"). The Investor and OHS, shall have received
all such originals or certified or other copies of such documents as have been
reasonably requested.
(b) OPINION OF COUNSEL. The Investor shall have received from Golenbock,
Eiseman, Assor & Bell, counsel for the Corporation, its favorable opinions
addressed to the Investor, dated the date of the Closing, substantially in the
form of EXHIBIT C attached hereto with respect to the Closing.
(c) DUE DILIGENCE. The Investor shall have completed its business and legal
due diligence review of the Corporation and the Subsidiaries to its
satisfaction.
(d) MATERIAL ADVERSE CHANGE. There shall have been no occurrence of any
material adverse change in the business or prospects of the Corporation and/or
the Subsidiaries.
(e) PAYMENT OF LEGAL FEES. Simultaneously with each such Closing, the
Corporation shall pay to OHS, special counsel to the Investor, up to $40,000 of
fees and charges incurred in connection with the transactions contemplated by
the Closing.
(f) FILING OF CERTIFICATE OF DESIGNATION. The Certificate of Designation
shall have been filed with and accepted by the Secretary of State of the State
of Delaware and a copy of the Certificate of Designation, certified by the
Secretary of State of the State of Delaware, shall have been delivered to the
Investors promptly thereafter.
17
<PAGE>
(g) REGISTRATION RIGHTS AGREEMENT. A registration rights agreement (the
"Registration Rights Agreement") among the Corporation and the Investors, in the
form of EXHIBIT D hereto, shall have been duly executed and delivered by the
Corporation and the Investor.
(h) STOCKHOLDERS AGREEMENT. A stockholders agreement (the "Stockholders
Rights Agreement") among the Corporation, the Founders (as such term is defined
therein) and the Investors, in the form of EXHIBIT E hereto, shall have been
duly executed and delivered by the Corporation, the Founders and the Investor.
(i) TERMINATION OF PREEMPTIVE RIGHTS. The preemptive rights granted to
Treacy & Co., LLC pursuant to the Letter Agreement dated November 16, 1998 shall
have been terminated.
6. INFORMATION RIGHTS.
6.1 ACCESS TO RECORDS. The Corporation shall, from and after such time that
it offers similar rights to any other person or entity who or which shall be an
equity investor of the Corporation but in any event from the date hereof until
the date that the Investors nominate a director, and such director is elected,
to the Board of Directors of the Corporation pursuant to the Stockholders
Agreement, afford to the Investors and their employees, counsel and other
authorized representatives free and full access, upon reasonable advance notice,
to all of the books, records and properties of the Corporation and the
Subsidiaries and to all officers and employees of the Corporation and the
Subsidiaries, for any reasonable purpose whatsoever. The Investors shall use
reasonable efforts to maintain the confidentiality of and confidential and
proprietary information so obtained by it; provided, however, that the foregoing
shall in no way limit or otherwise restrict the ability of the Investors or such
authorized representatives to disclose any such information concerning the
Corporation or the Subsidiaries which it may be required to disclose (i) to it
partners or limited partners to the extent required to satisfy its fiduciary
obligations to such persons or (ii) otherwise pursuant to or as required by law.
6.2 AFFIRMATIVE COVENANTS. (a) The Corporation shall furnish to the
Investors promptly upon becoming available:
(i) with respect to each fiscal year of the Corporation,
concurrently with the filing by the Corporation with the SEC, by its due
date (as the same may be extended), of its annual report on Form 10-K, a
consolidated balance sheet of the Corporation as at the end of such
fiscal year and consolidated statements of operations, cash flows and
stockholders' equity for such year, all in reasonable detail and
certified by independent certified public accountants for the
Corporation;
(ii) with respect to each fiscal quarter of the Corporation (other
than the final fiscal quarter of each fiscal year), concurrently with
the filing of the Corporation with the SEC, by its due date (as the same
may be extended), of its quarterly report on Form 10-Q, a consolidated
balance sheet of the Corporation as at the end of such quarter and
related consolidated statements of operations, cash flows and
stockholders' equity of the Corporation, for such quarter, all in
reasonable detail and certified by the principal
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<PAGE>
financial officer of the Corporation; and
(iii) copies of all financial statements, reports, press releases,
notices, proxy statements and other documents sent by the Corporation to
its stockholders or released to the public and copies of all regular and
periodic reports filed by the Corporation with the SEC or any securities
exchange.
7. ADDITIONAL AGREEMENTS OF THE CORPORATION.
7.1 RESTRICTIONS ON CERTAIN ACTIONS.
(a) For so long as the Investors collectively shall own or have the right
to acquire (upon conversion of the Senior Preferred Shares and/or exercise or
exchange of the Warrants more than 1.5% of the outstanding Common Stock of the
Corporation, the Corporation shall not directly or indirectly, without first
consulting with the Investors holding a majority in interest of such outstanding
Common Stock:
(i) sell, abandon, transfer, lease, or otherwise dispose of all or
substantially all of its properties or assets or license exclusively any
material intellectual or intangible property rights of the Corporation and/or
the Subsidiaries, or merge or consolidate with or into, or permit any
Subsidiary to merge with or into any other corporation, corporations, entity
or entities or sell or dispose of or grant any third party any right to
acquire any shares of capital stock or other securities of any Subsidiary,
except in the case where the Corporation shall be the surviving corporation
and except for transactions between the Corporation and a Subsidiary or any
two Subsidiaries, unless in any such event the Corporation has received an
opinion in customary form from a nationally recognized investment banking
firm that such transaction is fair to the Corporation or the Stockholders of
the Corporation (as the case may be), from a financial point of view;
(ii) take any action to cease operations of any business or segment
thereof that is material to the Corporation or a Subsidiary;
(iii) declare or pay any dividends (other than Junior PIK Dividends
or Senior Preferred Dividends in accordance with the Certificate of
Incorporation) or make any distribution of cash or property or both to
holders of shares of capital stock or other securities of the Corporation or
repurchase or redeem any shares of capital stock or other securities of the
Corporation; other than as set forth in Section 6 of the Certificate of
Designation for the Senior Preferred Stock of the Certificate of
Incorporation of the Corporation and other than the repurchase of Common
Stock from employees upon termination of employment which repurchase is
approved by the Board of Directors of the Corporation;
(iv) enter into or become subject to any agreement which restricts
or purports to restrict in any material manner the Corporation and/or the
Subsidiary from engaging or otherwise competing in any aspect of its business
anywhere in the world or which otherwise limits the business in which the
Corporation and/or the Subsidiaries may engage or compete, except in the case
of agreements not to compete that are entered into in connection with and are
reasonably related to any business transferred in connection with a sale of
assets; or
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<PAGE>
(v) take any action or enter into any other transaction not planned
or contemplated by the then current business and operating plan of the
Corporation or the applicable Subsidiary, as then approved by the Board of
Directors, or effect any material change in the conduct or operation of its
business and/or the businesses of the Subsidiaries.
(b) For so long as the Investors collectively shall own or have the right
to acquire (upon conversion of the Senior Preferred Shares and/or exercise or
exchange of the Warrants more than 1.5% of the outstanding Common Stock of the
Corporation, the Corporation shall not directly or indirectly, without the prior
written consent of the Investors holding a majority in interest of such
outstanding Common Stock, enter into any Related Party Transaction that is on
terms less favorable to the Corporation than could have been obtained on a bona
fide arms' length basis with a third party or repurchase or redeem any capital
stock of an affiliate (as such term is defined in the Securities Act) of the
Corporation and, in each case, is approved by the Board of Directors (excluding
therefrom any director involved in such Related Party Transaction);
(c) Anything contained in this Section 7.1 to the contrary notwithstanding,
the Corporation shall be permitted to consummate a Qualified Offering (as such
term is defined in the Certificate of Designation) under this Section 7.1
without the consent of the Investor.
(d) For so long as the Investors hold at least 50% of their original share
position, the Corporation shall not effect any material change in the direction
of its business unless approved by at least two-thirds of the Board of Directors
and the Investors.
7.2 COMPLIANCE. Each of the Corporation and the Subsidiaries (a) in
carrying out their respective contemplated businesses will comply in all
material respects with all Federal, state, local and foreign laws, ordinances,
regulations and orders applicable to it, its business and the ownership of its
assets and (b) will obtain and maintain in full force and effect all Federal,
state, local and foreign governmental licenses and permits necessary in the
conduct of its business if the failure to so obtain or maintain such licenses
and permits could reasonably be expected to have a Material Adverse Effect, and
such licenses and permits shall be so maintained, in full force and effect.
7.3 INSURANCE. All the insurable properties of the Corporation and the
Subsidiaries will be insured for the benefit of the Corporation or such
Subsidiary (as the case may be) in amounts deemed adequate by the Corporation or
such Subsidiary (as the case may be) against all risks usually insured against
by persons operating similar properties in the localities in which such
properties are located under policies in effect and issued by insurers of
recognized responsibility. The Corporation shall maintain directors and officers
insurance in such amounts adequate and consistent with companies similarly
situated.
7.4 CORPORATE EXISTENCE, PROPERTIES, ETC.. Each of the Corporation and the
Subsidiaries shall maintain, preserve and keep in full force and effect their
respective corporate existences and all rights, franchises, licenses and permits
necessary to the proper conduct of its business, and the ownership, lease, or
operation of its properties that, if not so maintained, could reasonably be
expected to have a material adverse effect on the Corporation or the
Subsidiaries (as the case may be); and take all action which may be reasonably
required to obtain, preserve,
20
<PAGE>
renew and extend all material licenses, permits, authorizations, trade names,
trademarks, service names, service marks, copyrights and patents which are
necessary for the continuance of the operation of any such property by the
Corporation and the Subsidiaries (as the case may be). Anything contained in
this Agreement to the contrary notwithstanding, the Corporation shall be
permitted to (i) transfer assets among its Subsidiaries, (ii) combine its
Subsidiaries and (iii) eliminate non-operating Subsidiaries that neither own nor
are a licensee of any material assets.
7.5 PAYMENT OF TAXES. The Corporation shall pay all taxes, assessments and
governmental charges or liens imposed upon its income or receipts or upon any of
its properties (except with respect to taxes being contested in good faith by
appropriate legal proceedings), which if not so paid could reasonably be
expected, individually or in the aggregate, to have a material adverse effect on
the Corporation.
7.6 NONDISCLOSURE AND INVENTION ASSIGNMENT AGREEMENT. The Corporation
shall, and shall cause each Subsidiary to, require each officer and employee of
the Corporation or such Subsidiary, as a condition to the employment of such
officer or employee, to execute and deliver a non-disclosure and assignment of
inventions agreement in the proper form approved by the Board of Directors. The
Corporation shall obtain a similar agreement (PROVIDED that appropriate changes
shall be made in such agreement to describe the appropriate nature of such third
party's relationship with the Corporation) from each consultant or independent
contractor to the Corporation who or which has access to the Corporation's
confidential information. The Corporation shall, within thirty (30) days of the
Closing, certify to the Investors that it has so complied with this Section 7.6
and shall provide the Investors with copies of any and all non-disclosure and
assignment of inventions agreements entered into by the Corporation that are
different from the form approved by the Board of Directors of the Corporation.
7.7 REVIEW OF REGISTRATION STATEMENT. Each Investor shall have a right to
review any references to such Investor that appear in any registration
statements filed with the SEC by the Corporation, PROVIDED that such Investor
shall not unreasonably object to such references and, PROVIDED FURTHER that this
review shall not impede the Corporation in meeting its disclosure obligations
under applicable securities laws, as reasonably interpreted by its counsel.
7.8 KEY-MAN LIFE INSURANCE. The Corporation shall after the date hereof
obtain and maintain life insurance policies on the lives of Robert A. Jennings
and Ian Sutcliffe, each of which policies shall (i) be issued by a financially
sound and reputable insurer, (ii) be in the face amount of $5,000,000 and (iii)
name the Corporation as beneficiary.
8. RESTRICTION ON TRANSFER.
(a) Senior Preferred Shares, the Warrants and/or any Reserved Common Shares
or Warrant Shares issued upon conversion, exercise or exchange of such Senior
Preferred Shares or Warrants (as the case may be) held by the Investor shall not
be sold, transferred, assigned, pledged, encumbered or otherwise disposed of
(each, a "Transfer") except upon the conditions specified in this Section 8,
which conditions are intended to insure compliance with the provisions of the
Securities Act.
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<PAGE>
(b) Each certificate for shares of the capital stock of the Corporation
held by the Investors and each certificate for any such securities issued to
subsequent transferees of any such certificate shall (unless otherwise permitted
by the provisions of Sections 8(c) and 8(d)) be stamped or otherwise imprinted
with a legend in substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN
ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933. THESE SECURITIES MAY NOT BE SOLD
OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN
EXEMPTION THEREFROM UNDER SAID ACT. ADDITIONALLY, THE
TRANSFER OF THESE SECURITIES IS SUBJECT TO THE CONDITIONS
SPECIFIED IN SECTION 8 OF THE STOCK PURCHASE AGREEMENT DATED
AS OF FEBRUARY 26, 1999, AMONG MEDICONSULT.COM, INC. AND THE
OTHER PARTIES THERETO, AND NO TRANSFER OF THESE SECURITIES
SHALL BE VALID OR EFFECTIVE UNTIL SUCH CONDITIONS HAVE BEEN
FULFILLED. UPON THE FULFILLMENT OF CERTAIN OF SUCH
CONDITIONS, MEDICONSULT.COM, INC. HAS AGREED TO DELIVER TO
THE HOLDER HEREOF A NEW CERTIFICATE, NOT BEARING THIS
LEGEND, FOR THE SECURITIES REPRESENTED HEREBY REGISTERED IN
THE NAME OF THE HOLDER HEREOF. COPIES OF SUCH AGREEMENT MAY
BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE HOLDER
OF RECORD OF THIS CERTIFICATE TO THE SECRETARY OF
MEDICONSULT.COM, INC."
(c) The Investors agree, prior to any Transfer of such shares of stock, to
give written notice to the Corporation of such Investor's intention to effect
such Transfer and to comply in all other respects with the provisions of this
Section 8. Each such notice shall describe the manner and circumstances of the
proposed Transfer and shall be accompanied by the written opinion, addressed to
the Corporation, of counsel for the holder of such shares, stating that in the
opinion of such counsel such proposed Transfer does not involve a transaction
requiring registration or qualification of such shares under the Securities Act
or the securities "blue sky" laws of any relevant state of the United States;
PROVIDED, HOWEVER, that no such opinion of counsel shall be necessary for a
Transfer to a subsidiary or affiliate or partner or retired partner of such
Investor, if the transferee agrees in writing to be subject to the terms of this
Section 8 to the same extent as if such transferee were originally a signatory
to this Agreement. Such Investor shall thereupon be entitled to Transfer such
shares in accordance with the terms of the notice delivered by it to the
Corporation. Each certificate or other instrument evidencing the securities
issued upon the Transfer of any such shares (and each certificate or other
instrument evidencing any untransferred balance of such shares) shall bear the
legend set forth in Section 8(b) unless (x) in such opinion of counsel
registration of any future Transfer is not required by the applicable provisions
of the Securities Act or (y) the Corporation shall have waived the requirement
of such legends; PROVIDED, HOWEVER, that such legend shall not be required on
any certificate or other instrument evidencing the securities issued upon such
Transfer in the event such Transfer shall be made in compliance with the
requirements of Rule 144 and the transferee is not an affiliate of the
Corporation. Such Investor shall not Transfer any shares until such
22
<PAGE>
opinion of counsel has been given (unless waived by the Corporation or unless
such opinion is not required in accordance with the provisions of this Section
8(c)).
(d) Notwithstanding the foregoing provisions of this Section 8, the
restrictions imposed by this Section 8 upon the transferability of any shares of
the capital stock of the Corporation held by an Investor shall cease and
terminate when (i) any such shares are sold or otherwise disposed of pursuant to
an effective registration statement under the Securities Act or as otherwise
contemplated by Section 8(c) and, pursuant to Section 8(c), the securities so
transferred are not required to bear the legend set forth in Section 8(b) or
(ii) the holder of such shares has met the requirements for Transfer of such
shares pursuant to subparagraph (k) of Rule 144. Whenever the restrictions
imposed by this Section 8 shall terminate, as herein provided, such Investor's
shares as to which such restrictions have terminated shall be entitled to
receive from the Corporation, without expense, a new certificate not bearing the
restrictive legend set forth in Section 8(b) and not containing any other
reference to the restrictions imposed by this Section 8.
9. FEES.
(a) The Corporation will pay, and hold the Investor harmless against all
liability for the payment of, (i) all costs and other expenses incurred in
connection with the Corporation's performance of and compliance with all
agreements and conditions contained herein on its part to be performed or
complied with and (ii) the fees (up to $40,000) and charges of OHS, special
counsel to the Investor, for its services in connection with the transactions
contemplated by this Agreement, which fees and charges will be paid by the
Corporation at the Closing or within three days thereafter.
(b) The Corporation further agrees that it will pay, and will save the
Investor harmless from, any and all liability with respect to any stamp or
similar taxes which may be determined to be payable in connection with the
execution and delivery and performance of the Documents or any modification,
amendment or alteration of the terms or provisions of the Documents, and that it
will similarly pay and hold the Investor harmless from all issue taxes in
respect of the issuance of the Reserved Common Shares or the Warrant Shares to
such Investors.
10. EXCHANGES; LOST, STOLEN OR MUTILATED CERTIFICATES. Upon surrender by the
Investor to the Corporation of any certificate representing Senior Preferred
Shares, the Warrants, the Warrant Shares or Reserved Common Shares, the
Corporation at its expense will issue in exchange therefor, and deliver to the
Investor, a new certificate or certificates representing such shares, in such
denominations as may be requested by the Investor. Upon receipt of evidence
satisfactory to the Corporation of the loss, theft, destruction or mutilation of
any certificate representing any Senior Preferred Shares or Warrants or Reserved
Common Shares or Warrant Shares purchased or acquired by the Investors upon
conversion of the Senior Preferred Shares or exercise or exchange of the
Warrants (as the case may be), and in case of any such loss, theft or
destruction, upon delivery of any indemnity agreement satisfactory to the
Corporation, or in case of any such mutilation, upon surrender and cancellation
of such certificate, the Corporation at its expense will issue and deliver to
the Investor a new certificate for such Senior Preferred Shares, Warrants,
Warrant Shares or Reserved Common Shares of like tenor, in lieu of such lost,
stolen or mutilated certificate.
23
<PAGE>
11. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS, ETC. Each
representation and warranty hereunder shall survive the Closing in accordance
with the applicable statute of limitations related to such representation or
warranty. All statements contained in any certificate or other instrument
delivered by the Corporation pursuant to this Agreement or in connection with
the transactions contemplated by this Agreement shall constitute representations
and warranties by the Corporation under this Agreement. All agreements contained
herein shall survive indefinitely until, by their respective terms, they are no
longer operative.
12. INDEMNIFICATION. The Corporation shall indemnify, defend and hold the
Investors harmless against all liability, loss or damage, together with all
reasonable costs and expenses related thereto (including legal and accounting
fees and expenses), arising from the untruth, inaccuracy or breach of any of the
representations, warranties, covenants or agreements of the Corporation herein
or any facts or circumstances constituting any such untruth, inaccuracy or
breach or with respect to any liability for any brokers' or finders' fees or
compensation owing or alleged to be owing in connection with the transactions
contemplated hereby.
13. REMEDIES. In case any one or more of the covenants and/or agreements set
forth in this Agreement shall have been breached by the Corporation, the
Investors may proceed to protect and enforce its or their rights either by suit
in equity and/or by action at law, including, but not limited to, an action for
damages as a result of any such breach and/or an action for specific performance
of any such covenant or agreement contained in this Agreement.
14. SUCCESSORS AND ASSIGNS. This Agreement shall bind and inure to the benefit
of the Corporation and the Investors and the respective successors, assigns,
heirs and personal representatives (as applicable) of the Corporation and the
Investors. Any transferee to whom rights under Sections 6 or 7.1 are transferred
shall, as a condition to such transfer, deliver to the Corporation a written
instrument by which such transferee identifies itself, gives the Corporation
notice of the transfer of such rights, identifies any securities of the
Corporation owned or acquired by it and agrees to be bound by the obligations
imposed hereunder upon the Investors to the same extent as if such transferee
were an Investor hereunder. A transferee to whom rights are transferred pursuant
to this Section 14 may not again transfer such rights to any other person or
entity, other than as provided in this Section 14.
15. ENTIRE AGREEMENT. This Agreement and the other writings referred to
herein or delivered pursuant hereto which form a part hereof contain the
entire agreement among the parties with respect to the subject matter hereof
and supersede all prior and contemporaneous arrangements or understandings
with respect thereto.
16. NOTICES. All notices, requests, consents and other communications hereunder
to any party shall be deemed to be sufficient if contained in a written
instrument delivered in person or sent by telecopy, nationally-recognized
overnight courier or first class registered or certified mail, return receipt
requested, postage prepaid, addressed to such party at the address set forth
below or such other address as may hereafter be designated in writing by such
party to the other parties:
(i) if to the Corporation, to:
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<PAGE>
Mediconsult.com, Inc.
33 Reid Street, 4th Floor
Hamilton HM 12
Bermuda
Attention: Robert H. Jennings
Telecopier:
with a copy to:
Golenbock, Eiseman, Assor & Bell
437 Madison Avenue
New York, New York 10022
Attention: Lawrence Bell, Esq.
Telecopier:
(ii) If to an Investor to such Investor at the address set forth
opposite such Investor's name on Schedule I,
with a copy to:
Orrick, Herrington & Sutcliffe LLP,
30 Rockefeller Plaza
New York, New York 10112
Telecopier: (212) 506-3730
Attention: Martin H. Levenglick, Esq.
All such notices, requests, consents and other communications shall be
deemed to have been delivered (a) in the case of personal delivery or delivery
by telecopy, on the date of such delivery, (b) in the case of dispatch by
nationally-recognized overnight courier, on the next business day following such
dispatch and (c) in the case of mailing, on the third business day after the
posting thereof.
17. CHANGES. The terms and provisions of this Agreement may not be modified or
amended, nor may any of the provisions hereof be waived, temporarily or
permanently, except pursuant to a written instrument executed by the Corporation
and the Investors holding a majority-in-interest of shares of Senior Preferred
Stock held or issuable upon conversion of the Senior Preferred Shares or upon
exercise or exchange of the Warrants.
18. COUNTERPARTS. This Agreement may be executed in any number of counterparts,
and each such counterpart hereof shall be deemed to be an original instrument,
but all such counterparts together shall constitute but one agreement.
19. HEADINGS. The headings of the sections of this Agreement have been inserted
for convenience of reference only and shall not be deemed to be a part of this
Agreement.
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<PAGE>
20. NOUNS AND PRONOUNS. Whenever the context may require, any pronouns used
herein shall include the corresponding masculine, feminine or neuter forms, and
the singular form of names and pronouns shall include the plural and vice-versa.
21. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York applicable to contracts made
and to be performed wholly therein (without reference to principles of conflict
of laws).
22. 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 may not bring or commence any such action or
proceeding except in any such court in such jurisdiction. 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. Without prejudice to the foregoing, the Corporation
irrevocably consents to service of process in the manner provided for notices in
Section 16. Nothing in this Agreement will affect the right of any party to this
Agreement to serve process in any other manner permitted by law.
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<PAGE>
Very truly yours,
MEDICONSULT.COM, INC.
By: /s/ Robert A. Jennings
------------------------------------------
Name: Robert A. Jennings
Title: Chief Executive Officer
THE INVESTORS:
NAZEM & COMPANY IV, L.P.,
By: Nazem & Associates IV, L.P., its General
Partner
By: /s/ Fred Nazem
------------------------------------------
Name: Fred Nazem
Title: General Partner
TRANSATLANTIC VENTURE FUND C.V.
By: /s/ Fred Nazem
-----------------------------------------
Name: Fred Nazem
Title: Investment Manager
/s/ Peter May
----------------------------------------
Peter May
/s/ Nelson Peltz
----------------------------------------
Nelson Peltz
27
<PAGE>
SCHEDULE I
SENIOR PREFERRED SHARES AND WARRANT SHARES
<TABLE>
<CAPTION>
- ---------------------------------------------------- ------------------------------ ---------------------- -----------------------
NUMBER OF SENIOR PREFERRED
SHARES BEING PURCHASED AT AGGREGATE PURCHASE
NAME AND ADDRESS OF INVESTOR THE CLOSING PRICE WARRANT SHARES
- ---------------------------------------------------- ------------------------------ ---------------------- -----------------------
- ---------------------------------------------------- ------------------------------ ---------------------- -----------------------
<S> <C> <C> <C>
NAZEM & COMPANY IV, L.P.
c/o Nazem & Co.
645 Madison Avenue
New York, New York 10022 158,228 $1,000,000.00 70,000
Attention: Fred F. Nazem
Telecopier: (212) 371-2150
- ---------------------------------------------------- ------------------------------ ---------------------- -----------------------
- ---------------------------------------------------- ------------------------------ ---------------------- -----------------------
TRANSATLANTIC VENTURE FUND C.V.
c/o Nazem & Co.
645 Madison Avenue
New York, New York 10022 189,873 $1,200,000.00 84,000
Attention: Fred F. Nazem
Telecopier: (212) 371-2150
- ---------------------------------------------------- ------------------------------ ---------------------- -----------------------
- ---------------------------------------------------- ------------------------------ ---------------------- -----------------------
Peter May
c/o Triarc Companies, Inc.
280 Park Avenue, 41st Floor, West Tower
New York, New York 10017 79,114 $500,000.00 35,000
Telecopier: (212) 451-3024
- ---------------------------------------------------- ------------------------------ ---------------------- -----------------------
- ---------------------------------------------------- ------------------------------ ---------------------- -----------------------
Nelson Peltz
c/o Triarc Companies, Inc.
280 Park Avenue, 41st Floor, West Tower
New York, New York 10017 79,114 $500,000.00 35,000
Telecopier: (212) 451-3024
- ---------------------------------------------------- ------------------------------ ---------------------- -----------------------
- ---------------------------------------------------- ------------------------------ ---------------------- -----------------------
TOTAL: 506,329 $3,200,000.00 224,000
- ---------------------------------------------------- ------------------------------ ---------------------- -----------------------
</TABLE>
28
<PAGE>
DISCLOSURE SCHEDULE
1. INTERPRETATION
We refer to the stock purchase agreement (the "Agreement") to be entered
into today between Mediconsult.com, Inc. (the "Corporation") and the
Investors referred to therein.
This letter is the Disclosure Schedule as defined in Section 3 of the
Agreement.
Defined terms where used in this Disclosure Schedule have the same meaning
as accorded to them in the Agreement, unless the context requires
otherwise.
The representations and warranties referred to in Section 3 of the
Agreement are made and given subject to the disclosures made in this
Disclosure Schedule. The Corporation shall not be or be deemed to be in
breach of any of such representations and warranties (and no claim shall
lie in respect thereof) to the extent of the disclosure made in this
Disclosure Schedule.
2. ANNEXES INCLUDED
This Disclosure Schedule consists of a disclosure schedule and Annexes
thereto and any and all documents and information specifically mentioned
in this Disclosure Schedule and the Annexes hereto.
3. SPECIFIC DISCLOSURES
3.1 Foreign Qualifications
Neither the Corporation or any Subsidiary is qualified to transact
business as a foreign corporation in any jurisdiction.
3.4 Consents, Approvals, Authorizations, Declarations and Filings.
CORPORATE AUTHORITY: The Certificate of Designation must be filed
in the State of Delaware.
BLUE SKY FILING:
New York - State Notice
Further State Notice
Broker/Dealer Statement
3.5 Capitalization
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(a)(i) The Corporation has granted to (1) Treacy & Co. LLC an option for
2,000,000 shares of Common Stock, exercisable at $.003 per share all vested, and
(2) Arnhold and S. Bleichroeder, Inc. ("ASB") warrants for an aggregate of
400,000 shares of Common Stock, exercisable at $1.22 per share.
(b) Treacy & Co. LLC and ASB have certain registration rights. The
Corporation has not made filings under the blue sky or state securities laws, or
under any foreign securities laws, in connection with the grant or exercise of
any stock options or warrants. Treacy & Co. LLC also has an option to purchase
358,333 shares of Common Stock from JHC Limited, at an exercise price of $1.20
per share. Since December 31, 1998, 18,000 shares have been issued upon the
exercise of options previously outstanding. At December 31, 1998, there were
862,950 shares of common stock reserved for issuance under the 1996 Stock Option
Plan, of which options to purchase 716,000 shares were then outstanding with a
weighted average exercise price of $1.38 per share. The Corporation has entered
into a memorandum of agreement with Cyberdiet Inc., pursuant to which the
Corporation may issue 400,000 shares of Common Stock. The Corporation's
agreements with INCIID permit payment in shares of Common Stock or in cash.
See Annex 3.5, a capitalization table.
3.6 Subsidiaries
The Subsidiaries of the Corporation and the jurisdiction of organization
thereof, are as follows:
<TABLE>
<S> <C>
Mediconsult.com(US), Ltd. Delaware
iHealth Inc. Delaware*
Pharminfonet Delaware*
Mediconsult.com Limited Bermuda
3542491 Canada Inc. Canada*
Mediconsult.com(UK) Ltd. Northern Ireland*
</TABLE>
* does not have significant activities
The laws of certain foreign countries in which Subsidiaries are organized
may require preemptive or similar rights.
3.9(a) Financial Statements See Annex 3.9
3.9(b) None
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3.10 None
3.11 Absence of Changes
(a) The Corporation has continued to incur an operating deficit.
(b) The Corporation has from time to time borrowed money from its majority
stockholder. A total of $4,300,000 of such stockholder advances have been
converted into Junior Preferred Stock, and the balance (approximately $700,000
as of February 20, 1999) remains outstanding and repayable upon demand. The
Corporation has entered into an agreement to form a joint venture with
CommonHealth LLP, pursuant to which the Corporation and CommonHealth LLP have
agreed to fund operations of the joint venture. The Corporation may borrow its
share of such operating funds from CommonHealth LLP. For information with
respect to transactions which INCIID and Cyberdiet, see Section 3.11(f) below.
(c) Assets and properties are subject to inchoate liens for taxes not yet
payable.
(e) Non-cumulative dividends on the Junior Preferred Stock accrue and are
payable in kind.
(f) The Corporation has entered into an Exclusive Sponsorship Agreement
with INCIID, pursuant to which the Corporation agreed to make donations of
$500,000 per year, in equal quarterly installments, in cash or Common Stock (the
"INCIID Transaction"). The Corporation has also entered into a memorandum of
agreement outlining the principle terms of certain management and option
agreements with Cyberdiet Inc., pursuant to which the Corporation has agreed to
issue to the stockholders of Cyberdiet Inc. an aggregate of 400,000 shares of
Common Stock under the circumstances (the "Cyberdiet Transaction").
(i) The Corporation has continued to incur operating losses.
(j) See the information with respect to Treacy & Co. LLC
3.14 Intellectual Property Rights
Trademarks: Mediconsult.com
iHealth
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Licenses: The Corporation licenses content from third parties in the
ordinary course of business. See Annex 3.14(a). The Corporation uses a standard
production and development server environment utilizing standard software
solutions running on generally available server hardware platforms. The
Corporation is currently transitioning from a core production environment
running on SGI hardware and UNIX platform hosted at TVisions of Cambridge,
Massachusetts to an in-house managed and hosted IBM Lotus Domino software
environment, using standard, off-the-shelf software components. The Corporation
is negotiating to enter into an Exclusive Source Code License Agreement with
TVisions, relating to its Web site software, pursuant to which it is expected to
pay to TVisions an aggregate of $260,000, for licenses to the object code of
MEDICONSULT.COM and source code for Habitrol and Expert Systems developed by
Tvisions.
Pursuant to various sponsorship, management and other agreements of the
Corporation, the Corporation has granted to certain persons and entities the
right to use its name and/or content of its Web Site.
For a listing of the Corporation's copyrights, URLs and domain names, see
Annexes 3.14(b), (c) and (d), respectively.
(c) Reference is made to the INCIID Transaction.
(e) The Corporation does not own the domain name iHealth.com.
3.15 Employment of Officers, Employees and Consultants
Michael Swanson is seconded from or loaned out by Treacy & Co. LLC, for
whom he performs services. Neither he nor Michel Bazinet has entered into
an employment agreement.
3.16 Employee Plans
1998 Stock Option Plan
401(k) plan
a health plan is being established
3.17 Agreements; Contracts
(c) service contracts
- employment agreements - See Annex 3.17(c) for year-end
listing; since then, contractors have become employees and all
senior executives other
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than Michel Bazinet and Michael Swanson have entered into
employment agreements. Such senior executives are entitled to
six to twelve months severance, and have a non-compete clause
of the duration equal to the severance period.
- consulting agreements - attorneys, accountants and many
others, including MediXpert Specialists. MediXpert is a
service pursuant to which medical professionals, pursuant to
consulting agreements, provide certain services. A listing
of such consultants is attached as Annex 3.7(c)(2).
- patient associations - see Annex 3.7(c)(3).
(d) loan agreements
The CommonHealth memorandum of agreement contemplates
certain borrowings by the Corporation from CommonHealth.
(i) broker's fees
ASB retainer agreement
(j) licenses
See Section 3.14
(k) content
The Corporation licenses a portion of its content from
third parties in the ordinary course of business. See
Section 3.14. The Corporation also seeks to license its
contents to third parties and has content licensing
agreements with Ontario Hospital Association, GeoAccess and
IBM.
The Corporation also has certain e-commerce relationships with
several vendors. See Annexes 3.14 and 3.17(k)
(n) other
See Annex 3.17(n)
3.18 Compliance; Licenses and Permits
See Section 3.21
3.20 Litigation
None
3.21 Tax Matters
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Prior to 1999, persons performing services for the Corporation were
treated for tax purposes as independent contractors, rather than as
employees. Beginning in January 1999, these "consultants" have been
converted to "employees" and the Corporation has commenced to
withhold for appropriate employee taxes and other amounts.
The Corporation has not filed tax returns in any U.S. or Canadian
jurisdiction.
3.22 Related Party Transactions
Advances to the Corporation have been made by the majority stockholder. A
portion of these advances have been converted into Junior Preferred Stock. The
provisions of the Junior Preferred Stock have been amended in respect of
dividends and conversion. Options have been granted to certain officers and
directors. The Corporation uses the homes of certain of its officers, without
charge. The Corporation uses shared office space in Toronto. In Bermuda the
Corporation uses the office of the majority stockholder. The Corporation has
entered into a Strategic Consulting Interim Agreement with Treacy & Co. LLC and
granted to Treacy & Co. LLC options for 2,000,000 shares of Common Stock.
In 1996, the Corporation purchased its Bermuda subsidiary from Mediconsult
Trust and Michel Bazinet, as a result of which the former stockholders of the
Mediconsult.com Limited became owners of 90% of the outstanding capital stock of
the Corporation.
3.25 Registration Rights
Treacy & Co. LLC
ASB
Cyberdiet (if option is exercised)
3.26 Other Securities
The majority stockholder has made certain advances to the Corporation, all
of which are senior to the Senior Preferred Stock. As of the date hereof,
such outstanding advances are approximately $715,000.
3.27 Use of Proceeds
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A portion of the net proceeds from the sale of Senior Preferred
Stock and Warrants will be used to repay advances to the Corporation made
by the majority stockholder in 1999, such amount being $200,000.
3.28 Insurance
E&O
D&O
MediXpert
3.29 Disclosure
Approximately 55% the Corporation's revenue for the year ended
December 31, 1997 and 65% of its revenue for the year ended December 31,
1998 resulted from engagements by various independent divisions of
Novartis AG. The Corporation anticipates that these and other divisions
will account for a substantial portion of its revenue for the foreseeable
future. The Corporation currently has an agreement with one division of
Novartis, Novartis Consumer Health Canada, to manage its Habitrol smoking
cessation Web site. The Corporation is evaluating and working with
Novartis Pharma to design, develop and manage additional Web sites. The
Corporation cannot predict whether it will be engaged to perform any
services as a result of these discussions. Novartis may elect to terminate
its agreements or engagements or it may demand changes to the terms of
these agreements or engagements that are less favorable to the Corporation
than existing terms. The Corporation does not have written agreements with
Novartis for most of these engagements. If the Corporation loses Novartis
as a customer or the relationship becomes less favorable to the
Corporation, the Corporation's business, financial condition and results
of operations will be materially and adversely affected.
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<PAGE>
EXHIBIT 10.17
REGISTRATION RIGHTS AGREEMENT dated as of February 26, 1999,
among MEDICONSULT.COM, INC., a Delaware corporation (the "Corporation"), and the
Investors listed on Schedule A hereto (the "INVESTORS").
The Investors own or have the right to acquire (by the
exercise, exchange or conversion of securities that are exercisable or
exchangeable for or convertible into) Common Stock, $.001 par value per share
(the "Common Stock"), of the Corporation. The parties hereto deem it to be in
their respective best interests to set forth the rights of the Investors in
connection with public offerings and sales of the Common Stock.
NOW, THEREFORE, in consideration of the premises and mutual
covenants and obligations hereinafter set forth, the Corporation and the
Investor hereby agree as follows:
SECTION 1. DEFINITIONS. As used in this Agreement, the
following terms shall have the following meanings:
"COMMISSION" shall mean the Securities and Exchange Commission
or any other Federal agency at the time administering the Securities Act.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934
or any successor Federal statute, and the rules and regulations of the
Commission promulgated thereunder, all as the same shall be in effect from time
to time.
"INVESTOR WARRANTS" shall mean, collectively, each stock
subscription warrant dated the date hereof, and issued by the Corporation to
each Investor, respectively.
"OTHER SHARES" shall mean at any time those shares of Common
Stock which do not constitute Primary Shares or Registrable Shares including,
but not limited to, shares of Common Stock owned by directors or officers of the
Corporation.
"PLANNED SECONDARY OFFERING" shall mean the underwritten
secondary public offering (the managing underwriters of which shall be one or
more nationally recognized investment banking firms) for the account of the
Corporation of its Common Stock pursuant to a registration statement filed under
the Securities Act which shall have been completed by the Corporation on or
before June 30, 1999 (the "Anticipated Offering Date") and results in aggregate
gross cash proceeds to the Corporation of not less than $20,000,000
(collectively, the "Secondary Offering Criteria").
"PRIMARY SHARES" shall mean at any time the authorized but
unissued shares of Common Stock or shares of Common Stock held by the
Corporation in its treasury.
"PURCHASE AGREEMENT" shall mean the Senior Preferred Stock
Purchase Agreement dated as of the date hereof, among the Corporation and the
Investors listed on Schedule 1 thereto.
<PAGE>
"REGISTRABLE SHARES" shall mean, with respect to any Investor,
the shares of Common Stock held by such Investor which constitute Restricted
Shares.
"REGISTRATION DATE" shall mean the date upon which the
registration statement pursuant to which the Corporation shall have initially
registered shares of Common Stock under the Securities Act for sale to the
public was declared effective.
"RESTRICTED SHARES" shall mean the shares of Common Stock,
Senior Preferred Stock and shares of Common Stock issuable upon exercise or
exchange of the Investor Warrants, any other securities 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 an
Investor and which have not theretofore been sold to the public pursuant to a
registration statement under the Securities Act or pursuant to Rule 144.
"RULE 144" shall mean Rule 144 promulgated under the
Securities Act or any successor rule thereto or any complementary rule thereto
(such as Rule 144A).
"SECURITIES ACT" shall mean the Securities Act of 1933 or any
successor Federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect from time to time.
"SENIOR PREFERRED STOCK" shall mean the Senior Convertible
Preferred Stock, $.001 par value, of the Corporation.
"TRANSFER" shall include any disposition of any Restricted
Shares or of any interest therein which would constitute a sale thereof within
the meaning of the Securities Act other than any such disposition pursuant to an
effective registration statement under the Securities Act and complying with all
applicable state securities and "blue sky" laws.
SECTION 2. REQUIRED REGISTRATION. If the Corporation shall at
any time following six (6) months after the consummation of the Corporation's
Planned Secondary Offering if the same occurs by the Anticipated Offering Date,
or if not, then after October 15, 1999 (the "Stipulated Date"), be requested in
writing by any Investor to effect the registration under the Securities Act of
Registrable Shares, then the Corporation shall, within 10 days of such request,
deliver a written notice of such proposed registration to all holders of
outstanding Registrable Shares and shall offer to include in such proposed
registration any Registrable Shares requested to be included in such proposed
registration by the holders of Registrable Shares who or which shall respond in
writing to the Corporation's notice within 15 days after delivery thereof,
PROVIDED, HOWEVER, that such registration shall have an aggregate gross offering
price of at least $5,000,000. The Corporation shall promptly thereafter use its
best efforts to effect such registration under the Securities Act of the
Registrable Shares which the Corporation has been so requested to register;
PROVIDED, HOWEVER, that the Corporation shall not be obligated to effect any
registration under the Securities Act except in accordance with the following
provisions:
(a) the Corporation shall not be obligated to use its best
efforts to file and cause to become effective (i) more than two (2)
registration statements initiated pursuant to this Section 2 pursuant
to which the Registrable Shares requested to be included therein have
been effectively sold thereunder; PROVIDED, HOWEVER, that any
registration
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<PAGE>
proceeding begun pursuant to this Section 2 shall not be so counted if
(x) such registration statement is subsequently withdrawn at the
request of the holders of a majority of the Registrable Shares
requested to be registered and such withdrawal is based upon material
adverse information relating to the Corporation or its condition,
business, or prospects that is different from that generally known to
the holders of Registrable Shares at the time of their request, (y) the
Investor shall have reimbursed the Corporation for all out-of-pocket
expenses incurred in connection with such withdrawn registration
statement, or (z) more than 20% of all Registrable Shares requested to
be registered in such registration statement have not been so
registered, or (ii) any registration statement during any period in
which any other registration statement (other than on Form S-4 or Form
S-8 promulgated under the Securities Act or any successor forms
thereto) pursuant to which Primary Shares are to be or were sold has
been filed and not withdrawn or has been declared effective within the
prior 180 days;
(b) the Corporation may delay the filing or effectiveness of
any registration statement for a period of up to 60 days after the date
of a request for registration pursuant to this Section 2 if:
(i) at the time of such request the Corporation is
engaged, or has fixed plans to engage within 60 days of the
time of such request, in a firm commitment underwritten public
offering of Primary Shares in which the holders of Restricted
Shares may include Registrable Shares pursuant to Section 3,
or
(ii) the Corporation determines in good faith that (A) it
is in possession of material, non-public information
concerning an acquisition, merger, recapitalization,
consolidation, reorganization or other material transaction by
or of the Corporation or concerning pending or threatened
litigation and (B) disclosure of such information would
jeopardize any such transaction or litigation or otherwise
materially harm the Corporation , and the Corporation shall
furnish to the Investor requesting such registration a
certificate signed by the President to such effect;
PROVIDED that the Corporation may not utilize the right set forth in
this clause (b) more than once in any 12-month period; and
(c) with respect to any registration pursuant to this Section
2, the Corporation may include in such registration any Primary Shares
or Other Shares; PROVIDED, HOWEVER, that if the managing underwriter
advises the Corporation that the inclusion of all Registrable Shares,
Primary Shares and Other Shares proposed to be included in such
registration would interfere with the successful marketing (including
pricing) of the Registrable Shares proposed to be included in such
registration, then the number of Registrable Shares, Primary Shares
and/or Other Shares proposed to be included in such registration shall
be included in the following order:
(i) FIRST, the Registrable Shares requested to be
included in such registration by the Investors PRO RATA based
upon the number of Restricted Shares
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<PAGE>
(based upon Common Stock equivalents) owned by all holders of
Restricted Shares at the time of such registration;
(ii) SECOND, the Primary Shares; and
(iii) THIRD, the Other Shares.
(d) in the event that the holders of Registrable Shares
requesting registration in any given instance under this Section 2
shall require that such registration be underwritten, then the managing
underwriters therefor shall be chosen by a majority-in-interest of such
holders, subject to the consent of the Corporation, which consent shall
not be unreasonably withheld, delayed or conditioned.
SECTION 3. PIGGYBACK REGISTRATION. If the Corporation at any
time proposes for any reason to register Primary Shares or Other Shares under
the Securities Act (other than (a) the Planned Secondary Offering, PROVIDED that
it is consummated on or before the Anticipated Offering Date or (b) on Form S-4
or Form S-8 promulgated under the Securities Act or any successor forms
thereto), it shall promptly give written notice to the holders of Restricted
Shares of its intention so to register the Primary Shares or Other Shares and,
upon the written request, given within 30 days after delivery of any such notice
by the Corporation, of the holders of Restricted Shares to include in such
registration Registrable Shares (which request shall specify the number of
Registrable Shares proposed to be included in such registration), the
Corporation shall use its best efforts to cause all such Registrable Shares to
be included in such registration on the same terms and conditions as the
securities otherwise being sold in such registration. Notwithstanding the
foregoing, if the managing underwriter advises the Corporation that the
inclusion of all Registrable Shares or Other Shares proposed to be included in
such registration would interfere with the successful marketing (including
pricing) of Primary Shares proposed to be registered by the Corporation, then
the number of Primary Shares, Registrable Shares and Other Shares proposed to be
included in such registration shall be included in the following order:
(i) FIRST, the Primary Shares;
(ii) SECOND, any Registrable Shares requested to be
included in such registration, PRO RATA based upon the number
of Restricted Shares (based upon Common Stock equivalents)
owned by holders of Restricted Shares requesting inclusion of
Registrable Shares in such registration at the time of such
registration.
(iii) THIRD, the Other Shares.
SECTION 4. REGISTRATIONS ON FORM S-3. From and after the
Stipulated Date, the holders of Restricted Shares shall have the right to
request in writing up to two registrations on Form S-3 per year, or such
successor form, of Registrable Shares held by them (the Corporation to bear the
costs of such registrations), which request or requests shall (i) specify the
number of Registrable Shares intended to be sold or disposed of, (ii) state the
intended method of disposition of such Registrable Shares and (iii) relate to
Registrable Shares having an anticipated aggregate offering price of at least
$500,000. A requested registration on
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Form S-3, or any such successor form, in compliance with this Section 4 shall
not count as a registration statement initiated pursuant to Section 2 but shall
otherwise be treated as a registration initiated pursuant to Section 2 and
shall, except as otherwise expressly provided in this Section 4, be subject to
Section 2.
SECTION 5. HOLDBACK AGREEMENT. If on or before the Anticipated
Offering Date the Corporation shall consummate a Planned Secondary Offering that
meets the Secondary Offering Criteria, the Investors shall not sell publicly,
make any short sale of, grant any option for the purchase of or otherwise
dispose publicly of, any Restricted Shares without the prior written consent of
the Corporation for a period designated by the Corporation in writing to the
holders of Registrable Shares, which period shall not begin more than ten (10)
days prior to the effectiveness of the registration statement pursuant to which
such Planned Secondary Offering shall be made and shall end no later than the
later to occur of (i) 180 days after the effective date of such registration
statement and (ii) October 15, 1999; PROVIDED, HOWEVER, that each officer and
director of the Corporation and each holder of at least 1% of the outstanding
capital stock of the Corporation is bound by and complies with no less
restrictive agreements with respect thereto than the agreement set forth in this
Section 5.
SECTION 6. PREPARATION AND FILING. If and whenever the
Corporation is under an obligation pursuant to the provisions of this Agreement
to use its best efforts to effect the registration of any Registrable Shares,
the Corporation shall, as expeditiously as practicable:
(a) use its best efforts to cause a registration statement
that registers such Registrable Shares to become and remain effective
for a period of 180 days or until all of such Registrable Shares have
been disposed of (if earlier);
(b) furnish, at least five (5) business days before filing a
registration statement that registers such Registrable Shares, a
prospectus relating thereto or any amendments or supplements relating
to such a registration statement or prospectus, to counsel selected by
the Investors, copies of all such documents proposed to be filed (it
being understood that such five (5) business-day period need not apply
to successive drafts of the same document proposed to be filed so long
as such successive drafts are supplied to the counsel to the Investors
in advance of the proposed filing by a period of time that is customary
and reasonable under the circumstances);
(c) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective for at least a period of 180 days or until all of
such Registrable Shares have been disposed of (if earlier) and to
comply with the provisions of the Securities Act with respect to the
sale or other disposition of such Registrable Shares;
(d) notify in writing the counsel to the Investors promptly
(i) of the receipt by the Corporation of any notification with respect
to any comments by the Commission with respect to such registration
statement or prospectus or any amendment or supplement thereto or any
request by the Commission for the amending or supplementing thereof or
for additional information with respect thereto, (ii) of the receipt by
the
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Corporation of any notification with respect to the issuance by the
Commission of any stop order suspending the effectiveness of such
registration statement or prospectus or any amendment or supplement
thereto or the initiation or threatening of any proceeding for that
purpose and (iii) of the receipt by the Corporation of any notification
with respect to the suspension of the qualification of such Registrable
Shares for sale in any jurisdiction or the initiation or threatening of
any proceeding for such purposes;
(e) use its best efforts to register or qualify such
Registrable Shares under such other securities or blue sky laws of such
jurisdictions as the Investor reasonably requests and do any and all
other acts and things which may be reasonably necessary or advisable to
enable the holders of Registrable Shares to consummate the disposition
in such jurisdictions of such Registrable Shares; PROVIDED, HOWEVER,
that the Corporation will not be required to qualify generally to do
business, subject itself to general taxation or consent to general
service of process in any jurisdiction where it would not otherwise be
required to do so but for this paragraph (e);
(f) furnish to the holders of Registrable Shares such number
of copies of a summary prospectus or other prospectus, including a
preliminary prospectus, in conformity with the requirements of the
Securities Act, and such other documents as the holders of Registrable
Shares may reasonably request in order to facilitate the public sale or
other disposition of such Registrable Shares;
(g) use its best efforts to cause such Registrable Shares to
be registered with or approved by such other governmental agencies or
authorities as may be necessary by virtue of the business and
operations of the Corporation to enable the holders of Registrable
Shares to consummate the disposition of such Registrable Shares;
(h) notify the holders of Registrable Shares on a timely basis
at any time when a prospectus relating to such Registrable Shares is
required to be delivered under the Securities Act within the
appropriate period mentioned in subparagraph (a) of this Section 6, of
the happening of any event as a result of which the prospectus included
in such registration statement, as then in effect, includes an untrue
statement of a material fact or omits to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances then existing and, at the
request of the holders of Registrable Shares, prepare and furnish to
the holders of Registrable Shares a reasonable number of copies of a
supplement to or amendment of such prospectus as may be necessary so
that, as thereafter delivered to the offerees of such shares, such
prospectus shall not include an untrue statement of a material fact or
omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in light of the
circumstances then existing;
(i) make available for inspection by the holders of
Registrable Shares, any underwriter participating in any disposition
pursuant to such registration statement and any attorney, accountant or
other agent retained by the holders of Registrable Shares or any
underwriter (collectively, the "Inspectors"), all pertinent financial
and other records, pertinent corporate documents and properties of the
Corporation (collectively, the "Records"), as shall be reasonably
necessary to enable them to exercise their due
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diligence responsibility, and cause the Corporation's officers,
directors and employees to supply all information (together with the
Records, the "Information") reasonably requested by any such holders of
Registrable Shares in connection with such registration statement;
PROVIDED, HOWEVER, that any of the Information which the Corporation
determines in good faith to be confidential, and of which determination
the Inspectors are so notified, shall not be disclosed by the
Inspectors unless (i) the disclosure of such Information is necessary
to avoid or correct a misstatement or omission in the registration
statement, (ii) the release of such Information is ordered pursuant to
a subpoena or other order from a court of competent jurisdiction or
(iii) such Information has been made generally available to the public;
and PROVIDED FURTHER, HOWEVER, that the holders of Registrable Shares
agree that they will, upon learning that disclosure of such Information
is sought in a court of competent jurisdiction, give notice to the
Corporation and allow the Corporation, at the Corporation's expense, to
undertake appropriate action to prevent disclosure of the Information
deemed confidential;
(j) use its best efforts to obtain from its independent
certified public accountants "cold comfort" letters in customary form
and at customary times and covering matters of the type customarily
covered by cold comfort letters;
(k) use its best efforts to obtain from its counsel an opinion
or opinions in customary form;
(l) provide a transfer agent and registrar (which may be the
same entity and which may be the Corporation) for such Registrable
Shares;
(m) issue to any underwriter to which the holders of
Registrable Shares may sell shares in such offering certificates
evidencing such Registrable Shares;
(n) list such Registrable Shares on any national securities
exchange on which any shares of the Common Stock are listed or, if the
Common Stock is not listed on a national securities exchange, use its
best efforts to qualify such Registrable Shares for inclusion on the
Nasdaq National Market System or such other national securities
exchange as the holders of a majority of the Registrable Shares held by
the Investor shall request;
(o) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission and make available
to its securityholders, as soon as reasonably practicable, earnings
statements (which need not be audited) covering a period of 12 months
beginning within three months after the effective date of the
registration statement, which earnings statements shall satisfy the
provisions of Section 11(a) of the Securities Act; and
(p) use its best efforts to take all other steps necessary to
effect the registration of such Registrable Shares contemplated hereby.
SECTION 7. EXPENSES. All expenses incurred by the Corporation
in complying with Section 6, including, without limitation, all registration and
filing fees (including all expenses incident to filing with the National
Association of Securities Dealers, Inc.), fees and
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expenses of complying with securities and blue sky laws, printing expenses, fees
and expenses of the Corporation's counsel and accountants and fees and expenses
of the counsel to the Investors, shall be paid by the Corporation; PROVIDED,
HOWEVER, that all underwriting discounts and selling commissions applicable to
the Registrable Shares or Other Shares shall not be borne by the Corporation but
shall be borne by the holders of Registrable Shares and holders of Other Shares
in proportion to the number of Registrable Shares or Other Shares sold by each
of them.
SECTION 8. INDEMNIFICATION.
(a) In connection with any registration of any Registrable
Shares under the Securities Act pursuant to this Agreement, the
Corporation shall indemnify and hold harmless the holders of
Registrable Shares, each underwriter, broker or any other person acting
on behalf of the holders of Registrable Shares and each other person,
if any, who controls any of the foregoing persons within the meaning of
the Securities Act against any losses, claims, damages or liabilities,
joint or several (or actions in respect thereof), to which any of the
foregoing persons may become subject under the Securities Act or
otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon an untrue
statement or alleged untrue statement of a material fact contained in
the registration statement under which such Registrable Shares were
registered under the Securities Act, any preliminary prospectus or
final prospectus contained therein or otherwise filed with the
Commission, any amendment or supplement thereto or any document
incident to registration or qualification of any Registrable Shares, 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 therein not misleading or, with
respect to any prospectus, necessary to make the statements therein in
light of the circumstances under which they were made not misleading,
or any violation by the Corporation of the Securities Act or state
securities or blue sky laws applicable to the Corporation and relating
to action or inaction required of the Corporation in connection with
such registration or qualification under such state securities or blue
sky laws; and shall reimburse the holders of Registrable Shares, such
underwriter, such broker or such other person acting on behalf of the
holders of Registrable Shares and each such controlling person for any
legal or other expenses reasonably incurred by any of them in
connection with investigating or defending any such loss, claim,
damage, liability or action; PROVIDED, HOWEVER, that the Corporation
shall 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 an untrue statement or alleged untrue statement or
omission or alleged omission made in said registration statement,
preliminary prospectus, final prospectus, amendment, supplement or
document incident to registration or qualification of any Registrable
Shares in reliance upon and in conformity with written information
furnished to the Corporation through an instrument duly executed by the
holders of Registrable Shares or underwriter specifically for use in
the preparation thereof.
(b) In connection with any registration of Registrable Shares
under the Securities Act pursuant to this Agreement, the holders of
Registrable Shares shall severally, but not jointly, indemnify and hold
harmless (in the same manner and to the same extent as set forth in the
preceding paragraph of this Section 8) the Corporation,
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<PAGE>
each director of the Corporation, each officer of the Corporation who
shall sign such registration statement, each underwriter, broker or
other person acting on behalf of the holders of Registrable Shares and
each person who controls any of the foregoing persons within the
meaning of the Securities Act with respect to any statement or omission
from such registration statement, any preliminary prospectus or final
prospectus contained therein or otherwise filed with the Commission,
any amendment or supplement thereto or any document incident to
registration or qualification of any Registrable Shares, if such
statement or omission was made in reliance upon and in conformity with
written information furnished to the Corporation or such underwriter
through an instrument duly executed by the holders of Registrable
Shares specifically for use in connection with the preparation of such
registration statement, preliminary prospectus, final prospectus,
amendment, supplement or document; PROVIDED, HOWEVER, that the maximum
amount of liability in respect of such indemnification shall be
limited, in the case of each seller of Registrable Shares, to an
amount equal to the net proceeds actually received by the Investor
from the sale of Registrable Shares effected pursuant to such
registration.
(c) Promptly after receipt by an indemnified party of notice
of the commencement of any action involving a claim referred to in the
preceding paragraphs of this Section 8, such indemnified party will, if
a claim in respect thereof is made against an indemnifying party, give
written notice to the latter of the commencement of such action. In
case any such action is brought against an indemnified party, the
indemnifying party will be entitled to participate in and to assume the
defense thereof, jointly with any other indemnifying party similarly
notified to the extent that it may wish, with counsel reasonably
satisfactory to such indemnified party, and after notice from the
indemnifying party to such indemnified party of its election so to
assume the defense thereof, the indemnifying party shall not be
responsible for any legal or other expenses subsequently incurred by
the indemnified party in connection with the defense thereof; PROVIDED,
HOWEVER, that if any indemnified party shall have -------- -------
reasonably concluded that there may be one or more legal or equitable
defenses available to such indemnified party which are additional to or
conflict with those available to the indemnifying party, or that such
claim or litigation involves or could have an effect upon matters
beyond the scope of the indemnity agreement provided in this Section 8,
the indemnifying party shall not have the right to assume the defense
of such action on behalf of such indemnified party and such
indemnifying party shall reimburse such indemnified party and any
person controlling such indemnified party for that portion of the fees
and expenses of any counsel retained by the indemnified party which is
reasonably related to the matters covered by the indemnity agreement
provided in this Section 8.
(d) If the indemnification provided for in this Section 8 is
held by a court of competent jurisdiction to be unavailable to an
indemnified party with respect to any loss, claim, damage, liability or
action referred to herein, then the indemnifying party, in lieu of
indemnifying such indemnified party hereunder, shall contribute to the
amounts paid or payable by such indemnified party as a result of such
loss, claim, damage, liability or action 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 which resulted in such loss, claim,
damage, liability or action as well as any other relevant equitable
considerations. The relative fault of the
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<PAGE>
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 or alleged 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.
SECTION 9. UNDERWRITING AGREEMENT. Notwithstanding the
provisions of Sections 5, 6, 7 and 8, to the extent that the holders of
Registrable Shares shall enter into an underwriting or similar agreement, which
agreement contains provisions covering one or more issues addressed in such
Sections, the provisions contained in such underwriting or similar agreement
shall control as to the party or parties so entering into such underwriting
agreement.
SECTION 10. INFORMATION BY HOLDER. Each of the holders of
Registrable Shares proposing to sell the same pursuant to a registration to
which this Agreement relates shall furnish to the Corporation such written
information regarding the holders of Registrable Shares and the distribution
proposed by such holders of Registrable Shares as the Corporation may reasonably
request in writing and as shall be reasonably required in connection with any
registration, qualification or compliance referred to in this Agreement.
SECTION 11. EXCHANGE ACT COMPLIANCE. From the Registration
Date or such earlier date as a registration statement filed by the Corporation
pursuant to the Exchange Act relating to any class of the Corporation's
securities became effective, the Corporation represents and warrants that it has
complied with and covenants that it shall comply with all of the reporting
requirements of the Exchange Act (whether or not it shall be required to do so)
and represents and warrants that it has complied with and covenants that it
shall comply with all other public information reporting requirements of the
Commission which are conditions to the availability of Rule 144 for the sale of
the Common Stock. The Corporation shall cooperate with the holders of
Registrable Shares in supplying such information as may be necessary for the
Investor to complete and file any information reporting forms presently or
hereafter required by the Commission as a condition to the availability of Rule
144.
SECTION 12. NO CONFLICT OF RIGHTS. The Corporation represents
and warrants to the holders of Registrable Shares that the registration rights
granted to the holders of Registrable Shares hereby do not conflict with any
other registration rights granted by the Corporation. The Corporation shall not,
after the date hereof, grant any registration rights which are superior to,
conflict with or impair the registration rights granted hereby.
SECTION 13. TERMINATION. This Agreement shall terminate and be
of no further force or effect when there shall not be any Restricted Shares
outstanding, PROVIDED that any rights granted to a holder of Restricted Shares
pursuant to Section 2 or Section 4 hereof shall terminate as to such holder at
such earlier time, if any, as such holder may sell immediately all Registrable
Shares held or entitled to be held by such holder under Rule 144 without
limitation as to volume.
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<PAGE>
SECTION 14. SUCCESSORS AND ASSIGNS. This Agreement shall bind
and inure to the benefit of the Corporation, the holders of Registrable Shares
and, subject to Section 15, the respective successors and assigns of the
Corporation and holders of Registrable Shares.
SECTION 15. ASSIGNMENT. Each holder of Registrable Shares may
assign its rights hereunder to any purchaser or transferee of Restricted Shares;
PROVIDED, HOWEVER, that such purchaser or transferee shall, as a condition to
the effectiveness of such assignment, be required to execute a counterpart to
this Agreement agreeing to be treated as the seller or transferor hereunder
whereupon such purchaser or transferee shall have the benefits of, and shall be
subject to the restrictions contained in, this Agreement.
SECTION 16. ENTIRE AGREEMENT. This Agreement, and the Stock
Purchase Agreement dated as of the date hereof, among the Corporation and the
other parties thereto, and the other writings referred to therein or delivered
pursuant thereto, contain the entire agreement among the parties with respect to
the subject matter hereof and supersede all prior and contemporaneous
arrangements or understandings with respect thereto.
SECTION 17. NOTICES. All notices, requests, consents and other
communications hereunder to any party shall be deemed to be sufficient if
contained in a written instrument delivered in person or sent by telecopy,
nationally-recognized overnight courier or first class registered or certified
mail, return receipt requested, postage prepaid, addressed to such party at the
address set forth below or such other address as may hereafter be designated in
writing by such party to the other parties:
(i) if to the Corporation at:
Mediconsult.com, Inc.
33 Reid Street, 4th floor
Hamilton HM12, Bermuda
Attention:
Telecopier:
with a copy to:
Golenbock, Eiseman, Assor & Bell
437 Madison Avenue
New York, NY 10022
Attention: Lawrence Bell, Esq.
Telecopier: 212-754-0330; and
(ii) if to an Investor, to the address set forth on
Schedule I hereto, with a copy to:
Orrick, Herrington & Sutcliffe LLP
30 Rockefeller Plaza
New York, New York 10112
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<PAGE>
Telecopier: (212) 506-3730
Attention: Martin H. Levenglick, Esq.
All such notices, requests, consents and other communications shall be deemed to
have been delivered (a) in the case of personal delivery or delivery by
telecopier, on the date of such delivery, (b) in the case of dispatch by
nationally-recognized overnight courier, on the next business day following such
dispatch and (c) in the case of mailing, on the third business day after the
posting thereof.
SECTION 18. MODIFICATIONS; AMENDMENTS; WAIVERS. The terms and
provisions of this Agreement may not be modified or amended, nor may any
provision be waived, except pursuant to a writing signed by the Corporation and
a majority-in-interest of the holders of Restricted Shares.
SECTION 19. COUNTERPARTS. This Agreement may be executed in
any number of counterparts, and each such counterpart hereof shall be deemed to
be an original instrument, but all such counterparts together shall constitute
but one agreement.
SECTION 20. HEADINGS. The headings of the various sections of
this Agreement have been inserted for convenience of reference only and shall
not be deemed to be a part of this Agreement.
SECTION 21. 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 may not bring or commence any such action or
proceeding except in any such court in such jurisdiction. 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 (b) 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
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<PAGE>
process from the Corporation. Without prejudice to the foregoing, the
Corporation irrevocably consents to service of process in the manner provided
for notices in Section 17. Nothing in this Agreement will affect the right of
any party to this Agreement to serve process in any other manner permitted by
law.
SECTION 22. GOVERNING LAW. This Agreement shall be governed by
and construed in accordance with the laws of the State of New York applicable to
contracts made and to be performed wholly therein (without reference to
principles of conflicts of laws).
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Registration Rights Agreement as of the date first written above.
MEDICONSULT.COM, INC.
By: /s/ Robert A. Jennings
------------------------------------------
Name: Robert A. Jennings
Title: CEO
THE INVESTORS:
NAZEM & COMPANY IV, L.P.,
By: Nazem & Associates IV, L.P., its General
Partner
By: /s/ Fred Nazem
------------------------------------------
Name: Fred Nazem
Title: General Partner
TRANSATLANTIC VENTURE FUND C.V.
By: /s/ Fred Nazem
------------------------------------------
Name: Fred Nazem
Title: Investment Manager
/s/ Peter May
---------------------------------------------
Peter May
/s/ Nelson Peltz
---------------------------------------------
Nelson Peltz
<PAGE>
SCHEDULE A
INVESTORS
NAZEM & COMPANY IV, L.P.
c/o Nazem & Co.
645 Madison Avenue
New York, New York 10022
Attention: Fred F. Nazem
Telecopier: (212) 371-2150
TRANSATLANTIC VENTURE FUND C.V.
c/o Nazem & Co.
645 Madison Avenue
New York, New York 10022
Attention: Fred F. Nazem
Telecopier: (212) 371-2150
Peter May
c/o Triarc Companies, Inc.
280 Park Avenue, 41st Floor, West Tower
New York, New York 10017
Telecopier: (212) 451-3024
Nelson Peltz
c/o Triarc Companies, Inc.
280 Park Avenue, 41st Floor, West Tower
New York, New York 10017
Telecopier: (212) 451-3024
<PAGE>
Exhibit 10.18
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
STOCKHOLDERS' AGREEMENT
AMONG
MEDICONSULT.COM, INC.,
THE FOUNDERS IDENTIFIED HEREIN
AND
THE INVESTORS IDENTIFIED
ON
SCHEDULE 1 HERETO
DATED AS OF FEBRUARY 26, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
STOCKHOLDERS' AGREEMENT dated as
of February 26, 1999, among (i)
MEDICONSULT.COM, INC., a Delaware
Corporation (the "Corporation"), (ii) each
of the Investors listed on Schedule 1 hereto
(each, an "Investor and, collectively, the
"Investors"), and (iii) ROBERT A. JENNINGS,
IAN SUTCLIFFE and TREACY & CO., LLC (the
"Founders").
The Investors own and/or have the right to acquire upon the exercise
or exchange of stock subscription warrants, shares of Senior Convertible
Preferred Stock, $.001 par value (the "Senior Preferred Stock"), of the
Corporation and each Founder owns, on the date hereof, or has the right to
acquire by conversion of shares of Preferred Stock, $.001 par value, (the
"Junior Preferred Stock") or exercise or exchange of options, shares of Common
Stock, $.001 par value (the "Common Stock"), of the Corporation. The parties
wish to provide herein for the terms with respect to certain matters regarding
the relationship between the Corporation and its stockholders and among such
stockholders. Accordingly, the parties agree as follows:
1. DEFINITIONS. The following terms shall have the following meanings:
(a) "AFFILIATE" shall mean any (a) corporation or other entity in which
the subject person owns, directly or indirectly, more than 50% of the capital
stock or other equity interests the holders of which are generally entitled to
vote for the election of the board of directors or other governing body of such
corporation or other entity and (b) any other person that directly or
indirectly, through one or more intermediaries, controls, is controlled by or is
under common control with, the subject person.
(b) "BOARD" means the Board of Directors of the Corporation and the
Subsidiaries of the Corporation.
(c) "CONTROL" (including the terms "controlled by" and "under common
control with") shall mean the possession, directly or indirectly or as trustee
or executor, of the power to direct or cause the direction of the management or
policies of a person, whether through the ownership of stock, as trustee or
executor, by contract or credit arrangement or otherwise.
(d) "FOUNDER SHARES" means the shares of Common Stock held by the
Founders on the date hereof or acquired by Founders after the date hereof, and
any shares of capital stock issued thereon as a stock dividend or upon any stock
split or other subdivision of shares of capital stock.
(e) "FOUNDER GROUP" means (i) the spouse and lineal descendants of such
Founder, and (ii) all trusts for the benefit of any of the foregoing.
(f) "INVESTOR SHARES" means at any time, with respect to any Investor,
the shares of Senior Preferred Stock held by it on the date hereof or issuable
upon exercise or
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<PAGE>
exchange of the Investor Warrants, and any shares of Common Stock issuable upon
conversion of any shares of Senior Preferred Stock so held or so issuable, any
shares of capital stock or other securities received in respect thereof, which
are held by such Investor, and which have not previously been sold to the public
pursuant to a registration statement under the Securities Act or pursuant to
Rule 144.
(g) "INVESTOR WARRANTS" means, collectively, each stock subscription
warrant dated the date hereof, and issued by the Corporation to each Investor,
respectively.
(h) "PRO RATA AMOUNT" means, the PRO RATA percentage of capital stock
being offered by a Selling Founder pursuant to Section 3.2 hereof that each
Investor shall be entitled to purchase; such PRO RATA percentage shall be the
percentage figure that expresses the ratio, based upon Common Stock equivalents,
between (x) the number of shares of Stock owned by such Investor and (y) the
aggregate number of shares held by such Investor and the Selling Founder that is
proposing to Transfer.
(i) "PLANNED SECONDARY OFFERING" shall mean the underwritten secondary
public offering (the managing underwriters of which shall be one or more
nationally recognized investment banking firms) for the account of the
Corporation of its Common Stock pursuant to a registration statement filed under
the Securities Act which shall have been completed by the Corporation on or
before June 30, 1999 (the "Anticipated Offering Date") and results in aggregate
gross cash proceeds to the Corporation of not less than $20,000,000
(collectively, the "Secondary Offering Criteria").
(j) "SHARES" means the Investor Shares and the Founder Shares.
(k) "STOCKHOLDERS" means the Investors and the Founders.
(l) "SUBSIDIARY" any corporation, partnership, joint venture, limited
liability company or other legal entity of which the Corporation (either alone
or through or together with any other Subsidiary) owns, directly or indirectly,
more than 50% of the stock or other equity interests the holders of which are
generally entitled to vote for the election of the board of directors or other
governing body of such corporation or other legal entity.
(m) "THIRD PARTY" means, with respect to any Founder, any person or
entity that is not a Founder or a member of the Group of such Founder.
(n) "TRANSFER" means to sell, transfer, assign, or otherwise dispose
of, either voluntarily or involuntarily and with or without consideration.
(o) "VOTING SHARES" means the shares of capital stock of the
Corporation entitled to vote for the election of directors.
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<PAGE>
2. BOARD REPRESENTATION.
(a) Subject to the terms of this Agreement, the holders of a majority
in voting power of all outstanding shares of Senior Preferred Stock shall be
entitled (A) to nominate one individual for election to the Board (the "Investor
Director") to serve as a director until his or her successor is elected and
qualifies, (B) to nominate such successor, and (C) if such holders so determine
to be appropriate, to propose the removal from the Board of such director
nominated under the foregoing clause (A) or (B), PROVIDED, HOWEVER, that a
majority of directors of the then current Board must consent to the selection of
such nominee, which consent shall not be unreasonably withheld, delayed or
conditioned. The Investor Director may otherwise be removed only by vote of
662/3% of the Board for cause. In the event that an Investor Director is removed
for cause, the holders of a majority in voting power of all outstanding shares
of Senior Preferred Stock may nominate the successor thereto in accordance with
this Section 2(a).
(b) Each nomination or any proposal to remove from the Board any
director shall be made by delivering to the Corporation a notice signed by the
party or parties entitled to such nomination or proposal. As promptly as
practicable after delivery of such notice, the Corporation shall take or cause
to be taken such corporate actions as may be reasonably required to cause the
election or removal proposed in such notice. Such corporate actions may include
calling a meeting or soliciting a written consent of the Board, or calling a
meeting or soliciting a written consent of the stockholders of the Corporation.
Anything contained herein to the contrary notwithstanding, no director may be
proposed for removal (other than for cause) by any Stockholder other than the
Stockholder entitled to nominate such individual in accordance with the
foregoing provisions of this Section 2.1(b).
3. VOTING AGREEMENT.
Each Stockholder shall vote all Voting Shares held by such Stockholder
for the election to the Board of the Corporation of the individual nominated in
accordance with Section 2 and for the removal from the Board of the Corporation
of any director proposed to be removed in accordance with Section 2, and the
Corporation shall cause such individual to be so elected or removed, as the case
may be, from the Board of each Subsidiary. If applicable, each Stockholder shall
use all reasonable efforts to cause each director originally nominated by such
Stockholder to vote, or if such Stockholder is a director, such Stockholder
shall vote, for the election to the Board of all individuals nominated as
replacement directors in accordance with Section 2.
4. CO-SALE RIGHT.
(a) CO-SALE. If any Founder (a "Selling Founder") proposes to Transfer
any Shares to any Third Party at any time after the date hereof, such Selling
Founder, shall, at least 30 days before such Transfer, deliver a notice (the
"Sale Notice") to all the Investors specifying the identity of the Third Party
and disclosing in reasonable detail the terms and conditions of the proposed
Transfer. Within 30 days after delivery of the Sale Notice, each Investor may
elect to participate in the proposed Transfer by delivering to such Selling
Founder, a notice (the "Purchase Notice") specifying the Investor Shares with
respect to which the Investor exercises its right under this Section. Each
Investor shall be entitled to Transfer, at the price and on the terms and
conditions applicable to the Transfer by such Selling Founder, up to a number of
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<PAGE>
shares of Common Stock equal to its Pro Rata Amount of the aggregate number of
shares of Common Stock subject to the Transfer, PLUS, in the case of any
Investor who or which indicated in its Purchase Notice its intention to sell, if
available, any Shares in excess of its Pro Rata Amount thereof, such Investor's
Pro Rata Amount of the balance of the Shares not sold by the other Investors(s)
excluding for purposes of determining such Pro Rata Amount the other Investor(s)
electing not to sell or selling less than its Pro Rata Amount. No Founder shall
be entitled or permitted to effect any Transfer of Shares contemplated by this
Section 4(a) unless the Third Party purchases all Investor Shares set forth in
the Purchase Notice delivered by each Investor hereunder in accordance with the
terms of this Section 4(a).
(b) FOUNDER PERMITTED TRANSFER. Notwithstanding Section 4(a), each
Founder may Transfer free of the restrictions of Section 4(a), (i) any Founder
Shares to any other member of the Founder Group, PROVIDED transferee executes
and delivers to the Corporation a counterpart to this Agreement, agreeing to be
treated in the same manner as the transferring Founder, (ii) any Founder Shares
to any other Founder or (iii) up to an aggregate of 10% of the Founder Shares
held by such Founder on the date hereof. Upon such Transfer and such execution
and delivery, the transferee shall be bound by, and comply with, this Agreement
with respect to the transferred Shares in the same manner as the transferring
Founder or (iv) any shares by will or intestate succession. In Addition, this
Section 4 shall not apply to shares of Common Stock representing an aggregate
offering price of up to $5,000,000 to be offered and sold in the Planned
Secondary Offering.
5. LEGEND ON STOCK CERTIFICATES.
(a) Each certificate representing shares of capital stock that are
subject to this Agreement shall bear a legend substantially in the following
form:
"THE SALE, TRANSFER, ASSIGNMENT, PLEDGE, OR ENCUMBRANCE OF THE SECURITIES
REPRESENTED BY THIS CERTIFICATE AND THE RIGHTS OF THE HOLDER OF SUCH
SECURITIES IN RESPECT OF THE ELECTION OF DIRECTORS ARE SUBJECT TO A
STOCKHOLDERS' AGREEMENT DATED AS OF FEBRUARY 26, 1999, AMONG
MEDICONSULT.COM, INC. AND CERTAIN HOLDERS OF ITS OUTSTANDING CAPITAL
STOCK. COPIES OF SUCH AGREEMENT MAY BE OBTAINED AT NO COST BY WRITTEN
REQUEST MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE TO THE SECRETARY
OF MEDICONSULT.COM, INC."
(b) Upon termination of this Agreement, the holders of any shares of
capital stock bearing the legends described in subsection (a) or (b) above shall
be entitled to receive from the Corporation, without expense, a new certificate
not bearing the restrictive legends described in subsection (a) or (b) and not
containing any other reference to the restrictions imposed by this Agreement.
6. SEVERABILITY; GOVERNING LAW.
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<PAGE>
If any provision of this Agreement shall be determined to be illegal
and unenforceable by any court of law, the remaining provisions shall be
severable and enforceable in accordance with their terms. This Agreement shall
be governed by and construed and enforced in accordance with the laws of the
State of New York.
7. ASSIGNMENTS; SUCCESSORS AND ASSIGNS.
Except in connection with any Transfer of Shares in accordance with
this Agreement, the rights of each party under this Agreement may not be
assigned. This Agreement shall bind and inure to the benefit of the parties and
their respective successors, permitted assigns, legal representatives and heirs.
8. TERMINATION. This Agreement shall cease and terminate and be of no further
force or effect upon the earlier to occur of (a) the Investors owning or having
the right to acquire less than fifty percent (50%) of the Investor Shares that
they own or have the right to acquire as of the date hereof or (b) the tenth
(10th) anniversary of the date hereof.
9. AMENDMENTS.
This Agreement may only be modified or amended, or the performance
thereof waived, by an instrument in writing signed by the Corporation, Investors
holding at least majority of all Shares then held by all Investors and the
holders of at least majority of the Founder Shares. This Section may only be
amended with the consent of all parties to this Agreement.
10. CONSENT TO JURISDICTION; VENUE.
(a) The Corporation and each Founder 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 and each of Founders 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
and the Founders may not bring or commence any such action or proceeding except
in any such court in such jurisdiction. Each of the Corporation and Founders
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 and each Founder 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. Each of the Corporation
and Founders 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.
6
<PAGE>
(c) The Corporation and each Founder hereby irrevocably appoints and
designates Gotenbock, 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 or such Founder, as the
case may be, 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 Founder, as the case may be. Without prejudice to the foregoing, the
Corporation and the Founder to this Agreement irrevocably consents to service of
process in the manner provided for notices in Section 4.6. Nothing in this
Agreement will affect the right of any party to this Agreement to serve process
in any other manner permitted by law.
11. NOTICES.
All notices, claims, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given if
personally delivered or if sent by nationally-recognized overnight courier, by
telecopy, or by registered or certified mail, return receipt requested and
postage prepaid, addressed as follows:
(i) if to the Corporation:
Mediconsult.com, Inc.
33 Reid Street, 4th Floor
Hamilton HM 12, Bermuda
Fax: 441-295-0560
Telephone: 441-2956-0736
Attention: Robert A Jennings
with a copy to:
Golenbock, Eiseman, Assor & Bell
437 Madison Avenue
New York, NY 10022
Fax: 212-754-0330
Tel: 212-907-7300
Attention: Lawrence Bell, Esq.
(ii) if to an Investor, to the address specified on Schedule 1
hereto, with a copy to:
Orrick, Herrington & Sutcliffe LLP
666 Fifth Avenue
New York, New York 10103
Fax: (212) 506-5151
Telephone: (212) 506-5325
Attention: Martin H. Levenglick, Esq.
and
7
<PAGE>
(iii) if to any Founder, to his or her address set forth on the
books of the Corporation;
or to such other address as the party to whom notice is to be given may have
furnished to the other parties in writing in accordance herewith. Any such
notice or communication shall be deemed to have been received (a) in the case of
personal delivery, on the date of such delivery, (b) in the case of
nationally-recognized overnight courier, on the next business day after the date
when sent, (c) in the case of telecopy transmission, when received, and (d) in
the case of mailing, on the third business day following that on which the piece
of mail containing such communication is posted.
12. HEADINGS.
The headings of the sections of this Agreement have been inserted
for convenience of reference only and shall not be deemed to be a part of this
Agreement.
13. NOUNS AND PRONOUNS.
Whenever the context may require, any pronouns used herein shall
include the corresponding masculine, feminine or neuter forms, and the singular
form of names and pronouns shall include the plural and vice versa.
14. ENTIRE AGREEMENT.
This Agreement contains the entire agreement among the parties with
respect to the subject matter hereof and supersedes all prior agreements and
understandings with respect to such subject matter.
15. COUNTERPARTS.
This Agreement may be executed in any number of counterparts, and
each such counterpart hereof shall be deemed to be an original instrument, but
all such counterparts together shall constitute but one agreement.
8
<PAGE>
COUNTER PART SIGNATURE PAGE TO
THE STOCKHOLDERS' AGREEMENT
DATED AS OF FEBRUARY __, 1999
IN WITNESS WHEREOF, the parties hereto have executed this
Stockholders' Agreement on the date first above written.
MEDICONSULT.COM, INC.
By: /s/ Robert A. Jennings
-----------------------------------
Name: Robert A. Jennings
Title: CEO
FOUNDERS:
/s/ Robert A. Jennings
-----------------------------------
Robert A. Jennings
-----------------------------------
Ian Sutcliffe
TREACY & CO., LLC
By: /s/ Michael Treacy
-----------------------------------
Name: Michael Treacy
Title:
INVESTORS:
NAZEM & COMPANY IV, L.P.,
By: Nazem & Associates IV, L.P., its
General Partner
By: /s/ Fred Nazem
-----------------------------------
Name: Fred Nazem
Title: General Partner
<PAGE>
COUNTER PART SIGNATURE PAGE TO
THE STOCKHOLDERS' AGREEMENT
DATED AS OF FEBRUARY __, 1999
TRANSATLANTIC VENTURE FUND C.V.
By: /s/ Fred Nazem
-----------------------------------
Name: Fred Nazem
Title: Investment Manager
/s/ Peter May
-----------------------------------
Peter May
/s/ Nelson Peltz
-----------------------------------
Nelson Peltz
<PAGE>
SCHEDULE 1
LIST OF STOCKHOLDERS
- ------------------------------------
NAZEM & COMPANY IV, L.P.
c/o Nazem & Co.
645 Madison Avenue
New York, New York 10022
Attention: Fred F. Nazem
Telecopier: (212) 371-2150
- ------------------------------------
TRANSATLANTIC VENTURE FUND C.V.
c/o Nazem & Co.
645 Madison Avenue
New York, New York 10022
Attention: Fred F. Nazem
Telecopier: (212) 371-2150
- ------------------------------------
Peter May
c/o Triarc Companies, Inc.
280 Park Avenue, 41st Floor, West
Tower
New York, New York 10017
Telecopier: (212) 451-3024
- ------------------------------------
Nelson Peltz
c/o Triarc Companies, Inc.
280 Park Avenue, 41st Floor,
West Tower
New York, New York 10017
Telecopier: (212) 451-3024
- ------------------------------------
<PAGE>
Exhibit 21.1
SUBSIDIARIES OF THE COMPANY:
Mediconsult.com (UK) Ltd.
Mediconsult.com (US), Ltd.
Mediconsult.com Limited.
3542491 Canada Inc.
Pharminfonet
iHealth Inc.
<PAGE>
Exhibit 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this Registration Statement
on Form S-1 of our report dated March 14, 1999 on our audits of the
consolidated financial statements of CyberDiet, LLC as of December 31, 1998
and 1997, 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
March 15, 1999 PricewaterhouseCoopers
<PAGE>
Exhibit 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this Registration Statement
on Form S-1 of our report dated March 14, 1999 on our audits of the
consolidated financial statements of CyberDiet, LLC as of December 31, 1998
and 1997, 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
March 15, 1999 PricewaterhouseCoopers
